A triangle is not a crown

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Chapter 2 in The Consumer Welfare Hypothesis in Law and Economics, 2022, pp 19-39 from Edward Elgar Publishing

Abstract: Allocative efficiency is the property that distinguishes perfect competition from monopoly. Thus, why economists consider perfect competition better than monopoly is crucial to understanding what allocative efficiency is. The reason given to reduce the monopoly's social harm to the deadweight loss triangle is a commitment to the equality of consumers and producers: transfers from the former to the latter cancel out each other, so they do not matter. Yet, in principal-agent models, economists focus on maximising the principals' interests. Moreover, the literature on consumer sovereignty supports the view that markets allocate resource efficiently when consumer welfare is maximised and offer an equality-based justification for this welfare standard: everyone is a sovereign as a consumer and a servant as a producer. This account of consumer-producer relations is compatible with different views of how society as a whole ought to be organised.

Keywords: Economics and Finance; Law - Academic (search for similar items in EconPapers)
Date: 2022
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