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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

April 1, 2015

Documents

Banks, monetary policy and competition policy: how do they connect?

This paper considers the banking system from the respective points of view of EU monetary and competition policy, and the issues that arise when excess credit creates an asset price bubble and crash. Banks are subject to competitive pressures, but are interdependent to a higher degree than most firms. Potential competition policy responses to this combination of features could include monitoring by the monetary and competition authorities to see if a concerted practice is involved where there is excessive bank lending; making co-ordinated behaviour between competing banks subject to the normal competition law requirement that it should provide economic benefits in the real economy, and to consumers; and, if it is established that an asset price bubble and crash has resulted from a concerted practice, adjusting the overhang of debt down to the pre-bubble value of the asset.

January 1, 2015

Letters and Notes

The OFT’s Higher Education Report: could do better

The Office of Fair Trading’s (OFT) 14 March 2014 report on higher education found that England’s higher education sector is largely “working well”, but it scratched at the surface of the problems that are facing the higher education market.
The OFT launched a call for evidence in October 2013 to examine whether students are able to make informed choices as a driver for competition in higher education; whether students are treated fairly; whether there was any evidence of anti-competitive behaviour between higher education institutions; and whether the regulatory environment protects students and facilitates entry, innovation and managed exit by higher education institutions.

July 1, 2014

Letters and Notes

Heuristics and biases in regulatory decision making

In his thought provoking note Applying behavioural economics at the Regulatory Conduct
Authority, 2 Stephen Littlechild has drawn attention to an important set of questions about the
use of behavioural economics in regulation. The Regulatory Conduct Authority of the paper’s
title is an imaginary agency that made a brief, Brigadoon-like appearance on 1 April 2014. Its
hypothetical purpose is to make use of behavioural economics in regulating other regulators.

July 1, 2014

Documents