Is the Free Market Broken? Hardly.

Wants to Fix What's Not Broken

Senator Elizabeth Warren (pictured above) has convinced herself that the free market is "broken," thereby justifying intrusive and coercive regulation to fix market outcomes.  According to this article, the Senator has offered three examples of such disrepair: (1) student debt (apparently including both the amount of debt and the interest rates that students pay), (2) wages that are in some cases lower than necessary to support a family, large or small and (3) insufficient financial regulation.  She would have the national government repair the market by, for instance, coercively raising the minimum wage and lowering student loan interest rates to the rate that the Federal Reserve charges individual banks.   (See here and here)  This rate, the so-called "discount rate," is less than one percent. (See here).     Senator Warren's indictment of the free market does not withstand scrutiny and reflects confusion about the proper objectives of this critical social institution.  As will be seen, it will be useful to compare her views regarding the appropriate objectives of the market with those of Frank Knight, one of the most influential and thoughtful economists of the 20th Century. 

1. What Americans call "the market" is a social institution that depends upon various background legal rules, particularly private property, free contract and legal prohibitions on fraud and duress. Frank Knight ably described the free market system as follows:

"Ours is a system of 'private property,' 'free competition,' and 'contract.'  This means that every productive resource or agent, including labor power, typically 'belongs' to some person who is free within the legal conditions of marketing, to get what he can out of its use."

See Frank H. Knight, The Economic Organization, 11 (1951).

2. Any critique of a social institution must begin by identifying a plausible set of objectives society expects the institution to achieve. For instance, while society can (and should) expect its system of education to produce a literate populace, it cannot expect that system to produce a safe and abundant food supply.  Thus, while proof that many high school graduates cannot read or write would indict the educational system, proof that many people go hungry would not.

3. In the same way, any critique of the free market must begin by specifying the objectives that society legitimately expects the market to achieve.  Does society expect the market to defend the nation from foreign attack?  Eliminate cruelty to animals?  Prevent the spread of infectious disease? If the answer to any of these questions is "yes," the market is "broken," and coercive regulatory intervention is appropriate.  But of course, no rational society would expect the free market as such (as opposed to other social institutions), to achieve any of these objectives.  

4. What, then, can society properly ask of free markets? Frank Knight would have answered the question as follows: society should expect markets to allocate resources (including labor) and organize production efficiently so as to maximize the amount of "want satisfaction" that consumers derive from society's given endowment of resources and know how.  See generally Knight, The Economic Organization, at 9-10.   A secondary but related objective involves assuring what Knight calls "economic maintenance and progress."  See id. at 12-14.  In particular, a well-functioning market will ensure optimal allocation of resources toward capital investment (including investments in human capital) and technological progress.   In the medium and longer run, such investments can enhance the nation's overall productivity and thus its ability to produce goods and services that provide want satisfaction. 

5.  Of course, free markets sometimes fail to maximize such want satisfaction and/or ensure optimal capital investment and technological progress.  For instance, transaction costs can prevent voluntary private bargains from allocating resources to their highest valued use.  The classic example involves an activity that imposes costs --- what economists call "negative externalities" --- on individuals who are not parties to a given transaction.  The result can be be overproduction by the industry in question and thus overuse of resources that would produce more social value elsewhere.  Even the most dedicated adherents to laissez faire have long recognized that governments should intervene to correct such market failures and that such intervention should include, if necessary, coercive restrictions on output.  Moreover, high transaction costs can also result in positive externalities.  For instance, bargaining and information costs may prevent individuals contemplating investments in technological innovation from identifying and securing remuneration from other individuals who might reap the benefits of such investments.  Here again, some coercive intervention in the market, such as the creation of patent rights, might be necessary to ensure adequate investment in the creation of new technology and thus optimal increases in national productivity.

6.  None of Senator Warren's examples qualifies as a manifestation of market failure that somehow suggests that the free market is "broken" and thus ripe for coercive interference.  Take the minimum wage first.  Labor is an input in the production of goods and services, and firms purchase this input in the market, in the same way they purchase other inputs such as steel, electricity or bread.  The wage is simply the price for labor, a price determined by conditions of supply and demand.

It is certainly true that free market determination of the price of labor sometimes results in wages insufficient to support an average-size family.  In the same way, prices for other inputs may be insufficient to guarantee any profit whatsoever to the owners of firms that produce such inputs.  A company that makes and sells high quality steel to automobile companies will earn negative profits and fail if automobile companies forgo steel for aluminum, for instance.  In such cases, the wages of some steel workers will fall to zero as steel companies cease to employ them.  To be sure, one can imagine situations in which such low wages reflect a market failure resulting from an employer's status as the dominant purchaser of labor in a particular market. However, the Senator's proposal to raise the minimum wage would apply to all employment relationships, including those in markets that are competitive, as most labor markets are. Far from exemplifying a broken market, wages in competitive markets reflect a well-functioning economic system at work performing its social function of allocating resources to their most efficient use. Society may in some cases view the resulting wages as unjust, either because they are too high or too low,  Indeed, employers may pay wages as low as the market will bear so as to increase their own share of the fruits of productive activity. However, coercive regulation setting different wages than those set by the market will undermine the market's chief virtue, namely, encouraging the economic actors to organize and allocate productive resources, including labor, in the most useful way possible. Here again Frank Knight is persuasive:

"It is assumed . . . that there is in some effective sense a real positive connection between the productive contribution made by any productive agent and the remuneration which its 'owner' can secure for its use.  Hence, this remuneration (a distributive share) and the wish to make it as large as possible, constitute the chief reliance of society for an incentive to place the agency into use in the general productive system in such a way as to make it as productive as possible.  The strongest argument in favor of such a system as ours is the contention that this direct, selfish motive is the only dependable method, or at least the best method, for guaranteeing that productive forces will be organized and worked efficiently."

See Knight, Economic Organization, at 11-12.

Ironically, then, Senator Warren's proposed "fix," state-determined wages, would itself injure the market and reduce the amount of wealth this critical social institution generates.

None of this is to say that society must stand idly by while some hardworking citizens earn only poverty wages.  On the contrary, there is one obvious method for alleviating such poverty, viz., the earned income tax credit, previously discussed on this blog.  By subsidizing wages, the EITC both makes hard work pay off and avoids the job-destroying impact of the minimum wage. It is thus no surprise that thoughtful experts such as Christina Romer, who once chaired President Obama's Council of Economic Advisors, have advocated the measure as an alternative to the minimum wage. This blogger has previously called on Congress to expand the availability of the EITC.

Of course, governments must find resources to pay for this subsidy. During a recession, governments that embrace the Keynesian economic paradigm can borrow unused private savings and spend the proceeds on a more robust EITC.   If the economy is near full employment, however, such a "borrow and spend" approach can be inflationary, with the result that governments should find the revenues for wage subsidies by cutting spending elsewhere and/or raising taxes.  One obvious source of such funds would be a tax on carbon  emissions.  As previously explained on this blog, such a tax would discourage pollution creating activity while generate revenue.  In this way society can have the best of both worlds:  a free market that generates as much wealth as possible and spending policies that reward work and alleviate poverty.
   
7.  What about the current system of students loans and resulting student debt and interest payments? Here again, the current system on financing higher education, including the student loan system, is not evidence that the marker is "broken." To be sure, a purely private market will produce insufficient investments in human capital, including higher education.  As previously explained on this blog:

 “The background legal framework prevents individuals who invest in education from granting creditors a security interest in their most valuable asset, namely, the human capital that a college education creates.  A creditor cannot “foreclose” on an individual’s college degree if the borrower defaults on a student loan.”

Moreover, as the same post also explained, state and federal income taxes, which combined produce top marginal rates of nearly 50 percent in some states (and more than 50 percent in California), prevent individuals from internalizing the full benefits of such investments.  As a result, individuals will generally under invest in human capital, even if lenders can perfectly assess the ability of such borrowers to repay and assure repayment when borrowers are able.  The state can respond to this under-investment in various ways, including by founding public universities that charge tuition that is far lower than the cost of the education provided, as every state does. (States could also, of course, provide college-age students with vouchers that students could spend at any qualifying institution, public or private.)  At the University of Virginia, for instance, full tuition covers just 52 percent of the cost of educating an in-state undergraduate student,    Indeed, some private and public universities do not charge tuition, fees or room and board to students from low income families. Some of these same schools provide significant discounts to middle class students as well.  To be sure, a significant proportion (far less than half) of America's students emerge from college with some debt; the average amount equals the cost of a new minivan.  To be sure, a subset of this subset of students graduates with significantly more debt than the average.  However, given the availability of below-cost public education and need-based financial aid, it stands to reason that some (though not all) students who emerge from college with larger than average debt loads voluntarily chose to attend relatively expensive universities in lieu of more modestly-priced options.  It's not clear why such voluntary decisions are evidence of market failure that calls for intervention by the national government.

As previously explained on this blog, government subsidized student loans can also be part of the response to the sort of market failure that results in under-investment in human capital.  Such loans, already provided at below-market rates, further subsidize investments in human capital.  Indeed, under recent reforms, many student loan payments are capped at a percentage of the debtor's income, still further reducing the actual cost of borrowing.  Some borrowers are even eligible for complete loan forgiveness if such capped payments do not suffice to pay off the loan over 20 years.

So far as this blogger is aware, Senator Warren has not explained why the one-two-three punch of (1) below-cost tuition at the nation's public universities, (2) below market interest rates and (3) income-based repayment and possible forgiveness does not suffice to counteract the unfettered market's admitted tendency to produce insufficient investments in human capital.  The existence of a market failure does not justify the adoption of every conceivable policy response to that failure.  Her own proposal --- interest rates of less than one percent for long term student loans already subject to repayment caps and possible forgiveness --- could, when combined with numerous other subsidies for such investments, result in the allocation of too much scarce capital to investments in human capital, further increasing demand for higher education and exacerbating increases in tuition.  Here again, Senator Warren has not made the case that the market, supplemented by public universities and the current system of student loans, is in need of further repair.

8.  What, though, about financial markets?  Surely insufficient federal regulation resulted in the financial crisis and resulting recession in 2008, thereby establishing that the free market is "broken" and in need of additional intrusive regulation,  Here again the Senator has not made her case.  After all, the financial system extant in 2008 hardly exemplified the free market in action. Instead, the national government had intervened in financial markets in various ways that predictably caused market failure and distorted market outcomes.  For instance, the nation's policy of "too big to fail" resulted in dangerous moral hazard, as large banks did not internalize the potential downside of risky investments.  Banks quite predictably made non-optimal investments as a result.  Moreover, the national government encouraged lenders to develop financial products (e.g., no money down mortgages) that extended credit to individuals that did not meet traditional lending standards.  Banks were all too happy to extend such credit, knowing that they could immediately resell many mortgages to the Federal National Mortgage Association (FNMA), which was itself deemed "too big to fail" and thus lacked adequate incentives to examine the quality of mortgages it purchased.  The FNMA, in turn, would either hold these mortgages itself or guarantee their repayment and use them as backing for so-called "mortgage backed securities" that it issued.  (See here for a description of the mechanics of the FNMA's role in the mortgage market.)  Regulators encouraged banks to hold these securities to satisfy capital reserve requirements, even in lieu of other securities.  While federal regulations required banks to hold $4 in high quality reserves (e.g., U.S government bonds) for every $100 in lending, banks could avoid this requirement by holding $1.60 in mortgage-backed securities instead, thereby signaling the national government's confidence in the FNMA's guarantee of the mortgages that backed these securities. Little wonder, then, that, according to this same source, banks held half the outstanding debt backed by sub-prime loans when the financial crisis broke out.  Simply put, the 2008 financial markets were rife with various forms of federal intervention and involvement that produced market failure, moral hazard and also set the table for the 2008 financial crisis.  That crisis hardly qualifies as evidence that the market is broken.

9.   In sum, free markets have great potential but they also have limits.  Critics must take care lest they attribute to markets objectives they cannot plausibly achieve.  To be sure, transaction costs sometimes result in market failure, including negative or positive externalities.  In such cases, society properly steps in with coercive regulation to correct such failure.  However, failure to achieve distributive justice is not a shortcoming of markets.  On the contrary, markets produce the very wealth that its opponents wish to redistribute, and society can employ taxation to redistribute income for social justice purposes.  Moreover, the presence of some market failure does not thereby justify the simultaneous adoption of every imaginable policy response.  Finally, markets sometimes "fail" because ill-considered regulation or other forms of state intervention distort private incentives and thus induce market actors to engage in wealth-reducing economic activity.  Such state-induced market failure is hardly a justification for even more coercive regulatory intervention. 

The AALS Cartel

 Not Good Enough for the AALS?

Received Substandard Legal Education?

Over at Truth on the Market, Thom Lambert has taken issue with a rule, promulgated by the American Association of Law Schools, that forbids law schools from making lateral offers of employment to faculty at other schools after March 1.  To be more precise, the rule admonishes against such offers in cases in which the poached faculty member must begin teaching at the new institution that same fall.  Lambert asserts, and I know of no evidence to the contrary, that law schools fastidiously adhere to the rule, even though it is framed as a "best practice."

As Lambert points out, the rule in question is a horizontal restraint of trade between rivals of the sort that courts ordinarily condemn.  Indeed, he expressly (and properly) invokes the Department of Justice's recent suit against eBay, challenging an alleged agreement between eBay and Intuit whereby the two firms agreed not to poach each other's employees.  (The Department also entered a consent decree with Intuit forbidding the practice.)  If the eBay/Intuit agreement violates Section 1 of the Sherman Act, and Lambert makes a persuasive case that it does, then so does the agreement between the member law schools of the AALS.  Such agreements, by their nature, reduce rivalry between companies (in the case of eBay/Intuit) and member schools (in the class of the AALS rule).  At the same time, neither agreement appears to produce any "redeeming virtue" of the sort recognized as cognizable by case law applying the Sherman Act.  To be sure, the fact that a faculty member leaves her institution in, say, May, for another school, can impose substantial costs on the institution that loses the faculty member.   However, as Lambert notes, the costs will vary depending upon the faculty member, the courses she taught, and whether the school is located near other schools that might be sources of potential visitors who would not have to relocate.  As Lambert also points out, schools can protect themselves unilaterally against such harm by entering contracts forbidding their faculty from accepting offers after a certain date, contracts that contain liquidated damages clauses that compensate the school for the any damages suffered when the faculty member leaves late in the year.    (These damages could, for instance, compensate the school for the cost of hiring a visitor to cover the departing faculty member's courses on short notice.)  (By analogy, it should be noted that many universities unilaterally provide that a faculty member who receives a sabbatical must return to teach for at least one year before leaving for another school.)  As a result, Lambert contends, no agreement between law schools is necessary to combat the harms from late departures.

Of course, and as Lambert recognizes, the Sherman Act does not ban all horizontal restraints.  Instead, as previously noted on this blog, courts will allow those horizontal agreements that are necessary to overcome any market failures that would result from parties' reliance upon an unfettered, atomistic market to conduct economic activity.  A classic example is the formation of a partnership and restraints ancillary thereto.  Such restraints may, for instance, prevent individual partners from "moonlighting," that is, competing with the partnership, thereby eliminating horizontal rivalry that would otherwise occur.  Nonetheless, as William Howard Taft explained over a century ago, the common law encouraged such restraints, and properly so.   After all, Taft said, such agreements encourage partners to devote all of their efforts to furthering the business of the partnership, instead of diverting value from the enterprise to themselves or, as modern economists would put it, "free riding" on the larger partership.  See United States v. Addyston Pipe & Steel Co., 85 F. 271, 280 (6th Cir. 1898) (treating such restrictions as paradigmatic ancillary restraints that the law should "encourage"); Robert Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 75 Yale L.J. 373, 381-83 (1965) (explaining how such restrictions could prevent free riding by partners on the overall enterprise and thus enhance welfare).  Put another way, such agreements pass muster under the Sherman Act's "Rule of Reason," articulated in Standard Oil v. United States, because they do not restrain trade "unduly," but instead "advance" or "fructify" it. 

In short, horizontal cooperation between rivals is perfectly proper when reliance on the unfettered market would otherwise  result in a market failure and a misallocation of resources.  See Alan J. Meese, Price Theory, Competition and the Rule of Reason, 2003 Ill. L. Rev. 77.  Where, on the other hand, there is no such failure, that is, where unilateral decisions in an efficient market will produce efficient results, there is no rationale for such collective action, and courts should ban otherwise lawful restraints.   See Alan J. Meese, Monopoly Bundling in Cyberspace: How Many Products Does Microsoft Sell?, 44 Antitrust Bulletin 65 (1999).  As the Supreme Court explained in National Society of Professional Engineers v. United States, 435 U.S. 679 (1978), the antitrust laws rest on the assumption that consumers understand their own interests and can assess the virtues and relative prices of competing products.

At the same time, the "anti-poaching agreement" that Lambert has condemned may be the tip of the AALS cartel iceberg.   Even a brief perusal of the organization's membership requirements reveals various provisions that eliminate competition without any apparent market failure justification.  For instance, the AALS provides that law schools must have a full time faculty of a certain minimum size, so as to "provide ready professional relationships among the faculty and between the faculty and the students and to offer a reasonably broad curriculum."  The Nation's first law school, at William and Mary, would have flunked this standard, because the faculty consisted of Founding Father George Wythe, who taught, among others, John Marshall, who would later become Chief Justice of the United States.  So far as I know, however, no one would plausibly argue that Marshall's legal education was "not up to snuff."

The same AALS standards also prevent a law school from de-emphasizing research so as to encourage more teaching,   The standards also mandate that each member school "shall seek to have a faculty, staff, and student body which are diverse with respect to race, color, and sex."  Finally, the standards require each school to have a library of a particular size.  The requirements of minimum faculty size, significant support for research and minimum library size, it should be noted, likely raise barriers to entry, by requiring a new school to enter at a particular scale to become a member.

Each of these standards seems inconsistent with the principle that Lambert espouses and, for that matter, the Supreme Court's antitrust case law.  One can stipulate that large faculties, significant research, diversity and large libraries are "good things" without thereby providing a justification of collective imposition of these objectives.  Put another way, there is no apparent market failure that prevents competition between member schools from resulting in appropriate attention to each of these attributes.  For instance, there is no apparent reason that potential law students are incapable of assessing the value that a diverse faculty will add to their education and thus preferring, other things being equal, those schools with diverse faculties.  That's the way competition in a free society is supposed to work.  Ditto for faculty size.  If a school believes that its large faculty provides a better educational environment, other things being equal, than a smaller faculty and vice versa, each such school should be free to offer its product in the marketplace, subject to market competition from other products.  Who knows, one such school might educate the next John Marshall!
 

Is The NCAA an Illegal Cartel?

Greedy Cartelist?

June 6, 2021 Update:

Earlier today I posted on this blog a forthcoming paper entitled: Requiem for a Lightweight: How NCAA Continues to Distort Antitrust Doctrine, 56 Wake Forest L. Rev. _____ (2021) (forthcoming).  (See here).  The paper critiques several aspects of the Supreme Court's decision in NCAA v. Board of Regents of the University of Oklahoma, 468 U.S 84 (1984), including the Court's decision to exempt all restraints imposed by sports leagues from per se condemnation as well as dicta suggesting that courts should subject some restraints that avoid per se condemnation to a "Quick Look" version of Rule of Reason.  The paper also endorses NCAA's dicta to the effect that horizontal restrictions on rivalry for the services of student-athletes can produce redeeming virtues, with the result that such restraints should survive per se condemnation.  The paper calls on the Supreme Court to correct these and other errors in NCAA v. Alston and thus ensure a more coherent jurisprudence under Section 1 of the Sherman Act that better reflects the teachings of modern economic theory.

An Op-Ed in Sunday's New York Times entitled "The College Sports Cartel," Joe Nocera decries the fact that NCAA student athletes cannot receive more than a full scholarship, room and board, and stipend to cover living expenses.   As the author notes, NCAA rules --- the product of an agreement between competing member schools --- forbid schools to pay student-athletes a salary analogous to what, say, a minor league baseball team would pay its players.  (Put another way, NCAA rules require student-athletes to remain amateurs.)  The author characterizes this agreement as "collusion" of the sort ordinarily forbidden by the antitrust laws, collusion that enriches member schools at the expense of purportedly "shackled" student athletes.   He ends by opining that "[I]t certainly would be worthwhile to see someone challenge [the NCAA's] cartel behavior in court."

And yet, as Nocera himself perceptively admits: "Sports leagues can’t exist without at least some [so-called] collusion."   A classic example, of course, the agreement between a league's members on the number of games in a season.  Thus, the NBA's decision that each team will play "only" 82 games in the regular season is a horizontal agreement on the output of games, a limitation that could be unlawful in other circumstances.  Ditto for members' agreement on the length of the playoffs, including how many games are in the finals.  (Imagine if Ford, GM and Chrysler announced they were agreeing on the number of pickup trucks they would produce in the coming year.)  Indeed, calling such agreements between members of the NBA "collusion" would deprive the word of any useful descriptive value in this context, as the term would become a synonym of "contract" or "cooperation."

Sports leagues are not unique in this sense.  All sorts of welfare-increasing economic activity is the result of agreements between rivals, agreements that economists and antitrust courts call "horizontal."  For instance, the formation of a partnership is a horizontal agreement that eliminates rivalry between the new partners.  Such partnerships often include explicit agreements between the partners not to "moonlight" and thus compete with the partnership.    Ditto for franchising, which many economists properly conceptualize as an agreement between actual or potential rivals (think of the numerous independent McDonalds franchisees in a medium-sized town).  Such agreements set product standards, decide what products members of the chain will offer, what ingredients each product will contain, etc.  Without such (horizontal) agreements, what consumers currently experience as a well-run franchise system would rapidly devolve into a loose confederation of business establishments that, while operating under the same trademark, would offer varying products and varying degrees of quality, sowing confusion in the mind of consumers and defeating the purpose of operating under a single trademark.  Thus, while such agreements reduce rivalry in some sense between members of a franchise system, they can ultimately enhance the quality of the products offered by a particular franchise system and thus further useful competition with other such systems, to the ultimate benefit of consumers and the rest of society. 

In short, like many productive ventures, the NCAA and other sports leagues entail cooperation between rivals, cooperation that could be problematic in other contexts when viewed in isolation.  The key question from the perspective of the antitrust laws is whether the cooperation in question, while nominally reducing competition between rivals, might in fact overcome a market failure and thus increase the welfare of society by inducing a more efficient allocation of resources.  That, in short, is the focus of antitrust's "Rule of Reason, " announced in Standard Oil v. United States.  (See this article for a more in depth explanation of the connection between market failure and Rule of Reason analysis.)

While litigation against the NCAA on this question might enrich antitrust lawyers, the Supreme Court has already explained how it would rule in such a case.  Twenty-five years ago, in NCAA v. Bd. of Regents of the University of Oklahoma, the Court evaluated NCAA rules limiting the number of games that networks could broadcast on television during any given season.  The rules also limited the number of times that any particular school could appear on television.  The Court condemned the rules under the Rule of Reason because they reduced output without any offsetting benefits.

In so doing, however, the Court expressly approved other horizontal restraints imposed by the NCAA, including those fostering amateurism by the players.  The Court's language (previously discussed on this blog) is worth quoting in full:

"What the NCAA and its member institutions market in this case is competition itself -- contests between competing institutions. . . . . [T]he NCAA seeks to market a particular brand of football -- college football. The identification of this 'product' with an academic tradition differentiates college football from and makes it more popular than professional sports to which it might otherwise be comparable, such as, for example, minor league baseball. In order to preserve the character and quality of the "product," athletes must not be paid, must be required to attend class, and the like. And the integrity of the 'product' cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed. Thus, the NCAA plays a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable. In performing this role, its actions widen consumer choice -- not only the choices available to sports fans but also those available to athletes -- and hence can be viewed as procompetitive."

The Court then noted (as suggested above) that "a restraint in a limited aspect of a market may actually enhance market-wide competition."

Simply put, the Court concluded that unbridled competition between member schools for players, thereby allowing schools to pay players a salary, would result in a market failure.  That is to say, no individual school would, when setting players' compensation, take into account the impact of that decision on the overall "brand" or "image" of the product being offered.  While players might benefit in the short run, the "brand appeal" of college football would suffer over the longer run, as what was once amateur athletics associated with an academic tradition (and thus a natural fan base) would degenerate into a professional league inferior to the NFL and without a natural fan base.

The result may seem to countenance an unfair distribution of the benefits produced by NCAA football.  Certainly some schools earn millions each year due to the performance of their student athletes.  (At the same time, however, many others lose money on the sport, and no one is proposing that student athletes share in these loses.)  However, antitrust law does not exist to ensure a fair division of the gains from economic activity but instead only bans those agreements or unilateral practices that reduce economic welfare.