Consumer Welfare Theory as an Ethical Consideration:: An Essay on Hipsters, Invisible Feet, and the “Science” of Economics

Abstract

This article outlines the principle of efficiency as taken from physics and misapplied into the realm of economics. The result of the misapplication has been a narrow view of antitrust policy, culminating in an extremely conservative application of the consumer welfare standard. The result of such policy has been increasing concentration in many industries, abdication of any examination of monopoly power in the context of Section 2 of the Sherman Act, and dogmatic defense of “consumer welfare” as the only scientific approach to antitrust law. Part II reviews of the original goals of antitrust, as viewed without the lens of present-day economic efficiency. These are policy goals as described in legislative history and judicial development of common law. As such, they are ethical considerations distinct from consumer welfare. In part III, the article discusses the central tenets of economics in antitrust policy. These central notions are policy considerations that are misapplications of physics. Part IV discusses the physics definition of efficiency, with some insights as to the issues arising from adopting such a standard in terms of antitrust markets. Part V addresses the failures of antitrust using the lens of physics, explaining that consumer welfare is an ethical argument, not a scientific one. Part VI addresses other potential ethical standards for antitrust enforcement, as well as empirical evidence that support such norms. Part VII offers concluding thoughts where the article argues that there are superior ethical norms that would boost antitrust enforcement and that are consistent with the goals of antitrust.