In 1983, the Assistant Attorney General of the Antitrust Division in the United States Department of Justice, Bill Baxter, did something that would be unfathomable today. He published an academic paper in a scholarly journal that related directly to a piece of antitrust litigation then pending in federal court in which he had served as an expert. The paper did not ignite a storm of controversy. Today, the paper is recognized as the seminal work on a topic that has attracted considerable attention for the last several years and seems likely to remain on the public agenda in the United States and elsewhere for the indefinite future: interchange.
The consensus on Baxter's paper ends there. There is considerable disagreement about what Baxter's paper actually says. The various interpretations of "Bank Interchange of Transactional Paper" flow from two omissions in the paper that a contemporary reader will notice-a formal model and discussion of the work of other economists. Baxter's article has none of the former and very little of the later.
With some trepidation, this essay attempts to make the going easier. It provides a short map of the paper. It also fills in some of the obvious holes in Baxter's article and flags portions where an unwary reader might get trapped. Baxter's article, like a proverbial Michelin-starred restaurant, is worth the trip. But it is also worth attempting to smooth an otherwise bumpy journey.