"Classical and Neoclassical Elements in Industrial Organization"

This article analyzes the theoretical foundations of industrial organization studies of monopolistic and competitive pricing. Our analysis will focus on the central debates of the 1950s, 1960s, and 1970s which formed the theoretical basis of the modern industrial organization paradigm. We will argue that despite claims to the contrary, and often unknowingly, the majority of these studies adopted a mixture of both classical and neoclassical elements . 2 We will try to show that the lack of a firm theoretical grounding has led to three types of confusion in this literature. First, there is a lack of clarity concerning what measure of profitability should be equalized in competitive equilibrium. A debate has developed concerning whether the rate of profit, total profit, or the profit margin, is the appropriate variable to study. Second, the industrial organization approach to monopoly and competition has never adequately resolved over what period of time profit-rate differentials must be studied. In this regard, Yale Brozen's criticism of the short-run nature of early profit rate-market structure studies is discussed. Third, we will argue that from a classical point of view, firm studies of profitability which draw conclusions for industry phenomena have been misguided. Harold Demsetz' work on concentration and efficiency will be referred to as an illustration. We will conclude by questioning the practicability of a purely neoclassical grounding for industrial economists, since they have been impelled to abandon this approach in their investigation of reality.

"Competing Micro Economic Theories Of Industrial Profits: An Empirical Approach"

Contrary to the impression given by most textbooks, microeconomics is not a homogeneous discipline. At least two major alternative theories exist which account for the long-run behavior of industrial prices and the between economic sectors in ways which are distinct from standard neoclassical explanations. Both Post Keynesian and Classical (Marxian/NeoRicardian) approaches to economics have developed a growing literature on microfoundations in recent years (see, e.g. Eichner, 1985; Dumenil & Levy, 1985).

"Long-Term Trends in Profitability: The Recovery of World War II"

It has become accepted doctrine among economists that the rate of profit in the United States has declined since the mid-1960s. What is less a matter of agreement is whether this decline represents a stage in a long-term secular decline. In a recent article Dumenil, Glick, and Rangel (1987) reviewed the existing empirical evidence on this topic and found that independent of variation in the definition of the rate of profit. any series extending back to 1929 reveals a stable or increasing trend. Although two periods of serious decline exist (after World War I and in the late 1950s) they are connected by a "leap forward" during World War II In fact in any measure which does not subtract taxes from profit World War II coincides with a considerable restoration of the rate of profit. This is an important anomaly for Marxists who predict a long-term declining tendency yet it has never been addressed in the empirical literature on this topic. There is no doubt that a restoration of the rate of profit discovered in the 1940s questions the relevance of Marx s famous thesis of a falling tendency of the rate of profit in capitalist economics. Certainly when Marx discussed the tendency of the rate of profit he acknowledged the important role of counter tendencies. However one would not expect the counter tendencies which Marx discussed to have such a concentrated impact over such a short span of time. The purpose of the present study is to investigate more carefully this leap forward in profitability. In a first part we will fully explore the statistical characteristics of the leap forward. Specifically we will compare the leap forward with earlier and future fluctuations and trends in profitability (an effort will be made in spite of the deficiencies of the data, to cover a period of 120 years). We will further determine whether the leap forward is invariant to the choice of the definition of the rate of profit or whether it can be explained by a specific choice of statistical categories. A second part will consider whether the leap forward is the expression of changes in the relative price of fixed capital, or a variation in the workweek of capital. The final part will explore whether the leap occurred in specific industries or whether it was a general feature of the economy. In the conclusion we will discuss a number of further alternative explanations.

Why Economists Should Support Populist Antitrust Goals

Antitrust policy can be a powerful tool to tackle important social and economic problems. For decades antitrust enforcement has been shackled by the so-called Consumer Welfare Standard (“CWS”) that has limited the goals considered to be “legitimate.” The CWS limits antitrust goals to those that impact demand in markets, and primarily in output markets. Recently, new voices have come forward to suggest that antitrust policy should address several other important social objectives. Such goals include the traditional antitrust goals that motivated passage of the antitrust statutes, and which were discussed in Pre-Rehnquist Court opinions, including dispersion of economic and political power, and protection of small business. Additionally, it has been suggested that antitrust law should contribute to alleviating inequality, protecting labor when mergers occur or in the presence of monopsony, protect macroeconomic growth and stability when financial entities merge, and possibly contribute to efforts to advance sustainability. While some argue that the CWS is flexible enough to support some or all of these objectives, we disagree. There are at least five reasons why the CWS is severely limited or defective, preventing it from being an appropriate standard for modern antitrust. First (Section III below), it is a “material welfare” approach derived from Alfred Marshall, meaning an approach that cannot incorporate important issues that affect welfare such as political democracy and sustainability. This is made clear in the writings of Marshall and Pigou, the originators of the theory imported into antitrust by Judge Bork. Second (Section IV), the CWS assumes that the marginal utility of money (or the marginal social welfare with respect to a change in anyone’s surplus) is constant and equal among individuals impacted by anticompetitive practices. As a consequence, the CWS treats as inconsequential transfers of income between groups resulting from alleged restraints or mergers. Third (Section V), CWS is biased in favor of the wealthy, despite Section IV’s findings that CWS is neutral with respect to marginal transfers. Fourth (Section VI), CWS uses an indefensible measure of efficiency. Fifth (Section VII), CWS ignores the input market when analyzing restraints in the output market.We suggest that there are three questions that must be addressed when considering an antitrust criterion. First: is there credible social science research showing that the policy goals embodied in the criterion result in material increases in human well-being (the basis of economic welfare)? Second: can competition policy substantially advance the criterion? Finally, does the criterion provide a method for dealing with tradeoffs between the goals it embodies, if such tradeoffs are present? The CWS is so seriously limited that it does not even allow consideration of the first requirement. A more general welfare approach certainly can address the first two questions and may hold promise for satisfying the third

Classical and Neoclassical Elements in Industrial Organization

Industrial organization studies of pricing are examined, focusing on the formative debates of 1950-70. It is argued that most of these studies unknowingly adopted a mixture of classical and neoclassical theory, leading to three types of confusions. First, over what measure of profitability is equalized in competitive equilibrium. Second, over what period of time profitability differentials must be studied. Third, over the correct conclusions to be drawn for industry phenomena from firm studies of profitability. The paper concludes by questioning the practicability of a purely neoclassical theoretical grounding for industrial economists, since they abandon this approach in their empirical work.

TGFβ1 Overexpression by Keratinocytes Alters Skin Dendritic Cell Homeostasis and Enhances Contact Hypersensitivity

Overexpression of transforming growth factor beta-1 (TGFβ1) in mouse epidermis causes cutaneous inflammation and keratinocyte hyperproliferation. Here we examined acute effects of TGFβ1 overproduction by keratinocytes on skin dendritic cells (DCs). TGFβ1 induction for 2 and 4 days increased the numbers and CD86 expression of B220+ plasmacytoid DCs (pDCs) and CD207+CD103+, CD207−CD103−CD11b+, and CD207−CD103−CD11b− dermal DCs (dDCs) in skin-draining lymph nodes (SDLNs). The dermis of TGFβ1-overexpressing mice had significantly more pDCs, CD207+CD103+ dDCs, and CD207−CD11b+ dDCs in the absence of increased dermal proliferation. Application of dye, tetramethyl rhodamine iso-thiocyanate (TRITC), in dibutylpthalate (DBP) solution after TGFβ1 induction increased the numbers of TRITC+CD207− dDCs in SDLNs, and augmented TRITC/DBP-induced Langerhans cell (LC) migration 72hours post TRITC treatment. Consistent with this, LC migration was increased in vitro by TGFβ1 overexpression in skin explants and by exogenous TGFβ1 in culture media. Transient TGFβ1 induction during DNFB sensitization increased contact hypersensitivity responses by 1.5-fold. Thus, elevated epidermal TGFβ1 alone is sufficient to alter homeostasis of multiple cutaneous DC subsets, and enhance DC migration and immune responses to contact sensitizers. These results highlight a role for keratinocyte-derived TGFβ1 in DC trafficking and in the initiation of skin inflammation

A Very Ambiguous Empire:Russia’s Hybrid Exceptionalism

Legal rules are often designed to provide different incentives to plaintiffs and defendants. With regard to prejudgment interest, however, it is not clear why there should be a bias in either direction. Absent a convincing argument for leaning toward one party or the other, we conclude that as a normative matter, the ideal rule for prejudgment interest should be neutral with regard to delay: plaintiffs are compensated fully for delay and defendants pay the market rate for the benefits they implicitly derive from holding money that belongs to the plaintiff. This simple “neutrality rule” implies, of course, that all claims should be treated equally with regard to applying prejudgment interest; that there should not be a legislatively-set prejudgment rate or legislative mandating of simple, rather than compound, interest; and that prospective damages should be discounted to the date of injury and not the date of trial. We conclude this Article with another admonition from the Eleventh Circuit: “Symmetrical treatment should be given to the estimated lost earnings both before and after trial so that neither party can benefit by delaying the final judgment.”161 Utah could substantially reduce the problems and inconsistencies that derive from the current legal treatment of prejudgment interest if it were to adopt a simple principle: other than adding prejudgment interest, if a change in the trial date increases or decreases estimated damages, the methodology being used embeds an inconsistency concerning the treatment of time