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2024 | OriginalPaper | Buchkapitel

12. The Consumer Welfare Standard, Consumer Sovereignty, and Reciprocity

An Evolutionary Foundation for the Positive Economic Approach to Law that Actually Works

verfasst von : Fabrizio Esposito

Erschienen in: Law and Economics of Justice

Verlag: Springer Nature Switzerland

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Abstract

The Consumer Welfare Hypothesis in Law and Economics claims that 1) in a partial equilibrium setting, a definition of allocative efficiency with remarkable pedigree uses a consumer welfare maximization standard; 2) this notion of allocative efficiency clearly fits better with EU antitrust and consumer law than the traditional total welfare hypothesis. The second claim is presented as a good reason for taking this notion of allocative efficiency in the economic approach to law seriously. This chapter shows that the consumer welfare hypothesis is supported by an indirect reciprocity mechanism with robust evolutionary credentials. Applied to a market setting, this indirect reciprocity mechanism is supported by the social norm of consumer sovereignty. Among other things, this account straightforwardly connects central themes of Adam Smith’s thought: reciprocity, moral equality, division of labour, and consumer sovereignty. Consequently, another advantage of the consumer welfare hypothesis over the total welfare hypothesis is that it can rely on a plausible evolutionary mechanism.

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Vorheriges Kapitel “Shared Joy is Double Joy”

Nächstes Kapitel Hierarchy, Efficiency, and Merit

Garoupa and Ulen (2022).

For example, Dworkin (1980) and Coleman (1988). For a review, see Mathis (2009).

See, for example, Collins et al. (2004) and Britton-Purdy et al. (2020).

Recently, Hesselink (2021), especially pp. 297–9.

See, for example, Bar-Gill and Ben-Shahar (2013); Posner and Sunstein (2022). For a broader analysis of this trend, see Esposito (2017).

I am drawing here a parallel between economic analysis and legal transplants and relying on the famous characterization by Teubner (1998) of legal transplants as legal irritants.

See below, Sect. 3.2.

For a discussion of this in particular, see Garoupa and Liguerre (2011), pp. 292–300. For an overall positive overview of the evolutionary economic approach to law, see von Wagenheim (2017); for a more critical analysis, see Deakin and Markou (2021).

See below, Sect. 3.3.

See below, Sect. 12.4.

See below, Sect. 12.5.

See V. Smith and Wilson (2019) and McCloskey (2021).

Esposito (2022), p. 3.

See Hildebrand (2016), pp. 30 et seq.

Esposito (2022), p. 180 explaining the ‘separationist purpose’ of the hypothesis for production contracts.

Esposito (2022), pp. 12–6.

This means, ultimately, that the book searches for ostensive definitions of “allocative efficiency”; McCloskey (2021), p. 6 does the same for “humanomics”.

Esposito (2022), pp. 22–5. For an example of this view, see Cowen and Tabarrok (2011), p. 225.

Esposito (2022), pp. 27–9.

Esposito (2022), pp. 40–56.

Esposito (2022), pp. 61–66.

Esposito (2022), pp. 175 et seq.

Esposito (2022), p. 86.

Esposito and Grundmann (2017) and Esposito and de Almeida (2018) offer preliminary investigations in the context of EU financial services and energy law, respectively.

I leave undecided, for current purposes, the epistemological question concerning the conditions for accepting a hypothesis. In particular, I wish to take no position, on whether to accept a hypothesis it these sufficient that it is better supported by the evidence than the alternative or one needs to be committed to the truth of the hypothesis.

See Liao (2017) and Hofmann (2021).

Compare the approach in Esposito (2022b) and Bar-Gill (2018).

See Murray (2022).

Esposito (2022), pp. 27–9.

Cooter and Ulen (2014), pp. 77–9). See also Esposito (2022), pp. 178 et seq.

See Giocoli (2020a, b).

For multiple testimonies from economists working in regulatory agency going in this direction, see Mantzari (2022).

Cambridge Dictionary online (nd); see also Merriam Webster Dictionary online (nd) defines reciprocity as “the quality or state of being reciprocal: mutual dependence, action, or influence”.

Fehr and Gächter (1998), p. 857.

For overviews, see Nowak and Sigmund (2005) and Okada (2020). The comparison between the two overviews shows that this literature has reached a certain degree of consolidation over the last two decades.

I include in this strand of the literature also the economic studies exploring the economic significance of reciprocal behaviour; for a useful overview, see Fehr and Schmidt (2006).

See below, Sect. 3.3.

Indirect reciprocity is further distinguished between upward and downward indirect reciprocity. See below, Sect. 3.3. Sometimes, following Kolm (1984, 2008) indirect reciprocity is called “reverse reciprocity”.

Seminal, in this regard Trivers (1971). See also the discussion in Ridley (1988, pp. 70–2) pointing out that, albeit observed, reciprocal behaviour is rather limited among animals; for a discussion of this point, see Freidin, Carballo, Bentosela (2015). Ridley (1988, p. 14) go as far as extending the insight to bacteria.

See, for example, Gintis (2016) and Bowles (2011, pp. 186–194).

Perugini et al. (2003), p. 252. See also Axelrod (1984) and Axelrod and Dion (1988).

Ohtsuki and Iwasa (2004, 2006).

See also Fehr et al. (2002) referring to retaliators as ‘strong reciprocators’.

Ohtsuki and Iwasa (2004, 2006).

Salazar et al. (2022), p. 1. See also, Young (1993).

Carbonara (2018), p. 467.

Gouldner (1960).

Okada (2020) points out that more than 100′000 papers on indirect reciprocity have been published in the last 30 years; note, however, that the criteria for identifying this number have not been made explicit in the paper, in violation of systematic reviews best practices.

Elster (2011), p. 328.

See Perugini et al. (2003) reviewing the literature on the internalization of the social norm of reciprocity and providing one of the first experimental results showing this norm at work. See also Burger et al. (2009), p. 11 who showed that “individuals return favors even when the initial favor giver will never know of their behavior”.

Cooter (1998) offers an interesting analysis of this matter in the economic approach to law. See also, Sunstein (1996); McAdams (2015); Basu (2018) and Sardo and Esposito (2020).

Salazar et al. (2022), p. 2.

Voelkl (2015), p. 17.

Nowak and Sigmund (2005), p. 1291.

Hutt (1936), p. 257.

Hutt (1936), p. 34.

See, for more details, Esposito (2022), pp. 42–49 and 53 et seq.

Smith (2007 [1776], p. 426.

See Schwartz (1988); Sunstein (1999); Liscow and Markovitz (2022).

See Esposito (2022), pp. 31–34.

Walraevens (2020).

Smith (1759) and Anderson (2016), p. 158.

See above, Sect. 2.1.

Alexander (1988), p. 159, criticises Titmuss (1971), p. 239. For recent analyses by experts in the importance of reciprocity missing this point, see Gintis (2016), pp. 67–87; Sugden (2018); Oliver (2019), pp. 76–92; V. Smith and Wilson (2019), pp. 205–207, and Richter and Siemoneit (2022). The framework by Richter and Siemoneit (2022) is, nevertheless, largely compatible with the one presented in this chapter and in Esposito (2022).

Esposito (2019).

Esposito (2022), p. 3.

Calabresi (2007), p. 5.

Calabresi (2007), p. 9.

Esposito (2022), p. 177.

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Titel: The Consumer Welfare Standard, Consumer Sovereignty, and Reciprocity
verfasst von: Fabrizio Esposito
Verlag: Springer Nature Switzerland
Buch: Law and Economics of Justice
Print ISBN: 978-3-031-56821-3

Electronic ISBN: 978-3-031-56822-0

Copyright-Jahr: 2024
DOI: https://doi.org/10.1007/978-3-031-56822-0_12

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