Antitrust and Inequality

Abstract

In its current form, antitrust law is often said to advance consumer welfare and to disregard economic inequality. But with the right priority-setting and other modest reforms, efforts to increase consumer welfare might simultaneously reduce economic inequality. Because monopoly and monopsony benefit shareholders at the expense of workers and consumers, ideal enforcement of antitrust law should redistribute resources from shareholders to workers and consumers. Antitrust enforcement agencies seeking to reduce inequality might adjust their priorities and target markets that are disproportionately important for low-income people. We also suggest that antitrust law could, with little violence, be turned toward advancing consumer welfare (in the sense of utility) rather than consumer surplus. Agriculture and health care would be good places to start; food and medicine compose a larger share of the budget of low-income people than of others, and these goods are essential to basic well-being. Regulators should also give priority to labor markets, especially labor markets in which lower-income people participate, and especially where pay gaps based on race or gender are large. In some cases, it is also appropriate to consider sacrificing economic efficiency for distributional goals by introducing distributional weights into antitrust analysis; doing so can increase social welfare.

Keywords: antitrust, equality, inequality, consumer welfare

JEL Classification: K21, L4, L40, L43