Monday, October 19, 2009

My Report Available Online

As I expected, my report on free competition, globalization and the EU that I presented at a European Enterprise Institute seminar in Brussels Wednesday last week has now been made available online. Read it here I haven't had time to read through the online version, but I assume that it is basically the same report that I submitted to the EEI. It's long but if you have the time I think you'll find it worthwhile reading.

Most of the content should provide few surprises for regular readers, but I should immediately comment on two things which some readers might find controversial.

First, that I use the "perfect competition" model to illustrate the benefits of increased competitive pressure. I did in the report note several reasons why it is not perfect and can't be used to justify strict anti-trust laws. In hindsight, I should also have mentioned a greater possibility for so-called price discrimination. However, having made those caveats, the model does in fact provide a good explanation of why increased competitive pressure is a good thing, other things being equal.

And secondly, my endorsement of the euro (the European Monetary Union) as a way to promote free competition and globalization, and therefore by extension also economic growth. There's not much to be added here to that except that you should read the arguments that I put forth and that I therefore believe it to be no doubt that it enhances structural growth. The one caveat to the benefits of monetary unification is if an independent monetary policy would be significantly sounder, as I discussed here.


Blogger Henry said...

One of the real problems with the € is this. Had the UK joined, the lower interest rates would have resulted in an even bigger real-estate bubble and an even more spectacular bust. As it is, the £ has dropped spectacularly which is not good for those of us who spend a lot of time abroad and will in the end result in imported inflation. On the other hand, the UK is excellent value both for importers and tourists, and the country has apparently enjoyed a good tourist season.

But even within the UK, so long as interest rates are the sole economic regulator, there is no one policy which is right for the entire country. London and the South-East enjoy the benefits of proximity to Europe and a concentration of population. The rest of the country suffers under the disadvantage of higher transport and other energy costs due to the greater distance from suppliers and customers. As a result, 80% of Britain's population is concentrated within one-third of its land area. Much the same applies with most European countries and across the EU as a whole.

It has been shown that there is a trend for productivity to be fall in proportion to distance from Frankfurt, this being the approximate centroid of Europe's population.

For the Eurozone to work effectively to the advantage of all, what is needed is a Europe-wide taxation policy that takes account of geographical advantage and disadvantage, thereby discouraging undue concentration. An simple example which illustrates the issue is given here.

11:40 PM  

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