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Essays in Regulation

To ‘see’, or not to ‘see’:  that is the question. Moving on from a half-brained system of economic governance

Why do similar mistakes appear to be repeated over and over again in the conduct of economic policy? Why does there appear to be so little error-learning/learning-from-experience in this domain of human activity? Why does knowledge and the application of knowledge in these matters appear not to progress cumulatively in the manner of the physical sciences?
In this major Essay in Regulation, Harold Hutchinson and George Yarrow seek to outline some answers, building on insights from brain science. The first picture in the Essay, from the clinical work of Dr Iain McGilchrist, suffices to signal a ‘now for something completely different’ moment.

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A Commentary on the Opening Chapters of ‘An Inquiry into the Nature and Causes of the Wealth of Nations’

Adam Smith’s Wealth of Nations (“WoN”) is a foundational book in the social sciences and one of the classic works of human civilization, but like many classics it is rarely read. Its influence has been profound, but that influence has come largely via the work of Smith’s
successors who, in their own writings, have frequently cherry picked the text in ways that have
served their own, particular purposes in a range of different, later contexts. In consequence many of Smith’s own points have been lost or distorted…

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Brexit and the Single Market Revisited

As the Brexit negotiations begin to focus on future trading and customs arrangements these
notes reprise the principal theme of Brexit and the Single Market2 (published in July 2016 in
the wake of the referendum) and add comments on some aspects of the subsequent discourse.
Very briefly, my conclusion back then was that the most efficacious way to respond to the
Leave vote on 23 June 2016 would be to seek a Brexit based on the UK’s continued
membership of the European Economic Area (EEA) in the period immediately following
withdrawal from the Treaty of Lisbon. There were three main reasons for taking this view.

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Brexit and the political economy of regulation

This essay is a developed version of the Zeeman Lecture given at the Regulatory Policy Institute’s Annual Conference on 26 September 2017 at Lady Margaret Hall, Oxford University. The motivation for the Lecture was that, in the period since the Brexit Referendum on 23 June 2016, politicians, interest groups, journalists and commentators have fed the public a steady diet of alternative facts and false or misleading propositions. The Lecture focused on three of a much wider set of such assertions and propositions. All are relevant to the future conduct of regulatory policy, though each in different ways. Each is associated with a cognitive style that I have called convenient, selective myopia.

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Essays in Regulation

Brexit and the single market

The UK is currently a Contracting Party to the European Economic Area (EEA) Agreement, and exit from the EU does not necessarily imply exit from the Single Market (i.e. withdrawal from the Agreement). Exit from the EEA would require that extra steps be taken, either unilaterally by the UK or by the other Contracting Parties to the Agreement.
There is no explicit provision in the Agreement for the UK to cease to be a Contracting Party other than by unilateral, voluntary withdrawal, which requires simply the giving of twelve months’ notice in writing (Article 127). A commonly held assumption that only EU and EFTA members can be Parties to the EEA Agreement – and hence that the UK has to be a member of one or other of these two organisations to be in the Single Market – is not well grounded, although UK consideration of an application for EFTA membership is an option well worth exploring in its own right.

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The political economy of markets

The word market is widely used in contemporary economic and political discourse, but usually without any clear sense of what it means or is meant to refer to. In a literal sense, people do not know what they are talking about. The first part of the essay therefore examines the question: what is a market?
The answer is that a market is an economic institution, i.e. a set/system of rules that structures, regulates or governs a particular set of activities involving exchange of goods and services. It encompasses both the system of rules and the activities governed by them and it serves a specific, particular purpose or function, which is to reduce the costs of exchange transactions

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Dysfunctions in economic policymaking: simple stories, complex systems and corrupted economics

This essay is focused on ways in which complexity in economic systems is addressed in policymaking and in particular on the over-simplifications that frequently occur in assessments. In doing so it touches on a range of matters that are relevant to the central concern. These include the monopolistic nature of public decision making and the limitations that this entails, the tendency for private interests to achieve undue influence in the use of this market power, the induced subservience of economic reasoning to these interests (corrupted economics), and the institutional disorder that can be created as a result.
It is organised around three questions: Are there reasons to expect a systematic policymaking bias against giving due consideration to complexities and uncertainties in the evolution of economic systems? Does any such systematic bias matter much? If it does matter, can anything be done to improve policymaking performance?

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