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Nobel Speculation Time

TOTM Every year around this time, I repeat my prediction that Armen Alchian, Harold Demsetz, and Ben Klein will win the Nobel Prize for contributions to . . .

Every year around this time, I repeat my prediction that Armen Alchian, Harold Demsetz, and Ben Klein will win the Nobel Prize for contributions to the theory of the firm, property rights, and transaction cost economics.  I understand that last year’s prize makes this combination less likely, but I see no reason to deviate.  I make the case for that combination, one that I think compares quite favorably to the more frequently discussed trio of Hart-Holmstrom-Tirole, in the linked post.  One can also imagine an Alchian / Demsetz prize for narrowly grounded in their work on property rights.

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Misbehavioral Economics: The Case Against Behavioral Antitrust

TOTM In a policy speech earlier this year, Commissioner J. Thomas Rosch of the Federal Trade Commission advocating the incorporation of behavioral economics into antitrust analysis . . .

In a policy speech earlier this year, Commissioner J. Thomas Rosch of the Federal Trade Commission advocating the incorporation of behavioral economics into antitrust analysis suggested one concern that others might have with the approach was that “behavioral economics was simply liberalism masquerading as economic thinking.”   The Commissioner himself has been a vocal proponent of incorporating insights from behavioral economics into antitrust, as has already been done in the consumer protection realm (see, e.g. CFPB).  Indeed, with Cass Sunstein’s appointment at OIRA, the recent creation of a “Nudge” team in David Cameron’s Cabinet (aka “behavioral insight team”) in the UK, the CFPB, and the calls from at least one Federal Trade Commissioner to modify antitrust analysis suggest the behavioral regulatory regime is no longer right around the corner; it has arrived.

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Antitrust & Consumer Protection

McDonald’s, Mini-Meds, and Medical Loss Ratios: What’s to come, and what can Sebelius do about it?

TOTM Yesterday, the Wall Street Journal ran an article entitled McDonald’s May Drop Health Plan. The article reported that “McDonald’s Corp. has warned federal regulators that . . .

Yesterday, the Wall Street Journal ran an article entitled McDonald’s May Drop Health Plan. The article reported that “McDonald’s Corp. has warned federal regulators that it could drop its health insurance plan for nearly 30,000 hourly restaurant workers unless regulators waive a new requirement of the U.S. health overhaul.” The insurance plan at issue is a so-called “mini-med” plan, which provides limited coverage but at low prices. The Journal reports, for example, that “[a] single worker can pay $14 a week for a plan that caps annual benefits at $2,000, or about $32 a week to get coverage up to $10,000 a year.”

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Financial Regulation & Corporate Governance

In Elizabeth Warren We Trust?

Popular Media The Obama administration has promised that the Federal Reserve’s new Consumer Financial Protection Bureau will be independent from politics, a model of regulatory expertise grounded . . .

The Obama administration has promised that the Federal Reserve’s new Consumer Financial Protection Bureau will be independent from politics, a model of regulatory expertise grounded in sound data and economics. Naming Harvard Law Prof. Elizabeth Warren as de facto agency head undermines both goals.

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Financial Regulation & Corporate Governance

Some Praise for the FTC

TOTM We dole out at least our fair share of criticism for the Federal Trade Commission here.  Now its time for some credit where its due.  . . .

We dole out at least our fair share of criticism for the Federal Trade Commission here.  Now its time for some credit where its due.  Historically, one of the consistent highlights of the Commission’s output has been its competition policy advocacy work.  In this case, the FTC (or at least the Bureau of Competition, Bureau of Economics, and the Office of Policy and Planning) provided comments on New Jersey Senate Bill 484.

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Antitrust & Consumer Protection

Beer v. Pot, Public Choice Edition

TOTM The political economy of alcohol regulation has always been fascinating.  But things took an interesting turn of late (HT: Marginal Revolution) when a beer industry . . .

The political economy of alcohol regulation has always been fascinating.  But things took an interesting turn of late (HT: Marginal Revolution) when a beer industry trade group took a stand against a proposition that would legalize marijuana in California…

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Antitrust and Congress

TOTM Last Thursday and Friday, I attended a conference at Case Western Law School on the Roberts Court’s business law decisions. I presented a paper on . . .

Last Thursday and Friday, I attended a conference at Case Western Law School on the Roberts Court’s business law decisions. I presented a paper on the Court’s antitrust decisions. Adam Pritchard, Matt Bodie, and Brian Fitzpatrick presented papers considering the Court’s treatment of, respectively, securities law, labor and employment law, and pleading standards.

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Antitrust & Consumer Protection

The Roberts Court and the Limits of Antitrust

Scholarship Abstract Antitrust is back in vogue at the U.S. Supreme Court. Whereas the Rehnquist Court decided few antitrust cases in its latter years (only one . . .

Abstract

Antitrust is back in vogue at the U.S. Supreme Court. Whereas the Rehnquist Court decided few antitrust cases in its latter years (only one from 1993 to 1995, one each year from 1996 through 1999, and none from 2000 to 2003), the Roberts Court issued seven antitrust decisions in its first two years alone. Numerous commentators have characterized the Roberts Court’s antitrust decisions as radical departures that betray a pro-business, anti-consumer bias. While some of the decisions do represent significant changes from past practice (see, e.g., Leegin, which overruled the 1911 Dr. Miles rule of per se illegality for minimum resale price maintenance, and Twombly, which abrogated the infamous “no set of facts” pleading standard set forth in the 1957 Conley v. Gibson decision), the “pro-business/anti-consumer” characterization of the Roberts Court’s antitrust decisions is inaccurate. The characterization – caricature, really – fails to appreciate the fundamental limits of antitrust, a body of law that requires judges and juries to make fine distinctions between procompetitive and anticompetitive behaviors that frequently resemble each other. While false acquittals of anticompetitive conduct may harm consumers, so may false convictions of procompetitive actions. And efforts to eliminate errors in liability judgments are themselves costly. Optimal antitrust rules will therefore aim to minimize the sum of decision costs (the costs of reaching a liability decision) and expected error costs (the social losses from false convictions and false acquittals). Each of the Roberts Court’s antitrust decisions can be defended in light of this “decision-theoretic” approach, an approach calculated to maximize the effectiveness of the antitrust enterprise, to the ultimate benefit of consumers. This Article first describes the fundamental limits of antitrust and the decision-theoretic approach such limits inspire. It then analyzes the Roberts Court’s antitrust decisions, explaining how each coheres with the decision-theoretic model. Finally, it predicts how the Court will address three issues likely to come before it in the future: tying, loyalty rebates, and bundled discounts.

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Antitrust & Consumer Protection

Antitrust Karma, the Microsoft-Google Wars, and a Question for Rick Rule

TOTM The WSJ recently published the next installment of the Microsoft-Google antitrust wars.  A Google representative argues “competition is one click away”; Charles (“Rick”) Rule, Microsoft’s . . .

The WSJ recently published the next installment of the Microsoft-Google antitrust wars.  A Google representative argues “competition is one click away”; Charles (“Rick”) Rule, Microsoft’s antitrust attorney, argues that Google’s conduct might harm competition.  Rule’s main point is summed up in the first line of his piece: “what goes around comes around.”  The longer version of the argument is as follows: (1) Microsoft was faced with antitrust allegations instigated by rivals that its business practices harmed competition; (2) Microsoft defended on various grounds, including that there was ample competition in high-tech markets; (3) Microsoft lost and new law was made; (4) Google is now faced with similar allegations, brought on and/or instigated by similar rivals (including Microsoft), and involving similar defenses; (5) fair play and consistency dictates that the same standard be applied to Microsoft and Google; (6) thus, Google is an antitrust problem and should lose a suit brought against it.  I will refer to (1)-(6) as the “antitrust karma” argument.

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Antitrust & Consumer Protection