Posted by Josh Wright on December 31, 2007
If traffic and number of comments are any indication, this one from Geoff on the antitrust analysis of the Whole Foods/ Wild Oats merger certainly attracted the most attention.
Its been a fun year of of blogging. Thanks to all of the TOTM bloggers, guests, commenters, and readers for making it so interesting! Happy New Year! See you in 2008.
Posted in announcements, blogging, musings | 1 Comment »
Posted by Josh Wright on December 30, 2007
Danny Sokol has collected picks from antitrust specialists around the globe. There were plenty of excellent articles and books to pick from but I ultimately selected this article from Keith Hylton and Fei Deng and this book on the Microsoft Case from Bill Page and John Lopatka. You can see the rest of the picks here.
While I limited myself to selecting a single article and a single book for the purposes of the Professor Sokol’s list, I thought I’d post the contents of the rough “Top Ten” list I sketched out. As a disclaimer, I’m probably am missing a few really good ones I read earlier in the year and didn’t put any effort into making an exhaustive list of antitrust scholarship for the year. Plus, I might have also misclassified the timing on some of these. Feel free to add your own in the comments, but here are some “articles” (broadly construed to include government reports, etc.) which would appear somewhere in my Top Ten (or Twenty?) List:
Posted in antitrust, legal scholarship, scholarship | 1 Comment »
Posted by Josh Wright on December 20, 2007
The December 2007 of the Antitrust Source is now available online and features a symposium on the recent Supreme Court activity along with several interesting articles, interviews, book reviews, and my favorite regular feature — the Working Papers and Recent Scholarship review by Bill Page and John Woodbury (which this month features scholarship by George Priest and FTC economist Malcolm Coate).
Posted in announcements, antitrust, legal scholarship, scholarship | Comments Off
Posted by Robert Miller on December 19, 2007
According to a news story from Reuters, a recent Tufts University study (available here) says that “if nothing is done to combat global warming,” then by the year 2100, “two of Florida’s nuclear power plants, three of its prisons and 1,362 hotels, motels and inns will be under water” because of rising sea levels. This is a rather dubious proposition since all of those assets would, I assume, outlive their useful lives long before they get submerged, and no one would rebuild in an area soon to be underwater. Still, let’s leave aside such objections. The study tells us that rising sea levels could cost Florida $345 billion a year and goes on to state that “the sort of mitigation efforts needed to restrict sea level rises to 7 inches or less would cost a U.S. state like Florida between 1 percent and 2 percent of GDP.” Hence, “doing something may seem expensive, but doing nothing will be more expensive.”
Steven Landsburg has written that “the antidote to naïve environmentalism is economics,” and I think that dictum applies here. According to this report from the Commerce Department’s Bureau of Economic Analysis, the GDP of Florida in 2006 (in chained 2000 dollars) was about $610 billion. One percent of that figure is $6.1 billion. The authors of the study thus argue that it’s a bargain to spend $6.1 billion to avoid a cost of $345 billion—which it would be, if we were talking about spending $6.1 billion today to avoid spending $345 billion today. The question, however, is whether we should spend $6.1 billion today to avoid spending $345 billion ninety-three years from now in 2100.
The Tufts study purports to take account of inflation, so we need be concerned only with the pure time-value of money and a risk premium. For the former, let’s say 1.7%, which is a commonly used estimate. The latter is harder to calculate, but I venture to say that predictions of costs almost a century in the future are at least as risky as small-cap stocks, and Ibbotson Associates has calculated the historical risk premium on such stocks to be 13.4%. So what happens if we discount $345 billion in 2100 back to present value using a 15.1% discount rate? Answer: that $345 billion becomes a mere $720,799. In other words, we’re being told that it’s bargain to spend $6.1 billion today to avoid a cost with present value of well under a million dollars. I think not.
Posted in economics, musings, regulation | 2 Comments »
Posted by Josh Wright on December 18, 2007
Courtesy of Lynne Kiesling who supplies such insights regularly over at Knowledge Problem. It’s about retail choice in electricity, but the general principles apply more broadly. The whole thing is worth reading carefully:
There are, though, several ways that free choice and the removal of entry barriers into retail markets generates better outcomes than regulated monopoly service. When free choice allows consumers to choose among dynamic pricing options, they can face price signals and use technology to reduce their peak electricity use, leading to lower wholesale electricity prices and a reduced need to build costly infrastructure to meet peaks that just sits idle the rest of the time.Â
Choice also encourages market entrants to bring differentiated products to market, to gain market share by appealing to different dimensions of consumer preferences and to reduce the extent of direct price-based competition. Product differentiation (and its associated price discrimination) benefits both consumers and producers (and thus creates surplus, or welfare, or value) in all cases except for some very special conditions. The connection between rivalry and product differentiation and economic value creation is one of the most unambiguous aspects of freedom of entry into retail markets.Â
Posted in economics, markets, regulation | Comments Off
Posted by Paul Gift on December 18, 2007
In France, it has been ruled that Amazon can no longer offer free shipping on book purchases. Don’t you just love it when competition policy protects certain competitors instead of actual competition? The protected competitors here are “vulnerable small bookshops.” Last I checked, the essence of competition is that “vulnerable” or inefficient competitors are supposed to be likely to go out of business. That’s the whole idea of promoting efficiency, innovation, economic growth, and enhanced welfare. The reason they’re vulnerable in the first place is that consumers in the market reveal that they more highly value the product characteristic bundle of other alternatives.
Personally, I have a love/hate relationship with this policy. I hate the “backwards” economics it promotes, but I love the fact that I get to make fun of it on TOTM. Death to free shipping, free samples, free coffee, loss-leaders, and, while we’re at it, Wal-mart rolled-back prices too!
See here.
Posted in antitrust, business, economics, law and economics | Comments Off
Posted by Josh Wright on December 18, 2007
Craig Newmark highlights this offer at Amazon allowing consumers who purchase an HD-DVD player up to 10 free DVDs. Newmark cites the DVD offer as an example of upfront competition resolving standard-based coordination problems in the presence of network externalities. Of course, Blu-ray also has a free DVD offer for those purchasing a Blu-ray machine this holiday season. These are excellent examples of the significant consumer benefits that arise from competition for the field.
Posted in antitrust, economics, markets, technology | Comments Off
Posted by Geoffrey Manne on December 18, 2007
Recently, Frank Pasquale at Concurring Opinions wrote a blog post did a drive-by hit on FTC Chairman Majoras supporting her recusal from considering the Google/DoubleClick merger now pending before the FTC.  You really have to read the post to get the full effect of the innuendo and intimation–it’s masterfully subtle. At the time I commented on his blog:
Ah, muckraking. A time-worn tradition. So, let me see if I get this straight. Majoras is incapable of acting scrupulously in assessing gouging claims because she has, in the past, advised oil companies (among hundreds of other companies). Nevermind the airtight arguments against price gouging by oil companies and the broad and vast company saying the same things as Majoras. And this tenuous, utterly-unsupported (and oh-so-carefully implicit) claim of bias thus supports calls for Majoras to recuse herself from involvement in a wholly-unrelated case, in a different industry entirely, because, something like, “she’s done it before; she’ll do it again!” I see. Yes, very compelling.
Now comes news, not reported by Frank, that the claims in the recusal motion are pretty far from the mark. Majoras’ statement (and Kovacic’s statement in response to a similar motion) and the statement of the remaining members of the FTC supporting her are here. The salient parts:
To fully explain why recusal is not required here, I first must correct some key factual errors contained in the Petition. The Petition states that “Petitioners learned on Monday, December 10, 2007 that Doubleclick, has retained the Washington law firm of Jones Day to represent the company before the Federal Trade Commission in the pending merger review.†(Petition, page 1 ¶ 3). . . . Jones Day does not represent DoubleClick before the FTC and, indeed, in dozens of meetings and submissions, has never appeared or even been mentioned.
More importantly, the Petition also incorrectly states that “The Spouse of the FTC Chairman, John M. Majoras, is currently an equity partner with the law firm Jones Day.†(Petition, page 2 ¶ 5). As of January 1, 2006, John Majoras converted from an equity to a non-equity status and became a fixed participation partner in Jones Day. I understand that as a fixed participation partner, his compensation will not be increased or affected by changes in the firm’s income. Further, all benefits my husband receives from Jones Day are the same as those earned by other similarly situated non-equity partners in the firm. Therefore, my husband does not have a financial interest in the firm’s income, and thus I do not have an imputed financial interest.
In 2004 and 2005, when my husband was still an equity partner, I assumed that I would have a financial interest in FTC matters in which Jones Day represented a party and recused myself in such matters, as petitioners note. (Petition, page 3 ¶ 8-12). After my husband relinquished his equity interest in the firm’s income, I began to consider participating in FTC matters in which Jones Day represented a party, in consultation with the FTC’s Ethics Official. FTC staff and I continue to actively monitor FTC filings and public appearances, as well as any public statements that we may see, to determine whether Jones Day is involved in FTC matters.
The final point helps to explain the petitioner’s oh-so-sinister assertion, duly quoted by Frank, that Majoras had recused herself from cases involving Jones Day before, but not this time . . . .
At any rate, I just thought I might keep the record straight for the blawgosphere.
Posted in antitrust, blogging, federal trade commission | 2 Comments »
Posted by Josh Wright on December 17, 2007
Gail Heriot (Right Coast) and John Fund discuss the Feingold-Kyl amendment to the pending bill which would give federal judges a long-awaited payraise amidst concerns that pay levels were to low to attract and retain a high quality judiciary. The FK amendment, as explained by Fund, “would bar any federal judge from accepting more than $1,500 in food, lodging or other reimbursement for any travel event not sponsored by a government, and more than $5,000 in a year.” The FK amendment appears to be related to the “junk ethics” movement which raises its head from time to time to throw charges at institutions like the George Mason Law and Economics Center, FREE, and others.
These educational programs have been adequately defended here and elsewhere in the past. However, it is worth emphasizing a point that both Heriot and Fund recognize but the FK amendment’s supporters apparently fail to understand: it is not very likely that the FK amendment will result in fewer educational programs for judges in the medium to long run. It is true, as Heriot notes in particular, that one obvious implication of the FK amendment’s funding limitations is that private schools (especially smaller ones) will suffer and no longer be able to attract judges to these programs. While it is no solace for the disfavored private schools, the amendments produce the greatest benefits for smaller public schools that would not be likely to attract federal judges in the absence of these programs. My guess would be that the net effect of the amendment is trivial (again, not much solace to the disfavored private schools) as growth in the number of new programs and expansion of existing programs at public schools offset the reduction in competition from private schools. There appears a healthy demand for the services provided by these programs and no shortage of high quality public law schools with the resources to produce them. One should not be surprised by a subsequent increase in the number of new state programs as well as expansion of existing programs to satisfy demand. I wonder if that is what Feingold & Kyl had in mind?
*Disclosure: I have in the past received summer research money from the George Mason Law & Economics Center.
Posted in economics, law and economics, law school, musings, politics | Comments Off
