Explaining regulatory autonomy in EU network sectors: Varieties of utility regulation?

This article explains variation in the autonomy in the range of activities that European regulators perform. By focusing on 102 regulators of four network sectors (electricity, gas, telecom, and railways), we test for functional and institutional explanations. The findings indicate that the inclusion of institutional factors matters for our understanding of recent changes in the governance of European network sectors. Reforms toward the independent agency form of governance and the range of competencies granted to sector regulators seem to be shaped not only by international functional pressures but also by domestic institutional factors. Beyond the credibility hypothesis, we find that national governments grant less regulatory autonomy to utility regulators the more coordinated an economy is and the more veto players are present. On the contrary, common law countries are associated with higher levels of regulatory autonomy.     

Autonomy and private ordering in contract law

This essay reviews Michael J. Trebilcock's book,The Limits of Freedom of Contract (Cambridge, MA: Harvard University Press, 1993), examining crucial and controversial social issues within the rigorous framework of the law and economics of contract. The idea that private markets are the primary institutions for the allocation of limited resources is central to any private ordering model of contract law. Yet such a premise leaves a number of fundamental questions unanswered. Trebilcock is critical of the insufficiency and ambiguity of current contract theory in addressing fundamental legal issues relating to the limits of freedom of contract. Pushing the frontiers of current legal theory, Trebilcock revisits the slippery notion of freedom of contract and tests the actual reach of economic analysis in providing a coherent answer to compelling social questions. The author pursues his ambitious task by examining the conclusions reached by competing paradigms of analysis. In spite of his declared trust in the economic approach to law, Trebilcock pays close attention to alternative analytical traditions, comparing the conclusions of various intellectual perspectives with those suggested by an economic framework of private ordering. The book objectively examines strengths and weaknesses of competing views, affording the reader a balanced position from which to conclude for herself, by illustrating the practical implications of the various approaches. In a number of instances, Trebilcock shows how different theoretical premises may indeed be conducive to similar institutional outcomes.Associate Professor of Law, George Mason University. The support of the Sarah Scaife Foundation and of the John M. Olin Foundation is gratefully acknowledged, as are the helpful comments of Jonathan C. Harris and Charles K. Rowley. Extensive remarks received from Michael J. Trebilcock prior to publication allowed me to remedy earlier omissions.     

The Constitutional and Political Economy of Trade Protection

This essay reviews Trade Protection in the United States (Aldershot, UK: Edward Elgar Publishing Ltd., 1995) by Charles K. Rowley, Willem Thorbecke and Richard E. Wagner. The book stimulates a radical rethinking of trade policy, with results that are applicable well beyond the political framework of the United States. The authors—all advocates of the Virginia public choice school of thought—provide a lucid explanation of the formation of trade policy and systematically explain the many paradoxes of endogenous policymaking. They assess the main players in the process of trade policy formation and rigorously explain the dynamic interaction of the various political organs involved. The authors conclude that unilateral free trade cannot be achieved through the ordinary legislative process, and make a compelling case for Constitutional reform. Given the fragility of free trade equilibria and the inadequacy of bilateral and multilateral trade treaties for a stable free trade environment, the right to trade should be constitutionally guaranteed as an individual right. Considering the relevance of the authors' conclusions in this phase of consolidation of European trade policymaking, this essay examines the proposed unilateral free trade amendment, addresses the game theoretic implications, in light of viable alternatives.     

Crowding-out in productive and redistributive rent-seeking

This paper presents a general rent-seeking model in which participants decide on entry before choosing their levels of efforts. The conventional wisdom in the rent-seeking literature suggests that the rent dissipation increases with the number of potential participants and with their productivity of effort. In this paper, we show that this result of the rent-seeking literature is far from general and applies only when participants are relatively weak and enter the game with certainty. In the presence of strong competitors, the expected total dissipation actually decreases, since participation in the game is less frequent. We further consider the impact of competitors’ exit option, distinguishing between “redistributive rent-seeking” and “productive rent-seeking” situations. In redistributive rent-seeking, no social loss results from the fact that all competitors exit the race. In productive rent-seeking, instead, lack of participation creates a social loss (the “lost treasure” effect), since valuable rents are left unexploited. We show that the lost-treasure effect perfectly counterbalances the reduction in rent dissipation due to competitors’ exit. Hence, unlike redistributive rent-seeking, in productive rent-seeking the total social loss remains equal to the entire rent even when parties grow stronger or the number of players increases.     

Author Index Volume 12

Authors Index

Author Index Volume 12     

Decision theoretic properties of forensic identification: underlying logic and argumentative implications

The field of forensic science has profited from recent advances in the elicitation of various kinds probabilistic data. These provide the basis for implementing probabilistic inference procedures (e.g., in terms of likelihood ratios) that address the task of discriminating among competing target propositions. There is ongoing discussion, however, whether forensic identification, that is, a conclusion that associates a potential source (such as an individual or object) with a given item of scientific evidence (e.g., a biological stain or a tool mark), can, if ever, be based on purely probabilistic argument. With regard to this issue, the present paper proposes to analyze the process of forensic identification from a decision theoretic point of view. Existing probabilistic inference procedures are used therein as an integral part. The idea underlying the proposed analyses is that inference and decision are connected in the sense that the former is the point of departure for the latter. As such the approach forms a coordinated whole, that is a framework also known in the context as 'full Bayesian (decision) approach'. This study points out that, as a logical extension to purely probabilistic reasoning, a decision theoretic conceptualization of forensic identification allows the content and structure of arguments to be examined from a reasonably distinct perspective and common fallacious interpretations to be avoided.     

The Value of Waiting in Lawmaking

Political actors and legislative bodies often invoke net present value calculations to support proposed legislative change. This paper explores the idea that adopting a law is like investing in a productive asset to identify possible misleading applications of net present value calculations. Investment involves incurring a present cost in the expectation of future benefits. Legal systems can be regarded as making investment decisions when incurring present lawmaking costs that will generate benefits over time. Lawmaking investments share, in varying degrees, three important attributes with other investment decisions. First, lawmaking costs cannot be recovered if the enacted rules prove to be ineffective or undesirable at a later time. That is, lawmaking investments are partially or completely irreversible. Second, there is often uncertainty over the future benefits of the legislation. Chosen rules may prove ineffective or changes in the social or economic circumstances may render them obsolete over time. Third, like any investment decision, timing is an issue for lawmakers to determine: lawmaking innovation or revision of current rules can be postponed. Often delays in such investment decisions come at a cost, given the forgone benefits of the investment in the immediate future. This paper focuses on the value of waiting in lawmaking, illustrating the interaction among the above factors in identifying the conditions that determine the optimal timing of legal intervention. The basic model is followed by two extensions. In the first extension, we allow for some learning and informational benefit from the immediate implementation of the new law. In a second extension, we allow for political time preference to affect the lawmaking choice.     

Evaluation and presentation of forensic DNA evidence in European laboratories.

The first part of this article describes Bayes' theorem and its practical application to scientific evidence. Secondly, statements proposed by European DNA laboratories are presented, analysed and commented upon. Finally, the authors reiterate their proposal of adopting a likelihood ratio framework justified by the usefulness of the approach in practical context of DNA cases. Note that this framework underlines the main questions the experts have to answer at trial: to what degree does the evidence support the prosecutor's hypothesis? and to what degree does the evidence support the defence's hypothesis?     

Private property and social costs

This article discusses the widely cherished theme of property rights and externalities, surveying the legal and economic literature that developed around Coase's 1960 article, The Problem of Social Cost. It identifies and appraises the most notable attacks to the Coase theorem and offers an insightful examination of the state of legal and economic scholarship in the wake of Coase's postulate. In revisiting familiar passages, this article shows the pervasive methodological implications of the Coasian approach to property rights and examines the normative and practical significance of the Coasian analysis in various situations of alleged market failure.