One of the principal quantitative techniques used in the studv of costs and benefits of regulation involves the evaluation of consumer's and producer's surplus. Examples are [2], [3], [4], [6]. The method can be caricatured as follows: Obtain data on quantity and price for the output produced by the regulated industry. Obtain estimates of the slopes of the demand and marginal cost from cross-section or timeseries estimates of elasticities. Calculate where demand and marginal cost would intersect. Complete a triangle whose vertexes are (1) the predicted intersection of marginal cost and demand, (2) the current demand price, and (3) the current estimated marginal cost. Add to the area of this dollar triangle the direct total cost of the entire regulatory machinery-the budget of the regulatory agency and the budget for lawyers, accountants, engineers, public relations men, and for all the other costs incurred by those being regulatedand you have an estimate of the social cost of regulation. Waiving their validity and accuracy for the moment, the calculations assume that a feasible social alternative to the regulated status quo is, in fact, described by the intersection of the measured marginal cost and demand curves, and that this alternative situation can be reached without new direct regulation costs offsetting the savings. If the social optimum were to require a price-output configuration for the regulated industry described by the pricemarginal cost equality, and this equality could be brought into being by a costless restructuring of the regtulated industry into one behaving like a competitive industry, then the social choice is trivial. The complex statistical calculations are unnecessary. However, if pure competition or its simulation are not viable alternatives to the regulated status quo because of decreasing unit costs often considered characteristic of public utilities, then the calculations are beside the point. Dismantling the regulatory machinery will save the resources used by the regulatory process, but the laissez-faire outcome will probably be oligopoly with its absence of price competition, excessive product differentiation, wasteful sales promotion and advertising, excess capacity, and expensive legal talent to forestall and defend antitrust prosecutions. The measured demand and marginal cost curves and the triangle provide no information about a new deregulated equilibrium. And it is not a valid proposition that entry of firms, threats of entry, and oligopolistic rivalry will be an improvement over regulated monopoly. So far I have not challenged the proposition that the intersection of demand and * Research support of the National Science Foundation is gratefully acknowledged.