Unfair Pricing Makes the World Go Round
Delivering this year’s Bruce C. Hafen Lecture, University of Chicago Law School Professor Saul Levmore connected seemingly disparate economic problems: condominium owners who declined to contribute to the cost of constructing a gym and now seek membership at a lower cost; US patients who pay the full cost of new drugs, while foreigners pay much less; and immigrants who seek to enjoy the benefits of a country without having paid the price either as taxpayers or soldiers. Levmore points out that all three problems reveal the tension of price discrimination and strategic behavior. The result is unfairness, yet Levmore observes that an unfair result may still be the best result. What if countries with low birthrates halt immigration and their economies shrink dramatically? If the US stops bankrolling drug development, will another country step up and take the lead, or will drug research and development grind to a halt? Is it better that the condo gym is never built because the cost of membership may not be the same for everyone? “These are the problems of a democracy,” says Levmore, and it is ultimately up to voters to determine when unfair becomes untenable.
