Maximization of Long-Term Consumer Surplus Is the Optimal Economic Policy

15 Pages Posted: 6 Jun 2018

Date Written: May 15, 2018

Abstract

In the real world, markets are never in equilibrium and there is insufficient information to determine the ideal policy. Maximizing long-run consumer surplus is a heuristic for approximating optimal economic policy. Ideally, if the economy was at an efficient equilibrium, we’d maximize both total welfare and consumer surplus simultaneously. The reason for focusing on consumer surplus is that producers have the resources to protect their surplus and to exploit consumers, while the reverse is rarely true. Given potential large dead weight losses from attempts to transfer consumer surplus, creating barriers to such transfers could increase overall welfare.

Keywords: economic policy, consumer surplus, efficiency, merger analysis, regulation

JEL Classification: D6, D72, K2, L41, L51, Q48

Suggested Citation

Isser, Steve N., Maximization of Long-Term Consumer Surplus Is the Optimal Economic Policy (May 15, 2018). Available at SSRN: https://ssrn.com/abstract=3178768 or http://dx.doi.org/10.2139/ssrn.3178768

Steve N. Isser (Contact Author)

Independent ( email )

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Elkins Park, PA 19027
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267-966-5066 (Phone)

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