Law & Society Blog

Joseph Stiglitz has posted an excellent review of Benjamin Friedman’s new book The Moral Consequences of Economic Growth. The moral implications of economic growth are, indeed, among the most pressing philosophical and practical problem of our time. Few choices affect more people more immediately than economic policies.

Consider the following problem, which was presented by Paul J. Ferraro and Laura O. Taylor of Georgia State University to about 200 Ph.D. economists at the 2005 annual meetings of the American Economic Association:
You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the […]

Here is a very brief, highly readable explanation of the critical insight underlying the Coase theorem, courtesy of Larry Solum.

In Moral Values and Market Attitudes, Wayne Baker and Melissa Forbes (both University of Michigan) explore how moral values influence market behavior. Not surprisingly, that influence is pervasive. For example, a nationalist is more likely to boycott foreign products than a non-nationalist. (Of course, once expressing one’s values through the market becomes too inconvenient, we […]

[Law & Economics] In 1956 the Supreme Court concluded that DuPont, accused by the government of having monopolized the market for cellophane, did not have sufficient market power, because, in a properly defined product market, it was unable to raise prices profitably, that is, so many customers would have stopped buying the firm’s products (or would have bought less) that the higher prices extracted from the loyal customers would not have made up for the loss…. Moreover, my choices of the least unappealing alternatives will, if others share my preferences, provide incentives for producers to supply more of what I want, and to expand or shift the set of available options in a direction that will provide greater value to me, given my set of preferences.Which brings me to an important point about the goals of antitrust policy.

First, supra-competitive prices as a result of market power are inefficient, because now there are units whose marginal utility exceed marginal cost that are not being made and cannot travel to those who value them most…. So it may well be more beneficial for society, at least in the long run (which is getting increasingly shorter, another implication of Moore’s Law) to trade some allocative and productive efficiency for greater corporate profits, if such profits and the additional capital that they attract are being re-invested in research and development.Against this backdrop, it seems that the discussion about the goals of antitrust and economic policy would benefit if we abandoned the “consumer welfare‚Äù or “consumer benefit‚Äù rhetoric for more explicit statements about how we want to make the pie (that is, what kind of efficiencies we promote), and how we propose to slice it (that is, what distributive mechanism and criteria we prefer).