The Unsound Theory Behind the Consumer (and Total) Welfare Goal in Antitrust

DOI10.1177/0003603X18807802
Published date01 December 2018
Date01 December 2018
AuthorMark Glick
ABX807802 455..493 Article
The Antitrust Bulletin
2018, Vol. 63(4) 455-493
The Unsound Theory Behind
ª The Author(s) 2018
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the Consumer (and Total)
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DOI: 10.1177/0003603X18807802
Welfare Goal in Antitrust
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Mark Glick*
Abstract
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 obser-
vations 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.
Keywords
goals of antitrust, new Brandeis school, consumer welfare standard, welfare economics and the law
*University of Utah, Salt Lake City, UT, USA
Corresponding Author:
Mark Glick, University of Utah, 260 Central Campus Drive, Room 4100, Salt Lake City, UT 84112, USA.
Email: glick@economics.utah.edu

456
The Antitrust Bulletin 63(4)
I. Introduction
Barry Lynn’s 2010 book, Cornered: The New Monopoly Capitalism and the Economics of Destruction,
was one of the first to challenge the current antitrust orthodoxy. According to Lynn, there are two
competing antitrust traditions: one personified by Judge Bork that embraced the “Chicago School” of
economics and a second tradition that is encapsulated in the work of Louis Brandeis.1 Since publica-
tion of Lynn’s book, there has been an avalanche of literature critical of the Chicago School and
advocating more active antitrust enforcement.2 This movement has come to be known as the New
Brandeis School or the New Brandeisians.3 The New Brandeisians has emphasized two major themes.
First, Robert Bork’s goal of consumer welfare has led antitrust jurisprudence astray and has resulted in
misguided policy that has done economic damage to the American economy.4 Second, the New
Brandeisians believe that the kind of aggressive antitrust enforcement reminiscent of the 1960s could
be a potent remedy to many of these problems. I address the New Brandeisians’ rejection of Judge
Bork’s consumer welfare goal in this article and reserve my discussion of the New Brandeisian views
of policy and history for a comparison paper. Below, I argue that Judge Bork’s introduction of his
version of welfare economics into antitrust was theoretically flawed and never should have received
uncritical acceptance by antitrust lawyers and economists. I contend that the consumer welfare stan-
dard was never rigorous, and this provides an additional foundation for jettisoning the Bork consumer
welfare standard.
In 1966, Robert Bork introduced the consumer welfare standard to the antitrust world in his
article in the Journal of Law and Economics. There, he argued the United States Congress in
1890 “intended the courts to implement (that is, to take into account in the decision of cases)
only that value we would today call consumer welfare.”5 Judge Bork’s article and subsequent
writings on the topic transformed the then contemporaneous and subsequent long-running
debate concerning the goals of the antitrust laws. At the time of Judge Bork’s paper, there
were several accepted competing goals for antitrust. These goals included defense of democracy
by dispersion of economic power,6 protection of small business,7 wealth transfers,8 and
1. BARRY C. LYNN, CORNERED: THE NEW MONOPOLY CAPITALISM AND THE ECONOMICS OF DESTRUCTION (2010). Lynn developed the
theme in The Consumer Welfare Standard in Antitrust: Outdated or a Harbor in a Sea of Doubt? Before the Senate
Committee on the Judiciary: Subcommittee on Antitrust, Competition, and Consumer Rights (Dec. 13, 2017) (testimony
of Barry C. Lynn).
2. Several authors have summarized this recent literature. For example, Lina Khan, The Ideological Roots of America’s Market
Power Problem, 127 YALE L. J. 960 (2018); Carl Shapiro, Antitrust in a Time of Populism (Working Paper, Oct. 24, 2017),
INT. J. IND. ORG (forthcoming); Daniel Crane, Antitrust’s Unconventional Politics (Michigan Law Working Paper, Mar. 2018)
VIRGINIA LAW REVIEW ONLINE (forthcoming).
3. Lina Khan, The New Brandeis Movement: America’s Antimonopoly Debate, 9 J. EUR. COMPETITION L. & POL’Y 131 (2018).
4. This argument is made most clearly by Khan, supra note 2; see also Marshall Steinbaum, Eric Harris Bernstein, & John
Sturm, Powerless: How Lax Antitrust and Concentrated Market Power Rig the Economy Against American Workers,
Consumers, and Communities (Roosevelt Inst., Feb. 2018); Marc Jarsulic, Ethan Burwitz, Kate Bahn, & Andy Green,
Reviving Antitrust: Why Our Economy Needs a Progressive Competition Policy (Center for American Progress, June
2016); Jay Shamburg, Ryan Nunn, Audrey Breitwieser, & Patrick Liu, The State of Competition and Dynamism: Facts
about Concentration, Start-ups, and Related Policies (The Hamilton Project, Brookings Inst., June 2018).
5. Robert Bork, Legislative Intent and the Policy of the Sherman Act, 9 J. L. & ECON 7 (1966).
6. Harlan Blake & William Jones, In Defense of Antitrust, 65 COL. L. REV. 377 (1965); Robert Pitofsky, The Political Content of
Antitrust, 127 U. PENN. L. REV. 1051 (1979); Lawrence Sullivan, Economics and More Humanistic Disciplines: What Are the
Sources of Wisdom for Antitrust? 125 U. PENN. L. REV. 1214 (1977).
7. Kenneth Elzinga, The Goals of Antitrust Other than Competition and Efficiency, What Else Counts? 125 U. PENN. L. REV.
1191, 1196 (1977) (offering limited support for the goal of protecting small business).
8. Robert Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged,
34 HASTINGS L.J. 65 (1982–83).

Glick
457
productivity.9 Judge Bork’s suggestion was unique in a critical respect.10 For many of these
non-consumer-welfare goals, one can pose the further question of why the goal itself is impor-
tant. For example, why is small business important? Why does consumer wealth transfer mat-
ter?11 Since consumer welfare is built on the foundations of normative welfare economics, it
incorporates its own ethical justification. The other goals do not. This difference added persua-
siveness and a veneer of science to the consumer welfare standard. Welfare refers to the quality
of individual lives as subjectively experienced by the individuals themselves. Increasing the
quality of human life is inherently ethically desirable. This advantage alone does not explain the
legal and political success of the consumer welfare standard. Its success has many causes.12
However, it is possible that the perception that Judge Bork’s suggestion is rooted in a deeper
theory of welfare economics backed by the economics profession helped to crowd out the other
potential goals of antitrust enforcement.13 As early as 1979, Robert Pitofsky wrote,
There probably has never been a period comparable to the last decade, however, when antitrust economics
and lawyers had such success in persuading the courts to adopt an exclusively economic approach to
antitrust questions.14
There is nearly a 100-year history of economic literature and debate in welfare economics, including
work by many of the giants of the economics field: Alfred Marshall, Arthur Pigou, Vilfredo Pareto,
John Hicks, Nicholas Kaldor, Paul Samuelson, Kenneth Arrow, and many others. What emerged
from this literature, among other things, was the recognition of the limitations and assumptions
necessary in order to sustain a plausible theory of welfare economics. I call this recognition
the “wisdom” of the founders of welfare economics. It is this wisdom that Judge Bork jettisoned
when he imported into antitrust law his concept of “consumer welfare.” Indeed, Judge Bork’s
explanation consumer welfare is only an ideological caricature of the original theory.15 My
9. Michael Porter, Competition and Antitrust: A Productivity-Based Approach (Harv. Bus. School, May 30, 2002). Michael
Porter’s focuses on the importance of competition to...

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