UPDATE:  Trying to find the right hash tag for the event, I’ve changed the title of this post and we’ll follow the convention for our live blogging today–posts from the Workshop will all have “#agworkshop” in the title.

Later this week Mike Sykuta and I will be winging our way to Iowa on behalf of the ICLE to attend the first of the year-long series of DOJ/USDA Workshops on Agriculture and Antitrust Enforcement Issues.  You can find the agenda for the first workshop, to be held Friday, March 12 in Ankeny, Iowa, here.  Intrepid reporters, we, our plan is to “live blog” the event for those of you unable to attend.  This first workshop, in addition to introducing the series, will focus on farming, which means seeds, which means the dispute between DuPont and Monsanto over licensing terms and everyone’s perennial favorite: industry concentration.

The agenda clearly reflects the highly-politicized nature of the issues under discussion, and, for example, a few news reports have suggested that the agenda has changed in response to pressure from Iowa Senator Tom Harkin.  Regardless, we expect a lively and interesting discussion.

For ease of reference all of our blogs from the workshop will be categorized under “ag/antitrust workshop,” and each post will have “DOJ/USDA Workshop” in the title.

TOTM is no stranger to the issues, and Mike and I have blogged a few times about the antitrust/licensing issues involved.  See:

Competition in Agriculture Redux (Manne, Kieff and Wright)

Competition in Agriculture (Sykuta)

Monsanto’s Licensing Case Victory (Manne)

Yet More Evidence Against the DOJ’s Antitrust Plantings (Sykuta)

The Seeds of an Antitrust Disaster (Manne)

DOJ Disconnect: Do We Really Need a Roadshow? (Sykuta)

Together with Scott Kieff and Joshua Wright, we also submitted a comment to the DOJ on the topic, “Comment on Intellectual Property, Concentration and the Limits of Antitrust in the Biotech Seed Industry,” available here (SSRN) or here (if you prefer to get it directly from the DOJ website).

The news has also been covering the seed industry antitrust issues, the DOJ/USDA workshops and agricultural antitrust issues more generally, and you can find a host of relevant news articles here.

We’re looking forward to the workshops and to your comments on the day’s events.

Over at the International Center for Law and Economics website we’ve posted a link to a pdf e-book version of the collected content (including both posts and comments) from our recent “Interchange Fees and the Law and Economics of Credit Cards” symposium.  Head on over and download a copy if you’re interested in a dead tree version of the symposium.

Antitrust & Competition Policy Blog is hosting a symposium on Competition in Agriculture.  Mike’s post from yesterday is available here.   So far in the symposium there are also posts by Ron Cass (BU Law), Jeff Harrison (Florida Law), Peter Carstensen (Wisconsin Law), and Kyle Stiegert (Wisconsin Applied Econ).  Additional posts should be forthcoming from Christina Bohannan (Iowa Law), Andrew Novakovic (Cornell Applied Economics), and the great George Priest (Yale Law), who I hope gets the blogging bug.

Josh, Scott Kieff and I have posted a short comment based on our submission to the DOJ/USDA Workshops on Agricultural Competition, co-authored by us and Mike. The comment should be available for download from the DOJ webpage when the public comments are posted (someday . . . ).  A copy is also available here (www.laweconcenter.org), and comments are most welcome at gmanne@laweconcenter.org Please leave comments on this post over at the A&CP Blog.

Regarding firm size and integration, it must be kept in mind that the agriculture industry in the U.S. has, for good reasons, moved beyond the historic, pastoral image of small family farms operating in quiet isolation, devoid of big business and modern technologies. The genetic traits that give modern seeds their value—traits that confer resistance to herbicide and high yields, for example—are often developed through processes that are technologically-advanced, time- and money-intensive, risky investments, and subject to various layers of regulation. It doesn’t take expertise in industrial organization to imagine why at least for some participants in this market these processes are likely to be more efficiently and effectively conducted within large agribusiness companies having enormous research and development budgets and significant expertise in managing complex business and legal operations, than they are by the somber couple depicted in the famous 1930 Grant Wood painting, “American Gothic.” Nor is such expertise required to imagine why complex contracting across firms, of any size, is likely to be of significant help in supporting the specialization and division of labor that is useful in allowing some businesses (even a small family farm is a business) to be good at planting and harvesting while others are good at inventing, investing, managing, developing, testing, manufacturing, marketing, and distributing the next wave of innovative crop technologies. This requires on the one hand that the government give reliable enforcement to contracts and property rights whether tangible or intangible (extremely important in this industry are patents, trade secrets, and even trademarks), while on the other hand it allows firms wide flexibility to decide for themselves which of these contracts and property rights they would like to enter into or obtain pursuant to the applicable bodies of contract and property law.

When courts and regulatory agencies like the DOJ Antitrust Division adopt special approaches to the body of antitrust law to address concerns that may arise from these property rights and contracts, they run the risk of crafting doctrines that inappropriately override well-established bodies of law that are informed by longstanding judicial and scholarly thought and consideration of each area, and creating the potential to reduce innovation and economic growth. A central countervailing concern is that the putative antitrust injuries that might arise are rooted in stylized economic models that are heavily dependent on a narrow set of assumptions, leaving significant room for erroneous antitrust enforcement. A modest but fundamental safeguard to protect against this concern of “false positives,” is an approach to antitrust that requires a strong demonstration of actual anticompetitive effect as a precondition for a monopolization violation.

Not only are patents not presumptive proof of market power in any static sense, but patents can also meaningfully improve both competition and access to patented technologies over time, in the dynamic sense. From the public record it appears that the driver of much of today’s antitrust enforcement in the agricultural industry boils down to intervention into business disputes between large and sophisticated parties. The inherent uncertainty regarding the economic consequences of specific conduct, coupled with competitors’ poor incentives and the huge costs of error, counsel strongly against antitrust intervention without strong empirical evidence that the conduct has reduced competition and harmed consumers in the form of higher prices, lower quality, or reduced innovation.

Steve Horwitz writes a short, lay piece on crowding out and job creation.

Brad “smacks down” Steve Horowitz.

Russ Roberts amplifies Horwitz with a nice point about the dangers of aggregation.

David Henderson notes that Brad misses what Horwitz is really saying.

Brad DeLong “smacks down” Steve Horwitz again, not acknowledging any of the criticisms.  Brad writes:

Me: I don’t think so. Take

Government can only spend what it takes from the private sector one way or another, either through taxation, borrowing, or the redistribution effects of inflation. For every dollar that government spends, there is one less dollar being spent somewhere else in the economy…

and replace “government” by “Larry and Sergei’s internet company.” It then reads:

Larry and Sergei’s internet company can only spend what it gets from other businesses and consumers one way or another, either through sales or borrowing. For every dollar that Larry and Sergei’s internet company spends, there is one less dollar being spent somewhere else in the economy…

Brad’s claim is that Horwitz wouldn’t make the second claim and thus, he doesn’t really mean to make the first claim because they are equivalent.  So Horwitz is a partisan hack.

Brad, Brad, Brad, Brad.  This is so revealing.  Brad really believes, I guess, that the government randomly spending money digging ditches or the equivalent (without regard to Russ’s well-highlighted concerns about where money is being spent, among many other things) is as productive as Google spending money inventing, making and improving its products for sale in the market.  Brad really believes, I guess, that when Google engages in voluntary exchange with customers that it is offering value exactly equivalent to the value the government offers in exchange for an equivalent amount of involuntary taxation or inflation.  Apparently Brad believes that the two cases are equivalent, so anyone who disagrees with the second must disagree with the first (and is thus being disingenuous in supporting the first claim).  But anyone who would claim that these two cases should be treated equivalently and who would disregard the obvious and essential differences between government action and private exchange is an ethics-free partisan ass and shouldn’t be taken seriously.

Economist, co-author, and sometimes TOTM guest David Evans (UCL, University of Chicago School of Law) has an excellent note on “Why Now is Not the Right Time To Revamp Consumer Protection,” based on remarks made at the New York Federal Reserve Board-New York University Conference on Regulating Consumer Financial Products yesterday in New York.  Evans makes some of the points we discuss in our joint work criticizing the intellectual basis for the Consumer Financial Protection Agency, but also offers a concise and powerful case against “revamping” consumer protection too hastily, or without attention to the institutional details or the economic evidence.  Geoff’s post the other day on credit card regulation, for example, points out precisely the types of harmful errors that can be made on “behalf” of consumers when invoking the behavioral economics literature without analyzing it (or the related empirical evidence) closely. Evans makes six essential points — and I’m excerpting here — but I suggest readers check out the whole thing:

First, the Treasury Department proposed a sweeping overhaul of consumer protection for financial services for the wrong reasons. It is widely reported that the Administration pushed consumer financial protection legislation because they thought it would be the “locomotive that would drive financial reform.” The idea is that the folks back home couldn’t get why their representatives would be working on obscure things like clearing houses for credit default swaps. But they could connect with plain old consumer protection. Hey, who wouldn’t want to be protected? Since we’re not in DC perhaps I won’t be laughed out of the room for saying this is pretty cynical.

Second, Treasury wrapped consumer protection in the flag of the financial crisis. Yet there is no credible evidence that failures in the current system were a significant factor in causing the financial crisis. Many of the consumer protection problems that people point to are mainly the result of our collective delusion—the madness of the crowds—that housing prices would go up forever. There are numerous accounts of the causes of the financial crisis from varying ideological perspectives. Not one of them that I know of blames the financial crisis on failed consumer protection.

Third, instead of being the locomotive for financial reform, consumer protection has deflected attention from problems that really were at the heart of the financial crisis. Remarkably, the Administration proposed no significant reforms of Fannie and Freddie. The Administration came forward with nothing on dealing with the credit rating agencies. There’s widespread support among economists for introducing competition into that business… .

Fourth, the Treasury Department and Congress have proposed this sweeping overhaul of the lending industry at just about the worst possible time. A massive credit crunch is holding back the economy. New businesses that drive most of the job growth in the economy can’t get loans. Small businesses have had their credit lines slashed. Consumers who need to borrow money can’t. Now is the time to focus on policies to encourage lending. It is not the time to impose a new layer of regulations and costs that will make it more expensive and legally risky for financial institutions to lend money to people and businesses who want to borrow it….

Fifth, instead of dealing with financial reform and getting ourselves out of the economic crisis it looks like a lot of energy is going to be spent on the CFPA bill. So let’s talk about the merits of the proposals. The CFPA is the brainchild of several law professors including Professor Warren who spoke at lunchtime. If you look at the articles that they have written you will see that the proposed CFPA is based on three propositions …. .

Here’s my sixth and final point. If we are going to have a single consumer financial protection agency I would give it to the Federal Trade Commission. They are a well run government agency, have significant expertise in consumer protection, and have first-rate economists….

On the reliance on behavioral law and economics providing the intellectual foundation for the CFPA, Evans notes:

I’m a fan of behavioral economics. However, much of the work that proponents of the CFPA rely on is based on studies that find that consumers are shortsighted in a particular technical sense known as hyperbolic discounting. Recent work has found that those studies confused shortsightedness with risk aversion. People act in ways that seem impulsive and shortsighted mainly, it seems, because bird in hand is better than two in bush. As a result I don’t believe we have a sound basis at least at this time for moving from regulations that are based on market failures in the provision of information (the intellectual basis for the current system) to market failures based on people making systematically stupid or shortsighted decisions (the intellectual basis for the new regime). The behavioral economics field has produced a rich and interesting theoretical and empirical literature. One should exercise caution, however, in unleashing these “new products” on the American consumer before they are more fully tested and vetted.

And consider the following fun anecdotal account of precisely the problems with authorizing (or requiring) a federal agency to design credit card products on the assumption that regulators are better situated than consumers to make these decisions:

Professor Warren’s lunchtime discussion of her venture into developing a new credit card deserves some mention here. As I understood it she and her colleagues had developed a “clean card”—one that did not have any fees besides an annual fee an APR—and at least got some banks excited about considering it. They soon learned that banks couldn’t introduce the card profitably. She also mentioned that Citi had introduced a more “consumer friendly” card and gotten a lot of great PR out of it. They eventually pulled it from the market because few consumers wanted it. So Professor Warren sees a problem. Banks can’t make money from a “good card” (I think that her explanation is that one bank can’t unless others also offer it) and consumers won’t take a “good card” (I think the story her goes back to our mental deficiencies). So regulation is needed. I find this very worrisome. I don’t believe that even extremely smart and well-intentioned people such as Professor Warren should be put in the position of telling—or prodding—businesses to offer products they don’t want to offer to consumers who don’t want to take them. The CFPA Act put forward by the Administration was set up to do just that.

If you are looking for a short and concise statement of the case against the consumer protection revolution, this is it.

It’s been quite a while since we discussed backdating here at TOTM.  But back when it was all the rage, we were substantial contributors, formulating (we believe) some of the first fundamental explanations of the issues.  Some of the best posts from our backdating archive are here:

I look pretty young but I’m just backdated, yeah (Geoff Manne)

Option Backdating: The Next Big Corporate Scandal? (Bill Sjostrom)

Backdated options and incentives (Bill Sjostrom)

Jenkins channels Manne (Geoff Manne)

Explaining Backdating (and Jenkins Channels Manne Again) (Josh Wright)

No, Matt, executive compensation is not all about norms (Geoff Manne & Josh Wright)

Thoughts on Walker on Backdating (Josh Wright)

Along with Larry Ribstein (of course) we were early critics of the law, economics and reporting of the backdating “scandal.”  One of our posts, “No, Matt, executive compensation is not all about norms,” was made into a short law review essay.  Geoff’s “I look pretty young but I’m just backdated, yeah” post was one of the first substantial criticisms of the claims in the Wall Street Journal article that broke the story.

Although we basically gave up the backdating reporting as the story dragged on, we have been interested to watch the spectacle unfold.  And it has been quite a spectacle.

With the latest”mockery of justice” in the prosecution of these cases upon us, we thought it might be a good time to revive some of our old posts for readers who might have forgotten that there was once a substantive debate over the topic, rather than a series of prosecutorial embarrassments.

Frankly, as Larry notes, the embarrassments stem in part from the fact–as we have discussed in the posts linked above–that these cases never should have been brought in the first place.  Maybe a reminder is in order.

We are delighted to announce the addition of another new permanent blogger here at TOTM:  University of Chicago law professor Todd Henderson.  Like Thom, Todd is a member of the venerable University of Chicago Law School class of 1998 (second only to the most-venerable class of 1997!).  Todd is an expert in corporate law and governance, but his interests and expertise are varied and broad, and we can look forward to his insights on a range of topics.  I would just add that Todd is the co-author of one of my favorite ever (and one of the best-titled) corporate governance law review articles:  “Corporate Heroin: A Defense of Perks, Executive Loans, and Conspicuous Consumption,” 93 Georgetown Law Journal 1835 (2005) (with James C. Spindler).

His official bio follows.  Welcome Todd!

M. Todd Henderson received an engineering degree cum laude from Princeton University in 1993. He worked for several years designing and building dams in California before matriculating at the Law School. While at the Law School, Todd was an Editor of the Law Review and captained the Law School’s all-University champion intramural football team. He graduated magna cum laude in 1998 and was elected to the Order of the Coif. Following law school, Todd served as clerk to the Hon. Dennis Jacobs of the U.S. Court of Appeals for the Second Circuit. He then practiced appellate litigation at Kirkland & Ellis in Washington, D.C., and was an engagement manager at McKinsey & Company in Boston, where he specialized in counseling telecommunications and high-tech clients on business and regulatory strategy. His research interests include corporations, securities regulation, bankruptcy, law and economics, and intellectual property.

There will be much to say about the Federal Trade Commission’s Intel complaint in the coming months.  And we’ve said quite a bit already.  But having just read the complaint and the statements from Chairman Leibowitz and Commissioner Rosch discussing the various rationales for making Section 5 the primary hook for this case, I wanted to share two thoughts about defenses for the move that appear in those statements.

The first comes from the joint statement:

Despite the long history of Section 5, until recently the Commission has not pursued free-standing unfair method of competition claims outside of the most well accepted areas, partly because the antitrust laws themselves have in the past proved
flexible and capable of reaching most anticompetitive conduct.  However, concern over class actions, treble damages awards, and costly jury trials have caused many courts in recent decades to limit the reach of antitrust.  The result has been that some conduct harmful to consumers may be given a “free pass” under antitrust jurisprudence, not because the conduct is benign but out of a fear that the harm might be outweighed by the collateral consequences created by private enforcement.  For this reason, we have seen an increasing amount of potentially anticompetitive conduct that is not easily reached under the antitrust laws, and it is more important than ever that the Commission actively consider whether it may be appropriate to exercise its full Congressional authority under Section 5.

Is dissatisfaction with the current state of Section 2 jurisprudence a good enough reason to warrant application of Section 5?  That’s a tricky question.   That Section 5 might apply in some situations where Section 2 does not is a perfectly reasonable proposition.  But I have a few problems with the use of this rationale here.  One is that the the Leibowitz/ Rosch story that the reduction in scope of Section 2 has nothing to do with whether conduct is anticompetitive but rather that it is all about immunizing conduct that is known to be harmful because of some sort of aversion to private enforcement is simply wrong.  And it’s wrong in an important way.  The fear that emerges out of Credit Suisse, Trinko, Brooke Group and Linkline is not merely that private actions are bad, but rather that error costs are a real problem.  In other words, the fear is that: (1) it is very difficult to determine in the first instance whether would-be exclusionary conduct is pro-competitive, anti-competitive, or competitively neutral, (2) this raises the inevitability of Type I and Type II errors, (3) a la Easterbrook, the former should be of greater concern because they create more substantial social costs (”error costs”).  Given (1)-(3), the Supreme Court has adopted liability rules that reflect the realities of the economic technology available to distinguish anticompetitive single firm conduct from pro-competitive conduct, and the asymmetrical costs of errors.

In sum, the changes in Section 2 law have not been merely out of fear of private enforcement–but rather out of fear that private enforcement in the face of Type I errors render those errors much more serious.  But make no mistake–the error cost approach is one that is concerned precisely with adopting liability rules that maximize consumer welfare.  To say otherwise is a poor description of the case law and the underlying logic.  The view implicitly adopted by the Commissioners that the antitrust laws are failing if they do not reach “most anticompetitive conduct” simply contradicts the approach taken by the Supreme Court.  The gap between actual Supreme Court interpretation of Section 2 and a hypothetical body of antitrust law that would reach all anticompetitive conduct is not one that is accidental or the product of “mere technicality.”  This is a conscious choice by the Supreme Court, based on error cost considerations that are well accepted and mainstream antitrust analysis.  This use of Section 5 cannot be said to be “gap filling.”  Instead, this invites application of Section 5 unhinged from the Section 2 principles entirely.  This, in my view, is a wrongheaded approach that is almost certain to strip away the protections for consumers embedded in the error cost approach incorporated into Section 2.  Thus, my view is that arguments that one does not like Trinko or Credit Suisse cannot and should not militate in favor of a broader scope for Section 5.

By the way, it is also worth noting that there is a striking tension between the expressed view that fear of private litigation warrants a shift toward Section 5 and the Commission’s apparent willingness to file a complaint with regard to conduct involving Nvidia for which it has not yet taken discovery.  In other words, Commissioner Rosch argues that the Commission should pursue the Intel complaint under Section 5 alone because it will avoid the social costs associated with follow-on private enforcement but should also reserve the right to proceed as if the Commission itself were a private plaintiff filing a complaint without discovery and surely without knowing whether the allegations over which it has no facts are indeed in the public interest.

Second, Commissioner Rosch’s separate statement makes a similar error in one of the four factors he argues militates in favor of Section 5 over Section 2.  Specifically, Commissioner Rosch asserts that Section 5 as a stand alone violation makes more sense when harm to competition is difficult to distinguish from harm to competitors:

Under those unique circumstances, the oft-repeated admonition that the Sherman and Clayton Acts protect competition, not competitors, and the federal courts’ attendant disinclination to protect competitors in cases brought under those statutes, do not fit well. If the firm with monopoly or near-monopoly power (here, allegedly Intel) engages in an exclusionary and unjustifiable course of conduct that hurts its only competitor in the CPU markets (here, allegedly AMD) or its only two competitors in the computer graphics product markets (here, allegedly AMD and Nvidia), given the uncommonly high entry barriers, that exclusionary conduct harms competition too, by inhibiting those rivals from constraining the exercise of monopoly power.

Again, Commissioner Rosch implicitly adopts the view that there is no “consumer welfare” based content to the old admonition about protecting competition rather than consumers.  More generally, however, the argument just doesn’t make economic sense.  If what Rosch means is that in markets with only one competitor harm to that competitor is more likely to lead to harm to competition (or is even synonymous with harm to competition), then that makes Section 2 more appropriate!  In other words, in such cases there will always be harm to competition so there is no need to expand Section 5 to reach the conduct.  Instead, Commissioner Rosch apparently is arguing that plaintiffs should be able to avoid the rigorous proof standards of Section 2 in cases where it is really hard to distinguish harm to individual competitors generated from vigorous competition from harm to the competitive process.  This turns antitrust on its head.  It is not gap-filling. And it is not merely extending Section 5 to situations of anti-competitive conduct known to be outside the scope of Section 2.

Rather, and this is the important part, this is the use of Section 5 to evade the protections afforded consumers by Section 2.  One of those, and perhaps the most important, is that plaintiffs be forced to demonstrate that (given the lack of empirical support for many of the vertical exclusionary theories in the literature) the conduct at issue has actually harmed consumers.  Using Section 5 to evade this fundamental feature of Section 2 may make the litigation easier to win, but it certainly doesn’t make it in the public interest.  The fact that in duopolies it might be more difficult to show competitive harm is no excuse to lighten the plaintiff’s burden by throwing Section 2 out in favor of Section 5.  Commissioner Rosch seems to be adopting the position that in competition in markets with few firms, we can presume that harm to competitors is a sufficient condition for harm to competition.

This is the European approach.   At best.  Despite attempts to suggest there is nothing to see here, there really is.  This is not a subtle shift in single firm antitrust jurisprudence.   This is a debate over whether the error  cost protections in Section 2 law are features or bugs, with the Commission taking the (indefensible) latter view.

Note that in May 2009 I wrote the following:

I’m quoted in the WSJ as saying that I believe it is much more likely that the US gets involved in the Intel litigation than was the case two weeks ago.  Its hard to avoid that conclusion after reading the combination of statements from the FTC on the repudiation of the Section 2 Report, the new life of Section 5, as well as the competitive pressures placed on that agency from the DOJ’s new agenda and the EU fines.

The problem is that the content of the Section 2 Report was not just policy statements from the Bush administration political appointees about what the Section 2 should be.  It was a serious project with engagement from DOJ and FTC appointees, staffers, the academic community, and business representatives to summarize the existing law and existing evidence as well as generate some guidance on best practices where available.  Turns out that with two years to work on the project and that breadth of resources and diversity of viewpoints, the Section 2 Report really does accurately state the law with respect to exclusive dealing, predatory pricing, loyalty rebates, and such.  And that law isn’t going anywhere.  Perhaps the mission of the new DOJ and FTC will be to change the law?  Or perhaps the FTC will avoid the unfavorable Section 2 law by substituting Section 5 for cases like Intel where they are unlikely to win under a Section 2 theory.  But the Supreme Court and the federal case law under Section 2 remain substantial obstacles to convergence that extends beyond the hallways of the agencies.

So far so good.  I’ll stick to my guns.  The FTC will lose under any elements of the case brought under Section 2.  To the extent that an appropriate interpretation of the requirements of Section 5 are at least informed by the requirements of Section 2, I think the FTC will also ultimately lose on its Section 5 claims (on appeal, of course).  But the Section 5 case is obviously much harder to predict.  Two things are certain.  The FTC will expend millions of dollars in resources litigating this case with Intel.  Some pro-competitive conduct will be chilled as a result of the action.  Taken in light of traditional market performance indicators like price and output in the microprocessor market, as well as AMD’s financial performance during the time period of the alleged misconduct, today’s announcement is neither a bright day for the FTC, nor consumers.

The Law and Economics of Interchange Fees and Credit Card Markets

Welcome to day two of of our two-day symposium on the law and economics of interchange fees and credit cards.

Our symposium brings together several of the world’s leading experts on interchange fees and the law and economics of credit card markets.  Our participants will discuss a range of issues surrounding the regulation of interchange and credit card markets.

• Omri Ben-Shahar (University of Chicago Law School)
• Tom Brown (O’Melveney & Myers)
• Bob Chakravorti (Federal Reserve Bank of Chicago)
• Richard Epstein (University of Chicago and NYU Law Schools)
• Joshua Gans (University of Melbourne Business School)
• Ron Mann (Columbia University Law School)
• Geoffrey Manne (International Center for Law & Economics and Lewis & Clark Law School)
• Tim Muris (George Mason University School of Law and O’Melveney & Myers)
• Allan Shampine (Compass/Lexecon)
• Bob Stillman (CRA International)
• Jim Van Dyke (Javelin Strategy & Research)
  
• Joshua Wright (George Mason University School of Law)
• Todd Zywicki (George Mason University School of Law)

Today’s posts will cover the following topics:

• Assessing Cross-Subsidies.  Posts from Tom Brown & Tim Muris and Todd Zywicki
• Assessing the Network Rules.  Posts from Bob Chakravorti and Joshua Gans
• Considering the Costs: Fraud.  Posts from Jim Van Dyke, Allan Shampine and Geoffrey Manne
• Additional Responses and Closing Thoughts.  Posts from Omri Ben-Shahar and Joshua Wright and TBD

The posts will appear regularly throughout the day to allow time between posts for discussion: Check back for updates and comments.  Expect free-ranging discussion in the comments–most of these issues are inter-related and we will return to several themes throughout the symposium.

You can find all of the symposium posts under the “credit card symposium” link on the right side of the page.

Thank you for joining us!

• Larry Ribstein on exempting small firms from SOX
• Bernie Sanders’ “Too Big to Fail, Too Big to Exist” Bill (but see here)
• More Professor Birdthistle on Jones v. Harris
• Michael Ward on the economics of H1N1 (here, here and here)
• Lots of blogging on the meat market — but I’ve seen nobody discuss what I thought was the most surprising event at the conference, i.e. the disappearance of Starbucks from the hotel

TOTM is extremely excited to announce the latest addition to our team, Mike Sykuta.  Readers might know Mike from his guest blogging stints at Organization and Markets.  Or perhaps making Brad DeLong’s Hall of Honor.  Mike joins J.W. Verret as the second addition to blog in the last week, and we hope to announce some other major changes in the very near future.  Mike is Director of the Contracting and Organizations Research Institute (CORI) at the University of Missouri and received his Ph.D. in economics at Washington University in St. Louis.  Mike is a productive scholar in the New Institutional Economics tradition who works on contracting, corporate governance, and the political economy of regulation.   Recent scholarship includes:

The Elgar Companion to Transaction Cost Economics. Introduced and edited by Peter G. Klein and Michael E. Sykuta. Edward Elgar Publishing (expected 2010).

“New Institutional Econometrics: The Case of Contracting and Organizations Research” Chapter 6 in E. Brousseau and J.M. Glachant (eds.), New Institutional Economics: A Textbook, Cambridge, UK: Cambridge University Press, 2008

“Farmer Trust in Producer- and Investor-Owned Firms: Evidence from Missouri Corn and Soybean Producers” (with Harvey S. James, Jr.), Agribusiness: An International Journal, 22(1) January 2006

“Property Right and Organizational Characteristics of Producer-Owned Firms and Organizational Trust” (with Harvey S. James, Jr.), Annals of Public and Cooperative Economics, 76(4) December 2005

“Market Integration: Case Studies of Structural Change” (with Jason V. Franklin, Joe Parcell, and Chris Fulcher), Agricultural and Resource Economics Review, 34(2) October 2005

“Agricultural Organization in an Era of Traceability,” Journal of Agricultural and Applied Economics, 37(2) August 2005

“Politics, Economics, and the Regulation of Direct Interstate Shipping in the Wine Industry” (with Gina M. Riekhof), American Journal of Agricultural Economics, 87(2) May 2005

“Who’s Monitoring the Monitor? Do Outside Directors Protect Shareholders’ Interests?” (with Eric Helland), Financial Review, 40(2) May 2005

Welcome Mike!

I have no intention of wading into the debate over the climate change chapter in Superfreakonomics.  I’m sure you all know the controversy:  Levitt and Dubner had the temerity to suggest that global warming was a huge problem, that we should look hard for really expensive solutions, and we need to do something.  And the outcry was from . . . the global warming alarmists. Curious.

Anyway, Brad DeLong has been among the most vocal and strident (Brad? Strident? Naaaaaaaah) critics of the book.  And one of Brad’s criticisms–couched in terms of “why are other people such idiots when I am so smart?”–appears on Yoram Bauman’s website in response to Yoram’s own critique of the book.  Here’s the main gist of Brad’s comment:

Yoram Bauman: “I have just seen a PDF of the Superfreakonomics chapter on climate change, and it makes basic mistakes when it says things like “When Al Gore urges the citizenry to sacrifice… the agnostics grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions, with the remainder generated by natural processes like plant decay.”… [Y]es, human generation of CO2 is dwarfed by natural processes like plant decay. But it also shows that natural processes balance each other out…. What you’re left with is a completely plausible story in which human activity slowly increases atmospheric concentrations of CO2 from pre-industrial concentrations of about 285ppm (parts per million) to current concentrations of about 385ppm that are going up by about 2ppm per year. This sort of misleading skepticism exists throughout the chapter, and it does a disservice to climate science, to economists like me who work on climate change, to academic work in general, and to the general public that will have to live with the impacts of climate policy down the road…”

Steven Levitt: “I don’t understand…. Why does it matter if natural processes are in balance or not? CO2 is CO2! The source doesn’t matter. If we could cut CO2 emissions a little bit overall, whether through natural sources or others, the effect would be the same. It is not saying that cutting human emissions isn’t the right way to do it, but it is a surprising fact and one worth mentioning…”

Levitt and Dubner are saying that the fact that only 2% of emissions are of human origin is in some sense relevant to and supports the “agnostic” case on global warming. That is grossly, grossly misleading–talking about flows when the relevant variables are the stocks.

Actually, Brad, if you are talking about cutting emissions–i.e., FLOWS–it is perfectly appropriate to talk about where the biggest flows are coming from.  As far as I know, the point of the chapter is to be agnostic about where the solutions are to be found, not necessarily about the cause.  And, frankly, I’m not sure why the historical cause would matter if the only way to reverse the problem is to cut flows or to reduce stocks (and from whence the stocks came is hardly relevant, unless their origin tells you something about how to reduce them, and I don’t think this is true).  So, essentially, Brad has it, as I see it, exactly backward.  But bravo to Brad for having the courage of his convictions to be utterly insulting to others while being so utterly wrong.

UPDATE:  Brad makes the same point even more stridently (and equally wrongly) on his blog.

TOTM is very pleased to announce a new permanent member, J.W. Verret (George Mason).  J.W. has been blogging at Volokh Conspiracy recently, but he’s been a guest over at The Conglomerate, and the Harvard Law School Corporate Governance Blog.  Quite frankly, it would be difficult to miss him if you’ve been following the recent events in the world of financial regulation.  Professor Verret has been talking about financial regulation and corporate law every where from The NewsHour with Jim Lehrey, to CNN Money, ESPN.com, The American Lawyer, Forbes, and of course, testimony before various House and Senate Committees regarding the Obama Administration’s 2009 financial regulatory reform proposals.

J.W. received his JD and MA in Public Policy from Harvard Law School (where he was an Olin Fellow under Lucian Bebchuk) and the Harvard Kennedy School of Government, respectively, in 2006.  Professor Verret then served as a law clerk for Vice-Chancellor John W. Noble of the Delaware Court of Chancery. Prior to joining the faculty at Mason Law, Professor Verret was an associate in the SEC Enforcement Defense Practice Group at Skadden, Arps in Washington, D.C. He has written extensively on corporate law topics, including a recent paper, Delaware’s Guidance, co-written with Chief Justice Myron T. Steele of the Delaware Supreme Court. His academic work has been featured in the Yale Journal on Regulation, The Business Lawyer, the Delaware Journal of Corporate Law, the University of Pennsylvania Journal of Business Law, and the Virginia Law and Business Review. Professor Verret was recently selected by the Northwestern Law School Searle Center on Law, Regulation, and Economic Growth for a 2009-2010 Searle-Kaufmann Research Fellowship.

J.W. will be finishing up his stint as a visitor at Volokh this week, but we’re happy to give him a permanent blogging home here at TOTM thereafter.

Steve Salop is a professor economics and law at the Georgetown University Law Center where he teaches antitrust law and economics and economic reasoning and the law.  Steve’s work in antitrust economics pioneered what is now frequently referred to as the “Post-Chicago” approach.  His research focuses on antitrust law and economics, and Steve has written numerous articles analyzing exclusionary market power, exclusionary conduct, and raising rivals’ costs in the context of a variety of antitrust areas, including monopolization, input purchases and monopsony, joint venture access rules, vertical mergers, and vertical restraints.  His research has also focused on various aspects of mergers and joint ventures, including market definition, partial ownership and cross-ownership interests, entry barriers, and efficiencies.  Professor Salop earned his Ph.D. in economics from Yale University in 1972. Before joining the Georgetown faculty, he worked at the Federal Trade Commission, the Civil Aeronautics Board, and the Federal Reserve Board.

TOTM is extremely pleased to have Steve here and is looking forward to some fun and lively exchanges.  Steve’s first post offers a different economic perspective on the buyer antitrust exemption issue Geoff and I have been discussing the last few days.