Total Welfare and Consumers’ Sovereignty: Comments on Professor Vanberg’s Papers (3/4)

Summary

This third article comments several papers by Professor Viktor Vanberg. In the first part, it attempts to demonstrate that the consumers’ welfare standard does constitute a sectional divide. Such a standard favors the consumers of the relevant market at the expense of all the other consumers, as Professor Alan Meese convincingly argued. The key here is that the economist must go beyond a partial equilibrium analysis and must look at the other markets where productive factors are freed up when a restriction of production occurs somewhere else. In the second part, the article contends that the concept of consumers’ sovereignty is at best a metaphor and that, in a private law society, it should not be considered as legally binding.

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Professor Viktor Vanberg is the author of many studies about constitutional economics, competition law, and the thought of Friedrich Hayek and James Buchanan.

In a series of articles, I am going to analyze Professor Vanberg’s work regarding competition.

Most of my comments will pertain to a paper entitled “Consumer Welfare, Total Welfare and Economic Freedom – On the Normative Foundations of Competition Policy.”[1] I invite any visitor to read this paper, freely available on the internet, before reading my article.

However, I will also refer to two more general books, namely Rules & Choice in Economics (1994)[2] and The Constitution of Markets (2001).[3] These books are collections of papers written by Professor Vanberg.

In the first article, I have enquired whether competition law could rightly be considered to amount to a private law order, as Professor Vanberg (following Franz Böhm) argued. My finding was negative: competition law is public law par excellence unless one takes Böhm’s programme seriously, which nobody does except libertarians.

In the second article, I discussed, approved, and tried to supplement Professor Vanberg’s case against the resort to economics at the “sub-constitutional” level. I also criticized the lack of congruence that I perceived between Professor Vanberg’s theoretical criticisms and his practical judgments and recommendations.

In the present article, I am going to challenge Professor Vanberg’s statements as to the most appropriate “welfare standard” for antitrust and as to the claim that the total welfare standard deals with “sectional interests.” I will also argue that “consumers’ sovereignty” may be used as a metaphor to explain the workings of the market but cannot be given any legal force in a private law order.

For the sake of clarity, let us specify once more that a “constitutional economist” as Professor Vanberg distinguishes between the constitutional level, i.e., the level at which the rules of the games are drafted (be it in a “constitution” in the traditional legal sense of the word or in an ordinary “law”), and the sub-constitutional level, that is, the level at which rules are enforced.

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Publicités

An Ordoliberal Criticism of The (Subconstitutional) Effect-Based Approach: Comments on Professor Vanberg’s Papers (2/4).

Summary

This second article comments several papers by Professor Viktor Vanberg. In the first part, it discusses and tries to expand Professor Vanberg’s criticism of the effect-based approach to competition law. It elaborates on the fact that an effect-based approach undermines the rule of law and allows a greater scope for interest-group lobbying. It takes Weimar and Nazi Germany as a historical example to illustrate this phenomenon. It also argues that forcing firms to justify their pricing policies in front of a competition agency results in an impoverishment of their decisional processes. In the second part, it discusses the apparent lack of congruence between Professor Vanberg’s theoretical criticism of the effect-based approach and what seem to be his practical recommendations. It also examines the role of article 101§3 in an ordoliberal paradigm. 

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Professor Viktor Vanberg is the author of many studies about constitutional economics, competition law, and the thought of Friedrich Hayek and James Buchanan.

In a series of articles, I am going to analyze Professor Vanberg’s work regarding competition.

Most of my comments will pertain to a paper entitled “Consumer Welfare, Total Welfare and Economic Freedom – On the Normative Foundations of Competition Policy.”[1] I invite any visitor to read this paper, freely available on the internet, before reading my article.

However, I will also refer to two more general books, namely Rules & Choice in Economics (1994)[2] and The Constitution of Markets (2001).[3] These books are collections of papers written by Professor Vanberg.

In the first article, I have enquired whether competition law could rightly be considered to amount, as Professor Vanberg (following Franz Böhm) argued, to a private law order. My finding was negative: competition law is public law par excellence unless one takes Böhm’s programme seriously, which nobody does except the libertarians.

In the present article, I am going to discuss Professor Vanberg’s criticism of the effect-based approach to competition law. I will explain why I agree with most of his theoretical objections and why I consider that Professor Vanberg fails to implement his theoretical paradigm into his practical judgments and recommendations.

Lire la suite

Question: How Did Eucken, Böhm, and Miksch Manage to Publish a Book in Berlin in 1942?

This is a question I have been pondering for some time.

The pioneers of ordoliberalism are generally described as intellectual resistants to Nazism. Modern ordoliberals never tire bringing up that Franz Böhm was dismissed in 1938 from his professorship at the University of Jena because of “critical comments he had made on the National Socialist regime’s treatment of Jews.[1]

If true, this is undoubtedly a very honorable attitude. But how did Walter Eucken, Leonhard Miksch and he manage to publish critical contributions on Nazism in Berlin in 1942 (that is, when the Third Reich entered its tougher phase)?

Indeed, Professor Goldschmidt somehow naïvely reports that “several economists opposing the Nazi-Regime” wrote contributions which were edited in 1942:

[W]hile this sounds more like fiction and legend, it is fact that the idea of a “controlled or guided market economy” […] was quite common during these years; even Müller-Armack spoke of controlled market economy before he established the term “Soziale Marktwirtschaft.” It was Erich Preiser […] who in an article he contributed to the volume “Der Wettbewerb als Mittel volkswirtschaftlicher Leistungssteigerung und Leistungsauslese” (Competition as a means of boosting economic performance and selection based on performance, edited by Günter Schmölders in 1942), coined the term “government-controlled market economy” as a contrast to “free market economy.” This 1942 volume contains contributions of several economists opposing the Nazi-Regime, working on plans for the social and economic order after the war. Later on, they pursued their work on a private basis and their work is recorded in the literature as the “Arbeitsgemeinschaft Erwin von Beckerath.” Thus, not only the concept, but also the term has some roots in the resistance against the Nazi regime.[2]

Now, it appears that this volume was published not in some democratic foreign country, but in Berlin. Moreover, it seems that this book was not a samizdat.

EBM1

Source.

EBM 2

Source.

Moreover, these ordoliberal authors published many other works between 1933 and 1942: source.

How was it possible? What about censorship?

As Professor Jörg Guido Hülsmann reports, economist Hans Hellwig suggested an explanation:

Hellwig had expressed such views in published writings from 1955 onwards. In a piece for Muthesius’s journal, he had argued that antitrust policies were counterproductive and that the champions of such policies — most notably Eucken, Miksch, and Böhm — could therefore not properly be called classical liberals. Moreover, he had the indelicacy to point out that Böhm’s and Miksch’s monographs had been published in the Nazi era, and could only have been published at the time because the Nazis did not perceive neoliberalism as a fundamental threat. On the contrary, quite a few of them took a liking to the idea of government imprinting its “order” on competition. Hellwig knew what he was talking about: he had been a Berlinbased journalist during those very years. But Walter Eucken’s widow, Edith, and Wilhelm Röpke protested with great vehemence and recrimination to Muthesius for publishing such politically incorrect views. Mises sided with Muthesius.[3]

Unfortunately, Professor Hülsmann does not indicate how Eucken’s widow and Röpke justified their protestations. It would be very interesting to clarify this point.

So, if anyone has any information about this subject, please let me know.

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[1]     Viktor J. Vanberg, The Constitution of Markets – Essays in Political Economy, Routledge, Taylor & Francis e-Library, 2003, first published in 2001, p. 38.

[2]     Nils Goldschmidt, « Alfred Müller-Armack and Ludwig Erhard: Social Market Liberalism, » Walter Eucken Institut, Freiburg Discussion Papers on Constitutional Economics, 04/12, p. 4.

[3]     Jörg Guido Hülsmann, Mises: The Last Knight of Liberalism, Ludwig von Mises Institute, 2007, pp. 1007-1008.

Antitrust Law: Enforcing or Subverting the Private Law Order? – Comments on Professor Vanberg’s Papers (1/4)

Summary

The first article in this series comments several papers by Professor Viktor Vanberg. It argues that competition law cannot be analyzed as a means of enforcing a private law order. While it approves of Franz Böhm’s agenda of implementing a “private law society,” it claims that competition law tends to subvert the basic principles of private law. It holds that the private property principle is not totally malleable and cannot be freely redefined by the legislator. Although it admits that the recognition of private property does not solve all the problems, it maintains that it narrows down considerably the remaining issues. In particular, the principle of private property implies the right to inflict pecuniary externalities/pure economic losses, as classical lawyers and economists made it clear. The article also points out the difficulty faced by the Ordoliberal School, which must define the notion of restraint of trade without resorting to the analysis of welfare effects. It states that this fundamental issue has not been settled adequately so far, which conflicts with the alleged concern of the ordoliberal school for the rule of law. 

***

Professor Viktor Vanberg is the author of many studies about constitutional economics, competition law, and the thoughts of Friedrich Hayek and James Buchanan.

In a series of articles, I am going to analyze the work of Professor Vanberg regarding competition.

Most of my comments will pertain to a paper entitled “Consumer Welfare, Total Welfare and Economic Freedom – On the Normative Foundations of Competition Policy.”[1] I invite any visitor to read this paper, freely available on the internet, before reading my article.

However, I will also refer to two more general books, namely Rules & Choice in Economics (1994)[2] and The Constitution of Markets (2001).[3] These books are collections of papers written by Professor Vanberg.

In this first article, I am going to enquire whether competition law can rightly be considered, as Professor Vanberg (following Franz Böhm) argues, to amount to a private law order.

Lire la suite