Slow wage growth and rising inequality over the past few decades have pushed economists more and more toward the study of monopsony power—particularly firms’ monopsony power over workers. Antitrust policy has taken notice. For example, when the Federal Trade Commission (FTC) and U.S. Justice Department (DOJ) initiated the process of updating their merger guidelines, their request for information included questions about how they should respond to monopsony concerns, as distinct from monopoly concerns. ?

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Since its founding in 1914, the Federal Trade Commission (FTC) has held a unique and multifaceted role in the U.S. administrative state and the economy. It possesses powerful investigative and information-gathering powers, including through compulsory processes; a multi-layered administrative-adjudication process to prosecute “unfair methods of competition (UMC)” (and later, “unfair and deceptive acts and practices (UDAP),” as well); and an important role in educating and informing the business community and the public. What the FTC cannot be, however, is a legislature with broad authority to expand, contract, or alter the laws that Congress has tasked it with enforcing.

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Abstract

We study the factors that predict medical malpractice (“med mal”) insurance premia, using national data from Medical Liability Monitor over 1990 to 2017. A number of core findings are not easily explained by standard economic theory. First, we estimate long run elasticities of premia to insurers’ direct cost (payouts plus defense costs), allowing for lags of up to four years, of only around +0.40, when one might expect elasticities near one. Second, state caps on malpractice damages predict a roughly 50% higher ratio of premia to direct costs even though, in competitive markets, a damages cap should affect premia primarily through effect on cost. A difference-in-differences analysis of the “new cap” states that adopted caps during the early 2000’s provides evidence supporting a causal link between cap adoption and the ratio of premium to direct cost. Third, the premium-to-cost ratio, which one might expect to be fairly constant over time, instead varies widely both across states at a given time and within states across time. Our results suggest that insurance companies do not fully adjust revenues to changes in direct costs even over long time periods. Insurers in new-cap states have been able to charge apparently supra-competitive prices for a sustained period.

A highly competitive economy is characterized by strong, legally respected property rights. A failure to afford legal protection to certain types of property will reduce individual incentives to participate in market transactions, thereby reducing the effectiveness of market competition. As the great economist Armen Alchian put it, “[w]ell-defined and well-protected property rights replace competition by violence with competition by peaceful means.”

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Background…

California’s state Assembly earlier this year passed A.B. 2408, which would impose a duty of care on social-media platforms for “any design, feature, or affordance that causes a child user… to become addicted to the platform.” The bill,  which has also cleared the state Senate Judiciary Committee, would empower parents to bring class-action suits against Big Tech platforms, with minimum statutory damages set at $1,000 per class member. California prosecutors also could seek damages of $25,000 per violation, or $250,000 for knowing and willful violations. Liability would attach when a platform becomes aware that an algorithm is potentially addictive.

But…

Not only is the theory of social-media addiction strongly contested, but it would be difficult, if not unconstitutional, to enforce the bill’s terms. The line differentiating fomenting user addiction and making a platform more attractive to users is exceedingly blurry. Moreover, a strong case can be made that A.B. 2408 violates the First Amendment.

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Abstract

Using hazard analysis, we study whether various physician characteristics, including prior paid claim history, gender, specialty, years of experience, type of degree (M.D. versus D.O.), country of medical school attendance (U.S. versus non-U.S.), and gender) predict future paid medical malpractice (“med mal”) claims, using detailed data on all licensed physicians and all paid claims in Illinois over a 25-year period. This level of granularity is not available using national data. After controlling for other factors, physicians with a single prior paid claim have a four-fold higher risk of future claims than physicians with zero prior paid claims. Male gender, attending a non-U.S. medical school, and practicing in a high-malpractice-risk specialty all predict higher paid claim risk. Paid claim risk is also higher for physicians with 6-15 prior years of experience than for those who are either earlier or later in their careers. We find having an M.D. (rather than a D.O.) is associated with higher paid claim risk, but only in our multiple-failure models.

Abstract

In social change contexts such as conservation or public health, marketing can communicate information, nudge people toward more socially aligned behavior, or encourage adoption of long-run solutions that permanently shift personal outcomes and/or social spillovers. These marketing options, if effective, can substitute for regulatory change to address the respective social issue. In this paper, we focus on California’s drought response, where cease and desist orders and community level fines are contingent on the effectiveness of local level voluntary change. We illustrate that a marketing challenge for the favored voluntary conservation approach of turf removal is that it ignores the preference trade-offs of those who consume the most and/or are least motivated by the social objective of conservation. We conduct sequential randomized control trials to evaluate the marketing and effectiveness of an Internet of Things (IOT) irrigation controller that helps consumers more efficiently irrigate and grow their lawns. We find that our marketing interventions for this “preference aligned” solution have higher response rates among heavy irrigators who would not otherwise conserve. Rather than cannibalizing other solutions with greater potential water savings, as some conservationists worry, our interventions lead to large persistent reductions in water usage.

In over a century of existence, the U.S. Federal Trade Commission (FTC) has been a policy leader in developing American thinking about and in enforcing antitrust and consumer protection laws pursuant to several specific statutory mandates. It has also promulgated a substantial number of consumer protection rules, dealing with a wide variety of practices. It has almost never, however, enacted substantive rules seeking to regulate specified forms of business conduct that affect competition in the marketplace.

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Executive Summary

Intermediaries may not be the consumer welfare hero we want, but more often than not, they are one that we need. Policymakers often assume that intermediaries and centralization serve as a cost to society, and that consumers are better off when provided with “more choice.” Concrete expression of this view can be found in regulatory initiatives that aim to turn “closed” platforms into “open” ones (see, in Europe, the Digital Markets Act; and in the United States, the Open App Markets Act and the American Innovation and Choice Online Act). Against this backdrop, we explain that, as with all economic goods, intermediation involves tradeoffs. Intermediaries emerge when it would otherwise be too difficult (or too costly) for groups of users to meet and interact. There is thus no guarantee that government-mandated disintermediation — such as that contemplated in the European DMA and the U.S. AICOA bill — will generate net benefits in a given case. The ongoing Epic v Apple proceedings are a good example of why it is important to respect the role of intermediaries in digital markets, and the unique benefits intermediation can bring to consumers. The upshot is that intermediaries are far more valuable than they are usually given credit for.

Read the full issue brief here.