Corporate & Securities Law

Stigler?s casket

Today?s Wall Street Journal has an article tailor made for anyone wishing to defend free-markets from overreaching regulation. The story details the legal battle between the monks of St. Joseph Abbey in Louisiana with the Louisiana state funeral regulatory board.  As is typical with such boards, the Louisiana version is dominated by the industry. Of course this is just what Stigler would have predicted 40 years ago in his classic article on regulatory capture.  Two things struck me about the story however.  First is how the ?captured? funeral board doesn?t even make a pretext of some sort of health or safety motivation for its actions.  In what might be the most honest statement ever made by a cartel member to a newspaper one of the monks? competitors states,

 ”They’re cutting into our profit,” says Leonard Dunn, the owner of Serenity Funeral Home, located a short drive from the abbey. He adds. “I don’t think the monks are actually making the caskets?I think it’s a marketing gimmick.”

 Much as I admire the monks? struggle and am rooting for them I suspect that their efforts will not end the cartel. As with so many things, Stigler had this one right. Few of us are repeat customers of the funeral industry and hence have little incentive to lobby for regulatory change. By contrast the industry is quite lucrative.  A more likely candidate to break the cartel, mentioned briefly in the story, is Wal-Mart and internet competition. As economist David E. Harrington of Kenyon College has documented (here, here and here) the costs of this cartel for consumers are substantial and caskets seem to be critical to the cartel.

?Greater competition in casket markets might also spill over to funeral markets if the price of caskets [are]  the best place to conceal the economic rents of funeral homes.?

 Good luck to the monks of St. Joseph Abbey.

Full post as published by Truth on the Market on August 25, 2010 (boomark / email).