A Shocking Truth For Law And Economics

Consumer Welfare Explains the Internal Market for Electricity Better Than Total Welfare

Fabrizio Esposito, Lucila de Almeida

Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review

Abstract

This chapter challenges the use of total welfare as the axiological assumption adopted by economically-informed legal scholarship in the field of electricity. To do so, it demonstrates that the efficiency hypotheses can be grounded in two different economic rationales: the traditional one based on total welfare; and an alternative one based on consumer welfare. To challenge the uncritical endorsement of total welfare, the chapter chooses the competition pillar for the EU internal market for electricity as a case study and shows that consumer welfare better explains its economic rationale. This finding proves that the economically-informed legal scholars are wrong in considering total welfare an unquestionable starting point for their research. This will likely be a ‘shocking truth’ for law and economics scholars. The argument is articulated in four steps. The first step builds the methodological foundations. It describes two types of explanatory claims, one external and the other internal to legal discourse, and discusses the superior relevance of the latter to legal practice. The second step lays the analytical framework. It identifies points of divergence between the two efficiency hypotheses, total and consumer welfare, with a focus on electricity markets. The third step reviews the economically-informed legal scholarship and the economic one on the regulation of electricity markets. It shows that scholars endorse total welfare, consumer welfare, and even both. The fourth and final step enters the realm of the EU internal market for electricity and proves that the economic rationale of legal materials and legal discourse is better explained by consumer welfare. This finding supports our alternative efficiency hypothesis based on consumer welfare.
Original languageEnglish
Title of host publicationEnergy Law and Economics
EditorsKlaus Mathis, Bruce R. Huber
Number of pages33
Place of PublicationCham
PublisherSpringer
Publication date20 Apr 2018
Pages101-133
ISBN (Print)978-3-319-74635-7
ISBN (Electronic)978-3-319-74636-4
DOIs
Publication statusPublished - 20 Apr 2018
MoE publication typeA3 Book chapter

Publication series

NameEconomic Analysis of Law in European Legal Scholarship book series (EALELS)
PublisherSpringer
Volume5

Fields of Science

  • 513 Law

Cite this

Esposito, F., & Almeida, L. D. (2018). A Shocking Truth For Law And Economics: Consumer Welfare Explains the Internal Market for Electricity Better Than Total Welfare. In K. Mathis, & B. R. Huber (Eds.), Energy Law and Economics (pp. 101-133). (Economic Analysis of Law in European Legal Scholarship book series (EALELS); Vol. 5). Cham: Springer . https://doi.org/10.1007/978-3-319-74636-4
Esposito, Fabrizio ; Almeida, Lucila de. / A Shocking Truth For Law And Economics : Consumer Welfare Explains the Internal Market for Electricity Better Than Total Welfare. Energy Law and Economics. editor / Klaus Mathis ; Bruce R. Huber. Cham : Springer , 2018. pp. 101-133 (Economic Analysis of Law in European Legal Scholarship book series (EALELS)).
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Esposito, F & Almeida, LD 2018, A Shocking Truth For Law And Economics: Consumer Welfare Explains the Internal Market for Electricity Better Than Total Welfare. in K Mathis & BR Huber (eds), Energy Law and Economics. Economic Analysis of Law in European Legal Scholarship book series (EALELS), vol. 5, Springer , Cham, pp. 101-133. https://doi.org/10.1007/978-3-319-74636-4

A Shocking Truth For Law And Economics : Consumer Welfare Explains the Internal Market for Electricity Better Than Total Welfare. / Esposito, Fabrizio; Almeida, Lucila de.

Energy Law and Economics. ed. / Klaus Mathis; Bruce R. Huber. Cham : Springer , 2018. p. 101-133 (Economic Analysis of Law in European Legal Scholarship book series (EALELS); Vol. 5).

Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review

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AB - This chapter challenges the use of total welfare as the axiological assumption adopted by economically-informed legal scholarship in the field of electricity. To do so, it demonstrates that the efficiency hypotheses can be grounded in two different economic rationales: the traditional one based on total welfare; and an alternative one based on consumer welfare. To challenge the uncritical endorsement of total welfare, the chapter chooses the competition pillar for the EU internal market for electricity as a case study and shows that consumer welfare better explains its economic rationale. This finding proves that the economically-informed legal scholars are wrong in considering total welfare an unquestionable starting point for their research. This will likely be a ‘shocking truth’ for law and economics scholars. The argument is articulated in four steps. The first step builds the methodological foundations. It describes two types of explanatory claims, one external and the other internal to legal discourse, and discusses the superior relevance of the latter to legal practice. The second step lays the analytical framework. It identifies points of divergence between the two efficiency hypotheses, total and consumer welfare, with a focus on electricity markets. The third step reviews the economically-informed legal scholarship and the economic one on the regulation of electricity markets. It shows that scholars endorse total welfare, consumer welfare, and even both. The fourth and final step enters the realm of the EU internal market for electricity and proves that the economic rationale of legal materials and legal discourse is better explained by consumer welfare. This finding supports our alternative efficiency hypothesis based on consumer welfare.

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T3 - Economic Analysis of Law in European Legal Scholarship book series (EALELS)

SP - 101

EP - 133

BT - Energy Law and Economics

A2 - Mathis, Klaus

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PB - Springer

CY - Cham

ER -

Esposito F, Almeida LD. A Shocking Truth For Law And Economics: Consumer Welfare Explains the Internal Market for Electricity Better Than Total Welfare. In Mathis K, Huber BR, editors, Energy Law and Economics. Cham: Springer . 2018. p. 101-133. (Economic Analysis of Law in European Legal Scholarship book series (EALELS)). https://doi.org/10.1007/978-3-319-74636-4