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REGULATORY SYSTEMS DESIGN
Abstract
If the broad purpose of regulation is to replicate the results of a competitive market, we need to be clear what are those results. It is a reflection of the difficulty of that task that competition has been given so many labels, ranging from perfect to managed; and can relate to products, processes, locations, firms, nations, technologies and systems.
Modelling in which the collection, processing and use of information is continuous is needed. This approach has to be carried into the design of regulatory systems. In particular, the information processes in which the regulator and firm participate must not be locked away in ‘black boxes’. Learning, knowing and having information are complex matters, giving rise to lock-in and diversity, and affecting key concepts like technology, information, cost and profit.
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NOTES AND REFERENCES
A revised version of a paper presented at the Launch and Workshop, Communications Economics Research Program, Curtin University of Technology, 17 August 1995.
“A New Era in Telecommunications”, Press Release, 1 August 1995.
A. Marshall, Industry and Trade, Macmillan, London, 1919, at p. 396, for example.
Shackle G. L.S.. 1967. . The Years of High Theory Invention & Tradition in Economic Thought 1926–1939 . , p. 69Cambridge University Press. .
Blaug M.. “‘Why I am not a Constructivist: Confessions of an Unrepentant Popperian’. ”. In New Directions in Economic Methodology . , Edited by: Backhouse R. E.. p. 128 London : : Routledge. . Appraising Economic Theories: Studies in the Methodology of Research Programmes
J. E. Stiglitz, ‘Information and economic analysis: A perspective’, Economic Journal, Supplement to Vol.95, 1985, p.23.
For Shackle, this perspective linked the Keynesian contribution with the analysis of imperfect markets: “Uncertainty was the new strand placed gleamingly in the skein of economic ideas in the 1930s”, op. cit., p.6. Knight had argued that “all investment consists, in part, of investment in new knowledge” (F. H. Knight, ‘Diminishing returns from investment’, Journal of Political Economy, 52, 1944, p.40).
Kuenne R. E.. 1968. . Microeconomic Theory of the Market Mechanism: A General Equilibrium Approach . , p. 403 New York : : Macmillan. .
Laffont J-J and Tirole J. A.. 1993. . Theory of Incentives in Procurement and Regulation . , p. 34 Cambridge , Mass. : : MIT Press. .
Nightingale J. N.. 1995. . “The Regulation of Unnatural Oligopoly: Appropriate Criteria for Regulators where the Goals of Regulation are Economic Progress’. ”. In Beyond Competition: The Future of Telecommunications . , Edited by: Lamberton D. M.. p. 249 Amsterdam : : Elsevier Science Publishers. .
cf. D. Sappington, and D. Weisman, ‘Potential Pitfalls in Empirical Investigations of the Effects of Incentive Regulation Plans in the Telecommunications Industry’, Consortium for Research Concerning Telecommunications Policy and Strategy, Telecommunications Infrastructure and the Information Economy: Interactions Between Public Policy and Corporate Strategy, March 1995 Conference, Ann Arbor, Michigan.
N. Rosenberg, Exploring the Black Box Techonology, Economics, and History, Cambridge University Press, 1994, p. 228.
O'Brien D. P. and Swann D.. 1968. . Information Agreements, Competition and Efficiency . , London : : Macmillan. .
Arrow K. J.. 1979. . “The Economics of Information’. ”. In The Computer Age: A Twenty-Year View . , Edited by: Dertouzos M. L. and Moses J.. p. 311––312. . Cambridge , Mass. : : MIT Press. .
Arrow K. J.. 1974. . The Limits of Organization . , New York : : Norton. .
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op cit., pp. 667–669.
Some authors see the task as unfinished, e.g., “At a conceptual level the theory or regulatory mechanism design is a useful guide to reasoning about applications and about the tradeoffs among the possible responses to incentive problems. The application of these principles, however, is only beginning and can be expected to involve a range of practical complications that may make precise calculations difficult” (D. P. Baron, ‘Design of Regulatory Mechanisms and Institutions’, in R. Schmalensee and R. Willig (eds), Handbook of Industrial Organization, Vol.2, North Holland, Amsterdam, 1989, pp.1437–1438.
Arrow 1974, op. cit., p.49.
See, for example, C. U. Ciborra, Teams, Markets and Systems Business Innovation and Information Technology, Cambridge University Press, 1993, Part II; C. Sauer, Why Information Systems Fail: A Case Study Approach, Alfred Waller, Henley-on-Thames, 993; S. Macdonald, ‘Learning to Change: An Information Perspective on Learning in the Organization’, Organization Science, 6, 1995, pp.l-12. Such research points to the urgent need for an economically significant taxonomy of information (See D.M. Lamberton, “Threatened Wreckage or New Paradigm?’, in D.M. Lamberton (ed.), The Economics of Communication and Information, Edward Elgar International Library of Critical Writings in Economics, Cheltenham UK, forthcoming.
See R. A. Heiner, ‘Uncertainty, Signal-detection Experiments, and Modelling Behavior’, in R.N. Langlois (ed.), Economics as a Process Essays in the New Institutional Economics, Cambridge University Press, 1986, pp.59–115. As Peter Earl notes the errors “do not have to be laid at the door of transactions costs, search costs or problems of asymmetric access to information” (‘Review of Economic Psychology: Intersections in Theory and Application by A.J. MacFayden and H.W. MacFayden’, Prometheus, 6, 1988, p. 144). See also D.M. Lamberton, ‘Australia: Regulation and the Diffusion of Telecommunications Technology’, in Marcellus Snow (ed.), Economic Policy Toward Telecommunications in Industrialized Democracies, Longman, New York, 1986, ch.7. A Theoretical Perspective.
Stiglitz J. E.. 1991. . “The Invisible Hand and Modern Welfare Economies’. ”. In Information, Strategy and Public Policy . , Edited by: Vines D. and Stevenson A.. p. 12––50. . Oxford : : Blackwell. .
cf. D. Allen, ‘Dynamic Industry Structure as Policy? Europe and World Telecommunications’, 9th European Communications Policy Research Conference, 19–21 October 1994. Allen cites Cawley that three alliances: BT-MCI's Concert, DBP Telekom-France Telecom-Sprint, and AT&T's World Partners including Unisource, together have 54% of the world's international traffic (R. Cawley, ‘Global Telecommunications Service: The Changing Face of the Trans-Atlantic Telephone Market’, 22nd Annual Telecommunications Policy Research Conference, Maryland USA).
A. Moyal, Clear Across Australia A History of Telecommunications, Thomas Nelson, Melbourne, 1984, Chapter 4. It would seem that this situation was unchanged in 1982, when a ‘List of Telecom Australia's Top Customers Ranked in Order of Annual Billed Revenue’ was published. Government departments/agencies (22 places) dominated the list. For the top 20, airlines and banks were in places 6,7,8,9,11 and 16, with Myer at 15 and BHP at 19 (Financial Review, 18 January, 1982, pp.1,16, 18).