THE INCENTIVES TO ORGANIZE AND DEMAND REGULATION: TWO ENDS AGAINST THE MIDDLE

A consumer versus business view of regulation frequently is too simplistic. Producers as a group may also be able to obtain rents from non-consumer surplus sources, and therefore may have relatively strong aggregate incentives to organize and seek favorable regulation as compared to consumers' incentives to avoid such regulation. This occurs in an increasing cost industry where producers purchase inputs whose supply curves are not infinitely elastic. The rents obtained by producers through regulatorily initiated output restrictions then include transfers from resource suppliers as well as from consumers, and exceed the potential losses consumers face.     

The social control of big business

Viewed from a conflict perspective, governmental agencies are tools of power and privilege. Subservient to powerful economic interest groups, regulatory agencies are claimed to exercise little, if any, effective control over the activities of big business.

Four hypotheses derived from a conflict perspective on the social control of big business are set forth: (1) less social control is exercised over big business than small business; (2) since the onset of the consumer movement, big business has been more frequently sanctioned; (3) over time big business “captures” regulatory agencies which results in a general decrease in the percentage of social control efforts directed toward big business; and (4) when big business is sanctioned, the smaller, less powerful of those businesses are sanctioned.

In this study the pattern of sanctioning of big business by a major federal regulatory agency is examined. Specifically, data on the issuance of cease and desist orders to business enterprises by the Federal Trade Commission over a twenty‐three year span of time are analyzed. The implications of the findings for each of the four hypotheses and for conflict theory in general are discussed.     

Political elites and regulatory bureaucrats: a case study concerning age discrimination

In 1988, the U.S. Senate Special Committee on Aging held a hearing on effectiveness of the Equal Employment Opportunity Commission (EEOC) with regard to age discrimination cases. The Hearing reported that approximately 7,500 age-based claims had run the statute of limitations. The article analyzes the ideological context of regulation, first, by explaining the purpose, procedures, and effectiveness of the EEOC in enforcing the Age Discrimination in Employment Act. Secondly, the article analyzes the 1988 Senate Hearing, including background issues and immediate outcomes. Thirdly, it discusses what has happened since 1988 from the perspectives of political elites, regulatory bureaucrats, and interest-group members.     

FIGHT,FOLD OR SETTLE?: MODELLING THE REACTION TO FTC MERGER CHALLENGES

This paper models the reaction of firms to Federal Trade Commission (FTC) decisions which seek to block proposed horizontal mergers. We find that firms' responses to the FTC's decisions depend on a number f factors, but only weakly on the structural merits of the FTC's challenge. For a large number of the FTC's merger challenges, we find that firms have strong incentives to settle with the Commission, regardless of the relevant competitive concerns. Therefore, in these matters the FTC appears to have powers more like a regulatory agency than a prosecutor.     

EMPIRICAL EVIDENCE ON FTC ENFORCEMENT OF THE MERGER GUIDELINES

The Justice Department's 1982/1984: merger guidelines identify various factors – concentration, entry barriers, ease of collusion, efficiency –that would thereafter determine whether the government will challenge a merger. Analysts have criticized enforcement agencies, however, for not following the guidelines, and criticize the guidelines themselves for not identifying the weights attached to the factors. Using a 1982-86 sample of seventy horizontal mergers, we examine which factors influenced Federal Trade Commission decisions to challenge mergers. The relative importance of the guidelines and other factors in merger challenges is measured, and related empirical issues are also explored.     

ANTITRUST ECONOMICS AND CONSUMER PROTECTION ECONOMICS IN POLICY AND LITIGATION: WHY THE DISPARITY?

The lag in the use of microeconomics in consumer protection policy and litigation—as compared with the use of microeconomics in antitrust/competition policy and litigation—has at least three causes: a considerably shorter period of intellectual development; the specific historical origins and culture of the U.S. Federal Trade Commission (FTC), where this disparity is especially noticeable; and the splintering of consumer protection responsibilities across a very large number of federal and state agencies. This paper will expand on these themes and discuss their implications—including the opportunities for expanded research in the area of consumer protection economics. (JEL B12, B13, B21, D18, L41)     

Regulation and the management of risk in commercial gambling in Great Britain

The regulation of commercial gambling in Great Britain is the responsibility of the Gambling Commission, the regulatory agency created by the Gambling Act 2005. This article examines the risk model that it has developed in order to assess operator risks to the Act's licensing objectives. These are to prevent gambling from becoming a source of crime, to ensure that gambling is fair and open, and to protect children and other vulnerable people from being harmed or exploited by gambling. The article discusses four factors that affect the implementation of this model: operator compliance, the regulatory environment, the regulatory toolkit and the Commission's approach to its regulatory responsibilities. Its regulatory ideology sits squarely within the neo-liberal mode of regulation that has been pursued in Great Britain since the 1980s. By reference to political and public disquiet concerning gaming machines, the article analyses the tensions between the state, the regulator, the gambling industry and its consumers to which this mode of regulation gives rise. The article examines the challenges that the Commission faces in seeking to adopt a regulatory stance that is defensible both in terms of the protection of the public and the demands of a liberal market economy.     

COMMON LAW, STATUTE LAW, AND THE THEORY OF LEGISLATIVE CHOICE: AN INQUIRY INTO THE GOAL OF THE SHERMAN ACT

Although the Sherman Antitrust Act is more than a century old, debate continues over its goals. In contrast to what many have argued, I contend that the Act's main goal is to maximize economic efficiency, rather than the welfare of consumers. The Sherman Act is a modest extension of the common law, which the "Law and Economics" literature indicates moves towards economic efficiency. Further, unlike the Interstate Commerce Act of 1887, Sherman Act decisions are made by courts, not a regulatory agency. Thus, the theory of legislature choice also implies that the goal of the Act is to maximize economic efficiency.     

AN ANALYTIC HISTORY OF DELIVERED PRICE LITIGATION: DO COURTS PROPERLY DISTINGUISH RIVALROUS FROM COLLUSIVE INSTANCES?

The federal judiciary's present, cautious approach to delivered pricing is appropriate. Using court records and recent contributions to the economic literature, this article evaluates the antitrust history of those practices. Delivered pricing can replace mill pricing naturally in some rivalrous settings, but under special circumstances could be collusive. Thus, delivered pricing has sometimes been adjudged a Sherman Act violation, but only given other evidence of collusion. For a time, however, the legal system threatened to treat delivered pricing as a per se violation of the Clayton and Federal Trade Commission Acts. That reflected poor economic understanding.     

Government regulation of gambling advertising: Replacing vice prevention with consumer protection

From 1895 to 1975, federal law forbade gambling advertising by use of the mail, interstate commerce, and the broadcast media. Congress exempted state lotteries in 1975 and charitable gambling (including casino games) in 1988. However, the Supreme Court requires a significant government interest, directly applied and narrowly tailored, in order to justify a commercial speech regulation. The exemptions for private charity casino games has arguably destroyed any constitutionally defensible government interest in restricting for-profit casinos. Casinos in new gambling jurisdictions (such as Iowa or Illinois) will probably push the hardest for an exemption for all legal gambling, as they have the most to gain from the freedom to advertise. Federal regulation of gambling advertising will fall to the Federal Trade Commission under prohibitions against unfair or deceptive trade practices. But as State regulations are not well developed even in states that permit casino gambling, there is a pressing need for new research to review state laws regulating gambling advertising and to propose a model statute.     

PARTIES,POLITICS, AND REGULATION: EVIDENCE FROM CLEAN AIR ACT ENFORCEMENT

Does local Federal regulation respond to the preferences of local Congressional representatives? For example, do Republican Congressmen reduce local enforcement of Clean Air laws in their districts? We use facility‐level panel data on Clean Air Act inspections over 1989–2005 to study the causal effect of a Congressman's party affiliation on local enforcement. Random assignment of electoral outcomes is obtained with a Regression Discontinuity design. We find that new Republican (vs. Democratic) Representatives significantly depress inspection rates for local polluting facilities in the first year after their election. (JEL D73, Q52, Q53)     

DYNAMIC GAINS AND STATIC LOSSES IN OLIGOPOLY: EVIDENCE FROM THE BEER INDUSTRY

The paper provides a new perspective on the estimate of the welfare losses due to oligopoly. I argue that the conventional analysis of monopoly/oligopoly welfare losses can be misleading. If causation runs from investment in new technology to increased concentration, dynamic gains from innovation should be taken into account for a fuller analysis of welfare losses. I use beer-industry data to demonstrate that technological changes Granger-cause beer prices, and beer prices Granger-cause the Herfindahl index. I then estimate the dynamic gains to consumers in the beer industry and find these gains to be impressive relative to conventional static losses. ( JEL L10, L13)     

INFLATION AND WAGE RIGIDITY/FLEXIBILITY IN THE SHORT RUN

A recent literature uses accurate wage data from payroll records and provides compelling evidence against the conventional belief that nominal wages are downward sticky. This paper provides a unique contribution to this literature by conducting a formal analysis of the role of inflation in cyclical wage rigidity/flexibility. Analysis of payroll‐based wage data from the Korean labor market for the period 1971–2014 finds that the degree of downward nominal wage flexibility is countercyclical, and the countercyclicality becomes stronger during a deflationary, relative to inflationary, recession. This serves as a counter‐example to the conventional theory of cyclical wage rigidity. (JEL E24, E32, J30, J64)     

Some economic effects of the California agricultural labor relations act

The California Agricultural Labor Relations Act (CALRA) evolved in the 1970s because the National Labor Relations Act (NLRA) excluded agricultural workers. CALRA effectively placed the United Farm Workers Union in a stronger bargaining position vis-a-vis farmers than the NLRA had done for industrial unions vis-a-vis nonfarm business firms. Society has suffered a net economic loss from CALRA and the events preceding its enactment. Since passage of the act, at least three effects have been verified: Relative to conditions that would otherwise have been expected to exist, consumers are facing higher prices; agricultural workers are earning lower wages; and landowners have suffered losses in land values.     

STATISTICAL MODELS OF CONSUMER BEHAVIOR WITH HETEROGENEOUS VALUES AND CONSTRAINTS

In a market with heterogeneous individuals, the fact that a particular group of individuals are the consumers of a particular product already indicates that there exist systematic differences between them and the average person. Simple tools from statistical theory are used here to analyze the implications of consumer diversity. It is argued that an increase in consumer diversity will increase the gains from trade, and that there is a "shadow price of heterogeneity" associated with product quality. Throughout the discussion, the significance of consumer self-selection and the distinction between "average" and "marginal" will be emphasized.     

A new paradigm: the wealth effect of the stock market on consumption,in a context of interacting bio-systems

This study examines the existence of a stock market wealth effect on aggregate private consumption in the economy. A theory of investor/consumer behavior is suggested, in a context of a symbiotic relationship between two quasi-bio-systems. The model offers predictions about likely outcomes in capital market interaction with the underlying economy in general and consumption in particular. These predictions are validated empirically. Specifically, the paper finds that investors/consumers do not respond immediately to a stock market rise (fall). Rather, they wait at first and thereafter gradually accelerate their ‘wealth spending’ on consumption only after they are convinced that the gain is permanent (a variation of the ‘income smoothing’ that was suggested many years ago by Friedman (1957)). The paper suggests that the capital markets and the economy interact like two bio-systems symbiotically responding to each other. This study presents evidence that the consumption wealth spending peaks at approximately 2.5% of the stock market wealth CUMULATIVE gain in the previous 12–24-month period, with some effects lingering on up to 36 months. For example, it shows that over 40% of the growth in consumer spending in 1999 was attributable to gains in the stock market in previous years, contributing to a strong GDP in that year.     

Immigrants’ Employment in Spanish Cooperatives: Outcomes in Relation to the Business Cycle

In this paper, we analyse the interaction between immigrants’ employment in cooperatives and the business cycle. The study is centred on the Spanish economy during the period 2003–2015. The main goal of this paper is to answer the following two key questions: are fluctuations in immigrants’ employment in cooperatives cyclical in relation to the business cycle? And, are immigrant employees more vulnerable to the business cycle than native employees? The cycles and their turning points are identified using the Bry and Boschan (Cyclical analysis of time series: selected procedures and computer programmes, National Bureau of Economic Research, New York, 1971) algorithm. To resolve it we employ the BUSY software, developed by the European Commission. The procedure allows us to identify the features of the cycle phases and to calculate the synchronization index. The results show that (1) employment in cooperatives is procyclical and with no differences between immigrant and native workers, (2) the economic crisis has hit immigrant workers harder than native ones, (3) the immigrants’ birthplace is significant because some cyclical behaviour can be found to vary according to the immigrants’ origins; however, in general, sensitivity to the business cycle is the common factor.     

Building Health Insurance Literacy: Evidence from the Smart Choice Health Insurance™ Program

With the passage of the Patient Protection and Affordable Care Act (ACA) of 2010, the health insurance literacy of Americans became a critical issue. In response, a consumer education program was created and tested by university researchers and educators associated with Cooperative Extension. This article draws extensively on the emerging literature on health insurance literacy and on data from participants in the Smart Choice Health Insurance? program. The intent of the study was to understand socio-demographic and environmental variables that predict initial health insurance literacy and gains in health insurance literacy. A standardized instrument measuring health insurance literacy was used to collect the data. Multivariate analysis showed higher income consumers demonstrated greater initial health insurance literacy scores compared to middle income consumers, whereas younger, male and lower educated consumers reported lower initial health insurance literacy. After participating in the Smart Choice Health Insurance? program, consumers who made greater gains in their health insurance literacy tended to be female, higher income, and consumers residing in states that showed supportiveness of the ACA. The findings highlight the importance of considering sociodemographic characteristics in program design and delivery, as well as how contextual issues, such as the political environment, might impact the delivery of educational efforts. Findings from the analyses help inform ways to adapt and tailor educational opportunities that focus on health insurance literacy for a range of consumers.     

MOONLIGHTING OVER THE BUSINESS CYCLE

Using data from the 1979 National Longitudinal Survey of Youth, we examine the cyclicality of moonlighting by gender. We estimate a random-effects Tobit model of moonlighting among working men and women and find that while male moonlighting behavior does not fluctuate significantly with the business cycle, female moonlighting does. The cyclicality of female moonlighting has, nonetheless, varied over the course of the past 35 yr. Female moonlighting seemed to behave countercyclically during much of the 1980s and early 1990s, confirming the popular media belief that moonlighting is more likely to occur during periods of economic distress. Yet, this countercyclical behavior disappears during the 1993–1999 period to become procyclical by the early twentieth century. The recent procyclicality of female moonlighting supports the idea that female workers respond to a need for "just-in-time" employment following the economic upturn of the mid- to late 1990s. ( JEL J2, E32)     

Emerging wealth disparities after the storm: Evidence from Spain

We examine how the recession that started in December 2007 in the United States impacted wealth accumulation and inequality among Spanish households. We find that overall wealth dropped by 15 percent between 2008 and 2011, with losses concentrating among households in the mid and top wealth quintiles. The most hard hit wealth components were business assets, primary home equity, and durable assets, which declined by 40 percent, 23 percent and 19 percent, respectively. Wealth losses among all households were likely sustained by restricted access to credit. Nonetheless, in part due to their more diversified wealth portfolios, households in the top wealth quintile amassed a greater share of the country’s wealth during the recession. Consequently, wealth inequality, which receded during the expansionary years of 2002 through 2005, rose by 2008 and continued its trend in 2011.