Economics of Consumer Protection: Contributions and Challenges in Estimating Consumer Injury and Evaluating Consumer Protection Policy

Abstract

The author examines the role of economics in consumer protection, drawing from her experience at the U. S. Federal Trade Commission (FTC), which has a dual mandate to promote competition and protect consumers. She compares the long established use of economics in competition law enforcement and policy to the relatively new application of economic analysis to consumer protection policy and law enforcement. She highlights contributions of economists to the development of consumer protection policy at the FTC and describes key questions involved in the economics of consumer protection policy. The focus of this article is on the definition and estimation of consumer injury from deceptive or unfair practices, including approaches to estimate consumer injury from lapses in data security and privacy policies and procedures. The paper brings together different strains of relevant economic literature, leading to a clearer exposition of alternative approaches to estimating consumer injury from an economic perspective. She also addresses, briefly, the debate over the role of behavioral economics in consumer policy, concluding that the appropriate tools for policymakers will vary depending upon their policy goals; policies appropriate to meet the goal of changing consumer choices in a particular direction may differ from policies suitable to meet the goal of improving the consumer information environment.