"It’s fair to say that economists like competition.
"It’s also fair to say that when politicians start talking about competition, economists ought to get a little bit nervous.
"People can have very different understandings of the same word. ... At the heart of the difference – while trying to avoid the boring bits – is how we understand the term competition. Is a competitive market one where there is some ‘right’ number of companies, of the ‘right’ sizes relative to each other? Or is a competitive market [an open market —] one in which no special permissions are needed to set up shop and every firm always needs to be looking over its shoulder?
"Sometimes, the two amount to the same thing. ... But not all competitive markets, by the one definition, are open by the other. And not all open markets are ‘competitive,’ if we measure things by counting companies. Openness matters more – both when thinking about customers’ experiences, and about government policy. ..."When markets are open, underperformance by existing competitors ... is potential profit for new entrants – and better service for customers. ..."And that gets us back to my worries when politicians start talking about enforcing more competition. ... If the Government wants to focus on openness [on reducing barriers to entry], it could do much good. ... There are no shortage of places to shine a flashlight. ..."It is a target-rich environment, if we are thinking about openness. ....
- "Successive Commerce Commission market studies identified regulatory and policy-based barriers that make it incredibly difficult, if not impossible, for new firms to compete with incumbents.
- "The market study into building materials noted the lack of land zoned for new big-box retail suppliers ...
- "The commission’s final report into grocery retail found a similar problem. ...
- "Similarly, the commission warned that regulatory barriers hinder competition in banking. ...
- "Opening a new pharmacy is tied up in weird regulations about who is allowed to own pharmacies. ...
- "Many occupational licensing regimes look an awful lot like cartels organised to protect incumbents. ... I wonder [for example] why anyone should need special permission to be a real estate agent. ... Are we quite sure that regime is still needed?
"The Government could help to bring down prices and improve the products on offer for consumers if it focused on ensuring market openness. Political campaigns against existing businesses may be more tempting, but they will do less good."~ Eric Crampton from his article 'When politicians campaign on competition, be very worried'
Friday, 31 January 2025
"When politicians start talking about competition, economists ought to get a little bit nervous."
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1 comment:
Excellent read!
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