Relaxing whilst doing Competition Law is not an Oxymoron

Archive for December 1st, 2009

Behavioral Economics, Liberal Paternalism and Possible Antitrust Implications

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In relation to Alfonso’s earlier post regarding behavioral economics, I was amazed to learn today that Cass Sunstein (Harvard Law School) and Richard Thaler (University of Chicago Booth School of Business) had been ranked by Foreign Policy in 7th position amongst the “100 Global Thinkers” of 2009.  Sunstein and Thaller are well-known for their book entitled Nudge: Improving Decisions About Health, Wealth, and Happiness in which they challenge the pervasive neo-classical rationality assumptions and describe men as irrational, uninformed and rash.

The upshot of this is that individuals’ free decisions cannot – as predicted by neoclassical theory – lead to optimality. Hence Sunstein and Thaller consider that, whilst freedom of choice must be preserved, a certain sense of government direction (labelled “liberal paternalism“) is required to achieve optimal economic outcomes.

Thinking of potential antitrust law consequences, Sunstein and Thaller’s argument brings support to the strong remedies occasionally applied by agencies to resolve competition concerns. Whilst simple remedies removing antitrust offenses  – think, for instance, of the arguably ineffective WMP unbundling requirement imposed on Microsoft by the Commission – might be in practice inappropriate to re-establish a competitive state of play (because customers do not bother to test alternative media players), more intrusive remedies forcing customers to make a choice – think for instance, of a must carry, ballot- screen remedy – might actually prove more efficient.

(Image possibly subject to copyrights: source here)

Written by Nicolas Petit

1 December 2009 at 11:36 pm