Antitrust's Normative Economic Theory Needs a Reboot

Antitrust has adopted a normative economic theory based on maximizing economic surplus. The theory originates with Marshall but was introduced into antitrust as the Consumer Welfare Standard by Judge Robert Bork, and survives today in virtually every industrial organization textbook. This persistence is unwarranted. Welfare economists abandoned it several decades ago because the theory is inconsistent, and we review those inconsistencies. Moreover, welfare economists and moral philosophers have shown that the theory is biased in favor of wealthy individuals and corporations—the very powers the antitrust law is supposed to regulate. Finally, behavioral economists and psychologists have shown that the model of human behavior behind the economic surplus theory is simplistic and often in conflict with actual human behavior. We argue that antitrust should be brought into alignment with modern welfare economics. We also discuss how the New Brandeis Movement's proposal to replace the consumer welfare standard with the protecting competition standard could be developed to accomplish this goal.