Why Economists Should Support Populist Antitrust Goals

46 Pages Posted: 5 Jan 2023

See all articles by Mark Glick

Mark Glick

University of Utah - College of Social & Behavioral Sciences

Gabriel Lozada

University of Utah

Darren Bush

University of Houston Law Center

Date Written: December 6, 2022

Abstract

Antitrust economists have generally supported the Consumer Welfare Standard as a guide to antitrust policy questions because of its origins in Marshall’s consumer surplus approach and the general economic surplus approach to welfare economics. But welfare economists no longer support the surplus approach because decades of research pertaining to the surplus approach have uncovered numerous inconsistencies and serious ethical challenges. However, the surplus approach to welfare survives in industrial organization textbooks and among industrial organization economists that specialize in antitrust. We argue in this paper that the Consumer Welfare Standard is not a reliable standard and should be abandoned. We cite several reasons: (1) it limits antitrust goals a priori without any defensible justification, (2) it considers all transfers of surplus between stakeholders in antitrust cases to be welfare neutral, (3) it is biased in favor of big business and the rich, and (4) the accumulation of inconsistencies and problems documented by welfare economists renders the theory completely unreliable. In a final section of the paper, we preliminarily contend that modern research in welfare economics concerning the factors that influence human welfare could be used to inform a more progressive standard for determining antitrust goals.

Keywords: Consumer Welfare Standard, Consumer Surplus, Antitrust, Law and Economics, Compensating Variation, Equivalent Variation, Kaldor Hicks, Pareto Efficiency.

JEL Classification: K1, D61, L4

Suggested Citation

Glick, Mark and Lozada, Gabriel and Bush, Darren, Why Economists Should Support Populist Antitrust Goals (December 6, 2022). Institute for New Economic Thinking Working Paper Series No. 195, Available at SSRN: https://ssrn.com/abstract=4318169

Mark Glick (Contact Author)

University of Utah - College of Social & Behavioral Sciences ( email )

United States

Gabriel Lozada

University of Utah ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States

Darren Bush

University of Houston Law Center ( email )

4604 Calhoun Road
4604 Calhoun Road
Houston, TX 77204-6060
United States
713.743.3346 (Phone)

HOME PAGE: http://www.law.uh.edu/faculty/main.asp?PID=1365

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