Mark Glick’s research while affiliated with University of Utah and other places

The fundamental originating principle of law and economics (L&E) is that legal decisions should be (and are) based on maximizing efficiency. But L&E proponents do not define “efficiency” in the way agreed to by most economists, as Pareto Efficiency. A Pareto optimal condition is obtained when no one can be made better off without making someone worse off. Pareto Improvements are win-win changes where no losers exist. In the judicial system, however, there are always winners and losers, because under Article III § 2 of the Constitution a legal case does not exist unless there is a justiciable “case or controversy” in need of resolution. Unable to use Pareto Efficiency, L&E scholars have been forced to adopt alternative definitions of efficiency. Most L&E scholars claim to define “efficiency” based on the work of Kaldor and Hicks, but (perhaps unwittingly) instead use a definition of “efficiency” derived from the 19th century idea of consumer surplus, which encompasses L&E notions such as “wealth maximization,” and “consumer welfare” in antitrust. Neither of these alternative definitions is viable, however. Outside of L&E, the Kaldor-Hicks approach has long been recognized to be riddled with logical inconsistencies and ethical failures, and the surplus approach is even more deficient. Remarkably, virtually none of the numerous L&E textbooks even hint at such problems. Critically, all definitions of efficiency improvements in economics are biased in favor of wealthy individuals or firms, either because they are dependent on the status quo ante distribution of assets, or because they bestow large advantages on parties with political influence or who can afford to bring lawsuits quickly. Many L&E practitioners treat efficiency improvements instead as being objectively good, an error revealing that L&E is primarily motivated by its neoliberal policy agenda.

The Big Tech companies, including Google, Facebook, Amazon, Microsoft and Apple, have individually and collectively engaged in an unprecedented number of acquisitions. When a dominant firm purchases a start-up that could be a future entrant and thereby increase competitive rivalry, it raises a potential competition issue. Unfortunately, the antitrust law of potential competition mergers is ill-equipped to address tech mergers. We contend that the Chicago School’s assumptions and policy prescriptions hobbled antitrust law and policy on potential competition mergers. We illustrate this problem with the example of Facebook. Facebook has engaged in 90 completed acquisitions in its short history (documented in the Appendix to this paper). Many antitrust commentators have focused on the Instagram and WhatsApp acquisitions as cases of mergers that have reduced potential competition. We show the impotence of the potential competition doctrine applied to these two acquisitions. We suggest that the remedy for Chicago School damage to the potential competition doctrine is a return to an empirically tractable structural approach to potential competition mergers.

Since the publication of Robert Bork’s The Antitrust Paradox, lawyers, judges, and many economists have defended “consumer welfare” (CW) as a standard for decisions about antitrust goals and enforcement priorities. This article argues that the CW is actually an empty concept and is an inappropriate goal for antitrust. Judge Bork adopted CW from economics where welfare unambiguously measured utility or well-being. Welfare economists concede that there is no credible measurable link between price and output and human well-being. This means that the concept of CW does not legitimate limited antitrust enforcement nor does it justify the exclusion of other antitrust goals that require more active enforcement practices. This article contends that antitrust policy is not welfare based at all and, that if it were, antitrust policy and enforcement would differ significantly from the Chicago School vision. Without the fiction that economists can establish that in the short run lower price and higher output measurably increase welfare more than other goals, recent defenses of the CW standard resolve down to arguments based on unsupported assumptions.

This article presents an historical analysis of the antitrust laws. Its central contention is that the history of antitrust can only be understood in light of U.S. economic history and the succession of dominant economic policy regimes that punctuated that history. The antitrust laws and a subset of other related policies have historically focused on the negative consequences resulting from the rise, expansion, and dominance of big business. Antitrust specifically uses competition as its tool to address these problems. The article traces the evolution of the emergence, growth, and expansion of big business over six economic eras: the Gilded Age, the Progressive Era, the New Deal, the post–World War II Era, the 1970s, and the era of neoliberalism. It considers three policy regimes: laissez-faire during the Gilded Age and the Progressive Era, the New Deal, policy regime from the Depression through the early 1970s, and the neoliberal policy regime that dominates today and includes the Chicago School of antitrust. The principal conclusion of the article is that the activist antitrust associated with the New Deal that existed from the late 1930s to the 1960s resulted in far stronger economic performance than have the policies of the Chicago School that have dominated antitrust policy since the 1980s.

Since the publication of Robert Bork’s The Antitrust Paradox, lawyers, judges, and many economists have defended “Consumer welfare” (CW) as a standard for decisions about antitrust goals and enforcement priorities. This paper argues that the CW is actually an empty concept and is an inappropriate goal for antitrust. Welfare economists concede that there is no credible measurable link between price and output and human well-being. This means that the concept of CW does not legitimate limited antitrust enforcement, nor does it justify the exclusion of other antitrust goals that require more active enforcement practices. This paper contends that antitrust policy is not welfare based at all, and that if it were, antitrust policy and enforcement would differ significantly from the Chicago School vision. Without the fiction that economists can establish that in the short run lower price and higher output measurably increases welfare more than other goals, recent defenses of the CW standard resolve down to arguments based on unsupported assumptions.

This is the first installment of a two-part commentary on the New Brandeis School (the “New Brandeisians”) in Antitrust. In this first part, I examine why the New Brandeisians are correct to reject the consumer welfare standard. Instead of arguing, as the New Brandeisians do, that the consumer welfare standard leads to unacceptable outcomes, I argue that the consumer or total welfare standard was theoretically flawed and unrigorous from the start. My basic argument is that antitrust law addresses the impact of business strategies in markets where there are winners and losers. For example, in the classical exclusionary monopolist case, the monopolist’s conduct is enjoined to increase competition in the affected market or markets. As a result of the intervention, consumers benefit, but the monopolist is worse off. One hundred years of analysis by the welfare economists themselves shows that in such situations “welfare” or “consumer welfare” cannot be used as a reliable guide to assess the results of antitrust policy. Pareto Optimality does not apply in these situations because there are losers. Absent an ability to divine “cardinal utility” from observations of market behavior, other approaches such as consumer surplus, and compensating and equivalent variation cannot be coherently extended from the individual level to markets. The Kaldor-Hicks compensation principle that is in standard use in law and economics was created to address problems of interpersonal comparisons of utility and the existence of winners and losers. However, the Kaldor-Hicks compensation principle is also inconsistent. Additional problems with the concept of welfare raised by philosophers, psychologists, and experimental economists are also considered. In light of this literature, the New Brandeisians are correct to reject Judge Bork’s original argument for adoption of the consumer welfare standard, but for deeper reasons than they have expressed thus far.