Distribution, Competition, and Antitrust / IP Law

Is Price Gouging Immoral? Should It Be Illegal?

In the wake of Hurricane Sandy, here are two takes on the question of price gouging in a time of emergency.

First, Matt Zwolinski (University of San Diego) presents the libertarian argument that price “gouging” provides an incentive to move products from lower areas of demand to higher areas of demand, and makes everyone better off.  (This is a nice little video argument.)

Second, Planet Money recently had a blog post entitled “Why Economists Love Price Gouging, and Why It’s So Rare.”

The people [Nobel Laureate Daniel] Kahneman surveyed said they would punish businesses that raised prices in ways that seemed unfair. While I would have paid twice the normal price for my groceries yesterday, I would have felt like I was getting ripped off. After the storm passed, I might have started getting my groceries somewhere else.

Businesses know this. And, Kahneman argues, when basic economic theory conflicts with peoples’ perception of fairness, it’s in a firm’s long-term interest to behave in a way that people think is fair.

I think there is much merit in the Kahneman/Planet Money point.

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The Unbearable Heaviness of Being the Bluebook

The Bluebook

(with apologies to Milan Kundera)

There are of course many inefficiencies in our legal system.  An admittedly smaller one — though probably a lot larger than you might think — is also one of the more egregious.

I’m talking about the Bluebook, the bible for legal citations in the United States.  The recent 18th edition weighs in at a massive 415 pages.  That’s 415 pages of material to tell us how to format citations in legal papers.

Let’s compare and contrast.  In the biomedical field, we have “Uniform Requirements for Manuscripts Submitted to Biomedical Journals.”  Check it out — the requirements are short.  In biology and related fields, we have the Vancouver System.  And for electrical engineering, there is the IEEE Style Manual.  Electrical engineering is complicated stuff — I daresay more complex than most areas of law — but the IEEE Style Manual is only 18 pages long.

Now look — of course it’s important to have some rules as to citation format and style.  Otherwise, things could get confusing.  But do you really think law needs 415 pages to accomplish that?  When’s the last time you ever heard a complaint that one of your citations was formatted incorrectly?  I can’t remember the issue ever coming up.  Courts have better things to do.

In the meantime, many, many hours are spent learning the Bluebook and complying with it.  To what end?  If the electrical engineers, biologists, and other scientists can live with short pamphlets regarding citation style, why can’t the lawyers?

Why is the Bluebook so bloated?  I’m not sure.  It may be because that in the legal field, the Bluebook is published and guarded by various law reviews, who earn income from its publication.  There is, therefore, a positive incentive to update it, expand it, and fiddle with it ad nauseum.  (18 editions?  Really?  I don’t think that ideas in the citation format world evolve that quickly.  And I say this as someone who helped prepare an earlier version of the Bluebook.)  On Amazon, the Second Edition of Citing Medicine (used in the medical field) is only $3.00 for a Kindle edition.  Meanwhile, the Bluebook is over $30.

It’s really time for a new and simplified approach.

* Yes, Citing Medicine looks reasonably complicated, but probably less so than the Bluebook.

Is Professional Licensing a Drag on the Economy?

The Planetmoney folks have an interesting episode entitled “why it’s illegal to braid hair without a license.”  The episode discusses the experience of one part-time African-style hair braider in Utah whose business was shut down by a state licensing board.  The episode presents the viewpoint that over-licensing is often unnecessary, sometimes exclusionary, and interferes with the supply and movement of labor in the labor market (not necessarily a good thing in an economic downturn).

Some of these arguments are familiar, but one statistic in the episode caught my ear: some 50 years ago, only one out of 20 workers was licensed.  Now, the statistic is one out of three. 

I suspect that statistic defines “license” rather broadly (perhaps to include any sort of registration requirement).  Nevertheless, it’s quite striking.

Here’s my take on the licensing system in the U.S. legal system.

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So, What’s the Point?

When I decided to start this blog, I resolved that it would not be simply a collection of legal case squibs — although there will certainly be room for those. I commit to writing about some issues in the news and more general issues of direct or tangential relevance to distribution law.

But first, a basic question: why distribution law? Aside from its own charms, why should anyone pay attention to it?

The answer is that distribution systems — defined and circumscribed by applicable law — have a fundamental impact on our quality of life. In the former Soviet Union, before the late 1980s, distribution was (at least in theory) highly planned and completely centralized. Bureaucrats decided which factories made which products, and in what quantities. They decided how those products were sent to market, and where they were sold. The result was a society with an impressive military machine but which could not provide basic appliances or products (washing machines, dishwashers, cars) to most of its people, and which witnessed repeated shortages of food and other household consumable goods.

The USSR was, of course, an extreme case. But in between it and a completely open, anarchic market are many points in between. How should one choose where on this spectrum to land?

Probably no one, and certainly not me, has the definitive answer. European law and U.S. law often diverge, yet both serve their societies reasonably well. What I can suggest is that distribution law has two primary, and sometimes contradictory, goals. First, efficiency.(*) Distribution law should attempt to ensure that high-quality products get to market in the fastest, cheapest way possible. And second, fairness. Sometimes the law decides to protect certain categories of persons because of values society attaches to their work or function. Sometimes this sense of fairness is merely sentimental; sometimes it is grounded in something deeper. Often, upholding a rule based on perceived fairness will result in decreased theoretical efficiency. There are almost always tradeoffs.

The federal Robinson-Patman Act sits squarely in the center of the efficiency v. fairness debate. It was enacted during the Great Depression in a deliberate effort to protect “mom and pop” retailers whom Congress thought were faced with potential commercial extinction. The Act strongly emphasizes fairness to such an extent that many have argued it fosters inefficiency.

We will see the Robinson-Patman Act often in this blog. More on it in a bit.

(*) Competition may be thought of as a goal of distribution law as well. But competition is not a goal in itself; competition is valued because it is thought to promote efficiency (lower cost, higher quality goods and services).

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