The Consumer Welfare Standard is severely limited or defective, preventing it from being an appropriate standard for modern antitrust.
Antitrust economists have generally supported the Consumer Welfare Standard as a guide to antitrust policy questions because of its origins in Marshall’s consumer surplus approach and the general economic surplus approach to welfare economics. But welfare economists no longer support the surplus approach because decades of research pertaining to the surplus approach have uncovered numerous inconsistencies and serious ethical challenges. However, the surplus approach to welfare survives in industrial organization textbooks and among industrial organization economists that specialize in antitrust. We argue in this paper that the Consumer Welfare Standard is not a reliable standard and should be abandoned. We cite several reasons: (1) it limits antitrust goals a priori without any defensible justification, (2) it considers all transfers of surplus between stakeholders in antitrust cases to be welfare neutral, (3) it is biased in favor of big business and the rich, and (4) the accumulation of inconsistencies and problems documented by welfare economists renders the theory completely unreliable. In a final section of the paper, we preliminarily contend that modern research in welfare economics concerning the factors that influence human welfare could be used to inform a more progressive standard for determining antitrust goals.