Part 3 (Chapters 7 and 8) reviews theories of labor markets and the relationship between education and earnings that disagree with at least some of the underlying premises of human capital theory. These theories introduce alternative conceptions of education’s role in worker productivity and earnings. Chapter 7 reviews theories that challenge the human capital assumption that there is a direct, causal link between the skills acquired in education and the productivity/wages of workers in jobs as determined through wage competition. This includes the major contributions of signaling theory, queuing theory, and internal labor market theory to understanding labor markets. All three of these alternatives to human capital theory share the assumption that the skills that individuals acquire through investing in education are not the principal reason that they are more or less productive and therefore earn higher or lower wages in the labor market, as claimed by human capital theory.

In Chapter 4, we examine the supply of dogs to the U.S. market. We first explain two potential sources of social inefficiency in the market: information asymmetry and negative externality. We then explore the heterogeneous nature of the sources of supply. Based on organizational form, we distinguish between commercial and so-called backyard breeders. Based on the ethics of practice, we distinguish between ethical breeders who provide high-quality care and unethical breeders who do not. We relate our six resulting categories of supply, including puppy mills and shelters, to the information asymmetry, negative externality, and a third potential market failure, the public good nature of the problem of protecting dogs from cruelty. Finally, we argue that serious market failures provide justification for government intervention to increase efficiency. However, the current patchwork of regulations and lack of resources invested in enforcement allow puppy mills and black-market breeders to impose costs on others and harm dogs.

The theory of the nonprofit institutional form introduced by Henry Hansmann more than 40 years ago proposed that informational problems, specifically information asymmetry, explains the essential defining feature of the nonprofit organization – the so-called nondistribution constraint. While the conventional argument holds that an asymmetry of information arises due to intrinsic, hard-to-measure attributes of nonprofit outputs, this chapter argues instead that informational problems arise because private purchasers fail to sufficiently value the positive externalities of information. In short, information is a social good, rather than a private good, and neither purchasers (donors) nor producers (nonprofits) have sufficiently strong incentives to systematically incur the costs and risks associated with generating information. The undervaluing of information by private parties results in a symmetry of ignorance that may lead to “benefit failure” in the form of foregone social impact. This type of failure is induced by transaction, allocative, and production inefficiencies resulting from the symmetry of ignorance.

Chapter 3 shows why the contracts model doesn’t work: consent is absent in the information economy. Privacy harm can’t be seen as a risk that people accept in exchange for a service. Inferences, relational data, and de-identified data aren’t captured by consent provisions. Consent is unattainable in the information economy more broadly because the dynamic between corporations and users is plagued with uneven knowledge, inequality, and a lack of choices. Data harms are collective and unknowable, making individual choices to reduce them impossible. Worse, privacy has a moral hazard problem: corporations have incentives to behave against our best interests, creating profitable harms after obtaining agreements. Privacy’s moral hazard leads to informational exploitation. One manifestation of valid consent in the information economy are consent refusals. We can consider them by thinking of people’s data as part of them, as their bodies are.

The market in ancient Greece should be understood as a specific institutional construct, that of the city-state, which allowed its citizens to exercise private property rights guaranteed by law. By extension, free foreigners were also acknowledged these rights, which however extended to the private ownership of human beings (slavery). The city-state also created the conditions for an unusually high division of labour. Each city was a market space of its own, with its own rules and logic, which could include the control over sales margins and even sometimes the establishment of maximum prices for some perishable fresh goods. The network of hundreds of Greek city-states also created the conditions for the development of an original form of international market.

This chapter explains the why, what, and how of the book. In the chapter, the term shadow business is explained and defined as a societal concern that necessitates further research. The remedy of the information asymmetry that shadow business represents is group transparency. If, however, transparency is a value that requires legal commitments, then it needs to be operationalized. This means that it should be possible to derive legal obligations and that this helps realize transparency as an objective. This can arguably only be achieved where the term “transparency” is precisely defined. This chapter discusses transparency in light of three aspects and whether and to what extent a disclosure regime facilitates accessible, high-quality, and processable information, and the underlying goal is the avoidance of information asymmetry.

In this chapter, three inherent challenges with Systems Thinking is addressed. These are (i) legal uncertainty, due to the case-by-case assessment of control relations that may lead to different outcomes, (ii) information asymmetry concerns, due to information gathering processes, and (iii) enforcement concerns, due to the need of a modified definition of legal terms such as corporate control, beneficial ownership, and controlled and affiliated entities.

This chapter provides an assessment of the economic merits of the New Competition Tool (NCT), as it was considered by the European Commission as a tool to address structural competition problems in a timely and effective manner. The NCT has strong analogies to the UK’s “markets regime,” which empowers the UK competition regulator, the Competition and Markets Authority (CMA), to initiate market studies and investigations. The authors review the UK’s markets regime and survey some of the competition concerns the regime is intended to address. This includes a selective review of UK market studies and investigations to illustrate some of the ways these concerns have been explored and a description of the remedies imposed or proposed. The authors conclude with a critical evaluation of the UK’s markets regime in light of this evidence and offer seven recommendations regarding the merits and design of market investigations as a New Competition Tool for the EU. In sum, they see a strong case for the introduction of a New Competition Tool to address factors that prevent effective competition in markets, and they see no benefit to limiting it to specific sectors and to dominant firms.

Unlike privacy law discourse, which has primarily explored questions related to others’ knowledge, access, and use of information about us, commercial law’s central focus has been on issues related to trade involving persons, merchants, and entities. In the commercial law context, questions about knowledge and information are primarily connected to the exchange and disclosure of information needed to facilitate transactions between parties.1 This distinct historical focus has likely contributed to commercial law’s failure to adequately account for and address privacy, security, and digital domination harms. In some cases, commercial law also defers to corporate commercial practices as well.

As we have seen, the law wields considerable influence over the rights and remedies available to us as consumers. Several areas of commercial law are ill-equipped to sufficiently protect our consumer interests in the IoT age. This is because various legal frameworks governing commercial practices have not been sufficiently reformulated to account for the growing connections between the world of privacy and the world of commercial law. As earlier sections of this book have demonstrated, there are multiple legal frameworks impacting commercial practices at the federal and state level that are ripe for significant legal reform. These sources of law include contract law, the FAA, products liability law, the CDA, debt collection law, the Bankruptcy Code, and secured financing laws.

Chapter 4 examines the success of standards in changing prevailing market mechanisms in the conventional commodity chain, and providing reliable market incentives for behavior change. It first takes note that only two out of the seven standards under analysis have the clear aim of fundamentally changing pricing structures. Yet, during a period of mainstreaming and competition between sustainability initiatives, these standards have been overtaken by more industry–friendly alternatives that offer negotiation–based price premiums. Standards’ failure to limit participant entry through strict rule–setting and the existence of information asymmetry regarding buyers’ future purchasing patterns has led to a large oversupply of certified coffee, driving down such premiums. They are also likely to be absorbed by other supply chain actors. The chapter further shows the difficulty of isolating the market–based effects of market–driven regulatory governance from the multitude of simultaneous signals related to quality, origin, or timing. Price incentives trickling down to producers have thus substantially weakened, putting into question their motivation to comply with costly behavioral rules.

How does nationalization of operations causally increase government revenue? Using the case of oil politics in prerevolutionary Iran, this chapter analyzes production elasticity and reduced informational asymmetries after the Shah of Iran nationalized the oil operations of BP and its partners. The chapter draws on a combination of conversations documented in archival records and quantitative analysis of historical fiscal data from the BP Archive. It begins by explaining the Shah’s surprise decision in January 1973 to reconfigure the National Iranian Oil Company from its role as a passive observer to a fully operational oil company able to set production levels and prices. The chapter then presents findings using BP’s revenue projections as counterfactuals to estimate the causal effects of the Shah’s decision with respect to whether NOC reform increased government take of oil revenues in 1974–1975 and whether revenues collapsed after retaliation by international oil companies in 1976 to strip the NOC of its ability to sell oil on the global market. The chapter illustrates both the nuances and consequences of operational versus nonoperational NOCs for fiscal strength.