MCAI Economics Vision: Federal Antitrust Breakdown as Nash-Stigler Equilibrium, Not Accident
The Stigler Equilibrium Series, Installment I on Harm Clearinghouse
See companion studies: The Stigler Equilibrium- Regulatory Capture and the Structure of Free Markets, Why Enforcement Must Compete to Keep Markets Free (Jan 2026), The Dual Nash-Stigler Equilibrium Architecture, Behavioral Settlement and Inquiry Sufficiency as Runtime Constraints (Jan 2026), Comparative Externality Costs in Antitrust Enforcement, A Nash–Stigler Foresight Study of Federal Enforcement Equilibria, Live Nation as Anchor, Compass–Anywhere as Validation (Jan 2026), Why the DOJ Banned Algorithms but Blessed a Mega-Brokerage (Jan 2026).
Executive Summary
Installment I advances the MindCast AI flagship series by formalizing federal enforcement failure as a stable, self-reinforcing equilibrium rather than a series of administrative errors. This analysis serves as the operational application of The Stigler Equilibrium: Regulatory Capture and the Structure of Free Markets (January 2026), which identifies capture as an informational outcome where concentrated beneficiaries out-organize diffuse victims.
Utilizing the Dual (Nash-Stigler) Equilibrium Architecture, we demonstrate how the Department of Justice (DOJ) and Federal Trade Commission (FTC) function as a “Harm Clearinghouse” that manages institutional risk by exporting structural competitive costs to the public in order to avoid Nash-terminating structural remedies.
Through the lens of the Strategic Behavioral Coordination (SBC) vision, we identify three distinct phases—Diversion, Dilution, Protection—that allow federal agencies to maintain a monopoly on enforcement while systematically externalizing the costs of regulatory capture.
This analysis provides the first falsifiable foresight mapping of the “Federal Failure Mode,” establishing the baseline for why decentralized state-level action is a necessary market-clearing mechanism for the enforcement market.
Equilibrium Definition Clarifier
This document defines an equilibrium; it does not run a foresight simulation nor advance a normative vision statement. Installment I specifies the structural conditions, incentive alignments, and termination constraints under which federal antitrust enforcement predictably stabilizes failure through cost externalization. It identifies the control logic governing agency behavior, firm adaptation, and public cost allocation, and it articulates falsification thresholds for that logic. By design, this installment precedes case-specific Cognitive Digital Twin simulations and Vision Function routing. Those applications depend on the equilibrium defined here; they do not substitute for it. Treating equilibrium definition as distinct from prediction is necessary to preserve analytical clarity and to avoid conflating system architecture with instance-level outcomes.
Falsification Contract: Installment I
The primary value of this framework lies in making qualitative institutional observations falsifiable. MindCast AI leading with this contract demonstrates that the objective is stress-testing mechanisms rather than soliciting endorsement of conclusions. Every claim made in this installment is subject to the following empirical constraints:
Nash Falsifier: If a federal agency successfully internalizes a structural harm via a behavioral remedy that alters firm incentives rather than merely constraining conduct, leading to a measurable 15% increase in market entry within 24 months, the “Dilution Phase” thesis is false.
Stigler Falsifier: If the DOJ/FTC “Clearance Agreement” process is reformed to include a mandatory “Structural Integrity Audit” (using SBC Vision constraints) that prevents the routing of exclusion harms to consumer protection silos, our “Routing Geometry” thesis is false.
GPI Falsifier: If the Grammar Persistence Index for federal merger settlements drops by 30% without a corresponding increase in judicial defeats, our “Linguistic Lock” thesis is false.
Scope Control: Foundational Premises
This installment advances the analysis by formalizing federal enforcement failure as a stable equilibrium condition, building upon the established premises of our previous work. These findings are treated as the analytical baseline for the series:
Federal Political Market Failure and State Substitution as a Free-Market Corrective (January 2026): Establishes the structural baseline for federal paralysis and the economic necessity of states acting as a competitive corrective.
Briefing for State Attorneys General: Federal Inaction Has Elevated State Authority (January 2026): Provides the empirical evidence for the rise of state authority as a direct tactical response to the federal enforcement vacuum.
Trump and Antitrust Authority Routing: The Mechanics of Institutional Drift (January 2026): Identifies the technical “routing” patterns used to manipulate agency jurisdiction for political and institutional ends.
The Stigler Equilibrium: Regulatory Capture and the Structure of Free Markets (January 2026): Provides the informational and economic theory required to model capture as a stable, predictable market state.
Contact mcai@mindcast-ai.com to partner with us on Law and Behavioral Economics foresight simulations. See recent publications: China’s H200 Import Block and the Reordering of National Innovation Control, The Two-Gate Game (Jan 2026), Foresight on Trial, The Diageo Litigation, How MindCast AI Predicted Institutional Behavior—Before the Courts Acted (Jan 2026).
I: The Routing Geometry — Clearance Agreements as Risk Valves
Antitrust authority routing is traditionally viewed as a jurisdictional negotiation between the DOJ and FTC intended to ensure administrative efficiency and prevent duplication. However, when analyzed through the Nash Equilibrium termination conditions established in The Dual (Nash-Stigler) Equilibrium Architecture (January 2026), the “Clearance Agreement” process functions as a strategic valve for exporting institutional risk. By routing structural competition harms—such as exclusion or foreclosure—into consumer protection or conduct-level silos, agencies successfully avoid the high-stakes, multi-year litigation required to actually fix a market. This strategic diversion allows the agency to reach a “Pseudo-Equilibrium” where they appear active to political stakeholders while the underlying structural rot is exported directly to the public balance sheet.
In our framework, this diversion is measured by the Grammar Persistence Index (GPI). The GPI tracks the reuse of legacy legal syntax to suppress novel structural inquiry; a high index score indicates that an agency is “linguistically locked,” prioritizing the aesthetics of procedural compliance over the functional reality of market exclusion. When the DOJ or FTC routes a merger review through a consumer protection lens, the GPI spikes, signalling a Nash-termination based on institutional path-dependence rather than market-clearing logic. This creates a durable enforcement blind spot where firms can rationally design strategies that are structurally harmful but linguistically invisible to the federal enforcer.
II: The Mispricing Metric — Consumer Protection as a Stiglerian Subsidy
The substitution of consumer protection for structural antitrust represents a fundamental failure of Cognitive Disciplinewithin the federal enforcement apparatus. As defined in The Stigler Equilibrium: Regulatory Capture and the Structure of Free Markets (January 2026), capture is an informational outcome where concentrated beneficiaries out-organize diffuse victims to dictate the limits of inquiry. At the federal level, this equilibrium is “captured” by the prohibitively high cost of proving structural harm, causing agencies to default to consumer protection where the Marginal Integrity Gain (MIG)—the verified signal added by deep structural inquiry—is perceived to be lower than the Marginal Compute Cost (MCC)—the administrative and political capital required for litigation.
This leads to a systemic mispricing of market power where the penalty is decoupled from the actual structural damage inflicted. While a firm may pay a multi-million dollar fine for a deceptive transaction, the structural monopoly power that allowed the deception to occur remains unpriced and untouched by the regulator. These penalties are internalized by firms as routine costs of business, while the broader externalities—such as suppressed innovation and wage stagnation—remain dispersed across the economy. Federal reliance on these behavioral “market aesthetics” essentially stabilizes a self-stabilizing terminal state of failure where scale, opacity, and strategic delay are actively rewarded.
III: Externality Mapping — Identifying the Payors of Capture
The “Harm Clearinghouse” model functions by converting structural injuries into a ledger of unpriced externalities borne by diffuse market participants. To understand the stability of the Stigler Equilibrium, we must map exactly who pays for enforcement failure and how those costs manifest across the market. By quantifying these exported harms, we transition from abstract policy critique to a concrete economic audit that makes federal inaction legible as a public tax.
Our Externality Mapping identifies four primary categories of payors:
Consumers: Face “Slow-Burn Inflation” through quality decay and price opacity that remains below the threshold of transaction-level deception.
Workers & Suppliers: Experience “Monopsony Drift,” where suppressed competition for inputs results in wage stagnation and capital starvation for small entrants.
Competitors: Suffer “Foreclosure Externalities,” where dominant firms use conduct-level settlements to lock in structural advantages that raise the barrier to entry.
State Authorities: Inherit “Fiscal Spillovers,” bearing the localized costs of market rot that federal agencies have exported to avoid institutional friction.
By systematically identifying these payors, the framework reveals that federal “stability” is purchased at the direct expense of market integrity and localized welfare. This mapping proves that the capture of federal enforcement is not a victimless procedural delay, but a transfer of wealth and agency from the public to concentrated actors. This distribution of costs creates the rational incentive for firms to further refine their engagement with the “Harm Clearinghouse,” transforming the externalization of harm into a sophisticated competitive strategy.
IV: Dynamic Firm Strategy — Rational Adaptation to the Clearinghouse
Market participants are not passive observers of the federal failure mode; they are rational agents who co-evolve strategies to exploit the “Harm Clearinghouse” equilibrium. Once a firm identifies that the federal enforcer defaults to Consumer Protection routing to avoid structural litigation, the firm’s strategic calculus shifts from avoiding harm to managing the “routing probability.” This adaptation transforms regulatory capture from an external influence into a core component of firm strategy, ensuring the Stigler Equilibrium remains self-correcting in favor of dominant actors.
Key behavioral adaptations in the firm-enforcer loop include:
Syntactic Camouflage: Structuring exclusionary conduct as discrete “consumer choice” initiatives to spike the agency’s GPI.
Information Overloading: Flooding the discovery process to intentionally depress the agency’s MIG, forcing a Stigler-termination of the inquiry.
Remedy Prototyping: Proposing behavioral “market aesthetics” early in the review cycle to give agencies an easy path to a conduct-based settlement.
The co-evolution of firm strategy and federal enforcement logic creates a self-reinforcing feedback loop that stabilizes capture as the default market state. By rationally adapting to the agency’s preference for transaction-level settlements, firms ensure that the true structural cost of their dominance is never internalized by the federal system. This strategic environment rewards those who can most effectively navigate the “Harm Clearinghouse,” creating a terminal equilibrium that necessitates the introduction of competitive enforcement pressure from state-level actors to break the cycle.
Section V: The Operational Detection Framework — A Methodology for Substitution
The “Harm Clearinghouse” model provides more than a diagnosis; it offers a replicable methodology for State Attorneys General and private litigants to identify where federal routing has created actionable gaps. By treating the four-phase externalization cycle (Diversion, Dilution, Externalization, and Substitution Signal) as a diagnostic template, state-level actors can systematically detect where structural market costs have been exported to their jurisdictions.
This framework transforms the equilibrium definition into an operational instrument for substitution. When a State AG detects high GPI in a federal clearance agreement combined with a clear “Fiscal Spillover” in their local budget, the framework identifies a Substitution Signal. This allows state-level intervention to be positioned not as political overlap, but as the necessary market-clearing response to a documented federal externality.
Section VI: Equilibrium Instantiations
The following matters are presented as sector-specific applications of the externalization cycle defined in Sections I–V. These instantiations demonstrate the framework’s adaptability across different market geometries, identifying where structural competitive costs are exported and how capture stabilizes across varied administrative silos.
VII: Sectoral Case Mappings (Mechanism Lens)
The following sectoral mappings translate the “Harm Clearinghouse” architecture into observable market phenomena. By isolating the four-phase externalization cycle—Diversion, Dilution, Externalization, and Substitution Signal—across diverse industries, we demonstrate how the Stigler Equilibrium persists independently of sector-specific conditions. These cases are analyzed as direct applications of the Nash-Stigler control logic, identifying the specific points where structural competitive harm is converted into dispersed public costs.
1. Compass (Residential Real Estate)
Diversion: Potential structural brokerage coordination and multi-sided platform dominance reframed as transaction-level conduct or discrete transparency issues.
Dilution: Behavioral remedies decoupled from the underlying market architecture, failing to address structural commission-sharing incentives.
Externalities: Real estate agents, homebuyers, and sellers bear the “Invisible Fee” of MLS-locked infrastructure and suppressed innovation in brokerage models.
Substitution Signal: Emerging pressure from State Attorneys General and private litigation addressing the structural components of the brokerage market.
2. Live Nation Entertainment (Live Events & Vertical Foreclosure)
Diversion: Decades-long reliance on conduct-based consent decrees to manage structural vertical integration between venue management, promotions, and ticketing.
Dilution: Repeated “settlement-and-monitor” cycles that provide an appearance of activity while the underlying integration structure prevents competitive entry. This is the ultimate example of the “Dilution” phase, where the cost of entry for competitors is ignored in favor of pricing consumer “convenience” fees.
Externalities: Artists suffer reduced bargaining power; venues face ecosystem lock-in; consumers bear ticket-pricing inflation driven by a total lack of structural platform competition.
Substitution Signal: Renewed multi-state coordination targeting the unwinding of vertical foreclosure as the only mechanism to re-internalize artist and venue costs.
3. Cryptocurrency ATM Market (Financial Infrastructure & Vulnerable Populations)
Diversion: Systemic market-integrity issues routed into the “Consumer Protection” silo, focusing on discrete fraud alerts rather than the structural exploitation of predatory payment rails.
Dilution: Transaction-level fines and warnings internalized as routine overhead while the structural exploitation of unbanked and elderly populations continues unpriced. The complexity of these “unpriced” harms often leads to a premature MIG/MCC collapse in federal inquiry.
Externalities: Vulnerable and elderly consumers bear direct fraud costs; state fraud and social-service budgets bear the indirect “Fiscal Spillover” of systemic financial destabilization in local communities.
Substitution Signal: Accelerated state-level legislation and AG enforcement actions targeting the underlying structural integrity of the terminal market to protect local financial ecosystems.
4. Hewlett Packard Enterprise (Enterprise Tech Infrastructure)
Diversion: Clearance grammar utilized to frame merger reviews around narrow product-market overlaps while ignoring broader structural “merger framing” strategies.
Dilution: MIG/MCC collapse in structural review, leading to agency acceptance of conduct commitments rather than architectural challenges to ecosystem dominance.
Externalities: Enterprise customers face innovation cycle stagnation and vendor lock-in; rivals suffer from ecosystem foreclosure.
Substitution Signal: Customer-driven demand for state-level data-interoperability guardrails to prevent federal “routing” from locking in enterprise dependencies.
These sector-specific mappings demonstrate that the “Harm Clearinghouse” is not a theoretical abstraction but an operational reality across the American economy. By applying the same diagnostic lens to real estate, tech, finance, and entertainment, we see that the externalization cycle consistently rewards structural dominance while penalizing the public. This alignment of outcomes across disparate markets reinforces the conclusion that federal failure is a systemic feature of the current enforcement architecture, rather than an accidental byproduct of isolated policy errors.
VIII: Pattern Recognition Across Sectors
The instantiations mapped above confirm that federal failure is not a collection of sector-specific scandals, but a series of predictable equilibrium outcomes. Across Real Estate, Entertainment, Crypto, and Tech, the same mechanisms repeat: routing grammars are used to downgrade structural risks, and search discipline collapses as soon as a settleable “market aesthetic” is identified. The consistency of these patterns across radically different market geometries identifies the federal “Monopoly of Supply” as the core barrier to market-clearing enforcement.
IX. Conclusion: Toward an Internalization Architecture
The transition from a federal enforcement monopoly to a competitive, state-integrated model is an economic necessity for market clearing. Installment I has defined the “Harm Clearinghouse” as a self-stabilizing equilibrium that persists because its primary output—unpriced externalities—is borne by diffuse victims rather than the enforcer. Breaking the cycle requires a structural intervention that forces the re-internalization of competitive harm, which is the functional objective of state-level action.
The mapping of this failure mode provides the epistemic foundation for the installments that follow. In Installment II, we will move from diagnosis to operational mechanics, detailing how State Enforcement as Competitive Supply functions as the primary instrument for pricing the structural costs that federal agencies refuse to recognize.