GV403

Rights under the Two Regimes (formal)

1. 1980: Very few legal rights for users 2. Today: We talk about consumers

3 Requirements for Formal Independence for Agencies

1. Agency that has its own powers under public law 2. Organizationally separate from ministries 3. Not directly elected nor managed by elected officials

Stigler and Pelzman

1. Assume regulation isn't independent from politicians 2. Regulation for them is an impediment to the competitive market 3. Traditional view of regulation: in the public interest

Interest groups

1. Bernstein: Lifecycle theory of capture. Regulators start strong then succumb to interest group pressure. 2. Stigler: Capture of regulation by politicians. Interests of regulators become those of the industry they regulate, lessening competition. 3. Peltzman: Broader theory of interest groups. He criticized Stigler, saying that industry capture doesn't always happen. Regulators can be influenced by other groups besides industry as consumer groups and politicians.

Privatisation can mean:

1. Change in ownership 2. Change in who's supplying 3. A shift in functions and responsibilities We therefore need to be careful about what we mean by "privatisation".

Week 7

1. Competition, industrial champions and the role of the state 2. We've thought about network industries, regulation of supply, relation of national and international levels, national levels 3. 2nd half of the semester: industrial policy

Industries

1. Electricity 2. Water 3. Roads - PPPs 4. Gas 5. Telecom 6. Railways 7. Airlines 8. Ports 9. Radio 10. TV 11. Internet

"The evolution of the European regulatory framework for electronic communications" by Johannes Bauer

1. European electronic communications reform can best be understood by analyzing the interplay of national and European levels. A handful of European nations, including Sweden, Finland, and Denmark, have historically been among the top performers in the world. As a an economic region, the member states of the European Union, either delineated as the EU-15 or the enlarged EU-28, historically lagged behind international peer regions, especially the US (and during the past decades a few leading Asian countries. However, within less than a dozen years, beginning in the late 1980s, European electronic communications was radically transformed from nearly a century of state monopoly to an environment of regulated competition. In the course of these reforms, the region was able to close the historical performance deficit that had prevailed for much of the twentieth century. The adopted model of liberalization combined with independent sector regulation was an appropriate response to the technological and economic conditions of the industry as well as the political conditions at the time. It facilitated rapid diffusion of services, entrants of new players and the associated innovations, and declining process, all integrated in a virtuous cycle of efficiency gains and growth. 2. After 25 years of reforms, several new challenges need to be confronted. Some are beyond the control of national and European policy makers. Fundamental shifts in global value generation have shifted important economic activities to low and middle-income countries. Advanced ICT has facilitated these shifts and hence increased the pressure to develop employment opportunities in high-tech industries heavily reliant on advanced communications. At the same time, these technologies offer a highly plastic and malleable production technology in which products and services can be generated with multiple alternative processes (e.g., video service can be configured via cable TV, satellite, P2P streaming, content delivery networks-CDNs, etc.), generating enormous competitive pressure and tumultuous market conditions in which sustained and high investment in infrastructure networks is difficult to sustain. Many of the digital technologies also allow a high rate of substitution of human capital by machine capital, thus creating significant strain on jobs and employment. Moreover, they go hand in hand with a process of de-monetization of services and a severe redistribution of income to technologically savvy risk takers. European policy, like policy elsewhere, will have to find new responses to these challenges but it is difficult to see how the big agendas (e.g., the Digital Agenda 2020 or the American Agenda for American Innovation) can be effective responses to these global tidal forces. 3. Other challenges originate in the need to adapt the existing framework to the new economics and technological conditions within the ICT sector. Here the European framework has, at least in some areas, turned into a legacy that is in the way of the massive network investment needed in the coming decade. In an international comparison, such periods of transition between an old regime of regulation and a new one are visible periodically and they need to be expected. As the EU seeks for innovative solutions going forward, it will be important to design regulatory frameworks and practices that are more attuned with the dynamic adaptive system characteristics of advanced communication systems.

Services

1. Food 2. Steel 3. Mines 4. Medicine Note financial services straddles the line between the two

4 freedoms at the heart of the EU

1. Freedom of movement of goods 2. Freedom of movement of services 3. Freedom of movement of capital 4. Freedom of movement of people These were enshrined in the Treaty of Rome (1957)

Where does legitimacy come from?

1. IRAs may have output or procedural legitimacy 2. NMAs suffer from democratic deficit

Changes in EU Regulation re: Telecoms

1. In 1990s, directives about licensing, interconnection, universal service, competition 2. In 2000s, directives broadened and set by BEREC

"The role of independent regulatory agencies in policy-making: a comparative analysis" by Martino Maggetti (Repeat)

1. In West European countries, we observe an increasing phenomenon of delegating political power from democratic institutions to various non-representative bodies that are not democratically responsive to citizens. The most important and widely diffused type of such bodies corresponds to formally independent regulatory agencies. These agencies often accumulate several powers: rulemaking, monitoring, adjudication, and sanctioning. This article presents a systematic study of their role in policy-making. Specifically, I studied six decision-making processes in three corporatist European countries (the Netherlands, Sweden, Switzerland) and two policy domains (finance, competition). First I combined a structural with a reputational approach, drawing from both documental and survey information about the participation and weight of each actor in the course of the decision-making process under investigation to obtain results about the centrality of IRAs in the course of the related process. My theoretical expectations were then tested with a two-step QCA 2. Results show two crucial empirical findings. First, in line with my first hypothesis, IRAs are highly central in the course of each political decisionmaking process under scrutiny. As the Actor-Process-Event Schemes clearly show, agencies are not only crucial in the implementation phase, but they also actively participate in the entire processes, especially in agenda-setting and pre-parliamentary discussions. Second, following the QCA, a combination of variables that is jointly sufficient to explain the maximal centrality of agencies in policy-making is identified (confirming hypothesises 3 and 5): non-professionalization of the legislature and scarce de facto independence of the IRA in charge from those being regulated. Moreover, the high de facto independence from the political decision-makers is a necessary condition for the outcome. This is the case of the Swiss Federal Banking Commission in the course of the revision of the Stock Exchange Act of 2006 and the Swiss Competition Commission during the revision of the Act on Cartels of 2003. In addition, it should be noted that hypothesis 2, on the role of the politico-administrative culture, and hypothesis 4, on the distinction between sector-specific and general regulation, are not supported by the results. 3. From this piece of research, we can derive two main insights. First, IRAs are the most central actor in policy-making related to their area of competence, more than experts commission, organized interest representatives, and ordinary agencies subordinated to the ministerial level. This point corroborates the arguments about the rise of an age of 'regulocracy' (Levi-Faur 2005) and 'agencification' (Christensen and Laegreid 2005). At the same time, it suggests that the activity of formally independent regulators is not limited to the implementation of the delegated regulatory competencies (i.e. market supervision and technical regulatory functions), but, very interestingly, it shows that they are developing a key political role in law-making. Second, it appears that the level of de facto independence - the distinctive feature of IRAs - may affect their centrality in policy-making, but only in combination with other variables. Indeed, external factors, such as the professionalization of the legislature, can alter the impact of agencies on the decision-making processes. In this regard, further in-depth research is needed, especially concerning the mechanisms underlying the causal relations identified above.

Public service

1. Service is of first necessity, and people have to right to enjoy it 2. Access should be continuous, equal and affordable

Privatisation in German terms:

1. Shifting an entity from a situation where it's subject to public law, to a situation where it's subject to private law. 2. It's about legal form rather than legal ownership.

"When Institutions No Longer Matter: Reform of Telecommunications and Electricity in Germany, France and Britain" by Ian Bartle (Repeat)

1. The evolution of pricing policies of British and French PTOs does not corroborate commonly accepted HI contentions concerning the impact of national institutions on economic outcomes. Although the comparison of national institutional frameworks, their reforms and contrasts would have led us to expect specific patterns of policy outcomes in terms of dynamics and trajectory through the operation of the mechanisms advocated by HI, the article has accumulated empirical evidence that challenges HI in two essential respects. 2. First, institutional changes were not followed by systematic and concomitant bending of price developments or trend reversals. Indeed, the institutional reforms in Britain in 1981 and 1984 as well as those in France in 1990 and 1996/97 have not produced marked changes. At most, institutional alterations were followed by an acceleration of existing trends but did not clearly break away from pre-existing ones. More fundamentally, the data show evidence of trend reversal and/or sharp acceleration (e.g. local calls and rentals in France) occurring before institutional changes, great changes in trends and even reversal of price developments taking place within the context of stable institutions (e.g. local charges in Britain in the 1990s and in France in the mid-1980s). Second, a sequence of divergence-convergence has admittedly been observed but has not been systematic and its timing does not t the predictions of HI. The process of convergence of absolute levels has preceded institutional convergence as the regulatory frameworks in Britain and France were broadly similar at the overall level only from 1996/97. Telephony charges did diverge increasingly during the 1980s but the underlying trends which sustained such a process existed before and were merely speeded up following the British reforms of the early 1980s. Thus, no clear and systematic links can be identified between institutions and outcomes. 3. How then can this puzzle be unravelled? The similar directions of change and indeed convergence of pricing policies, despite marked cross-national institutional contrasts, strongly suggest that forces common to Britain and France were at work and may have been more decisive than institutions. In other words, they may have counterbalanced the effect of national institutions and even overcome their resistance to change. Indeed, the most straightforward and convincing explanation for the pattern of outcomes appears to be the sweeping international forces with which the telecommunications sector has been confronted from the late 1960s onwards. 4. Technological and economic developments as well as radical changes in the international regulatory environment have actually constituted mutually enforcing pressures challenging policy legacies and undermining the sustainability of pricing policies. New technologies with radically different economic characteristics became commercially available from the late 1960s and at an accelerating pace in the 1980s and 1990s. This tide of innovation fundamentally altered the level and structure of network costs in a way that contradicted policy legacies. While new technologies overall offered the prospect of much lower costs, higher profits for PTOs or a combination. of these, they have had three fundamental impacts on the balance of costs. First, they drastically reduced the importance of the distance factor as a cost driver for calls; the cost of long-distance, including international, calls fell much more rapidly and by a wider extent than local calls. Second, they increased the relative percentage of switching costs relative to those of transmission. And finally, the relative proportion of non-traffic sensitive costs rose in comparison to usage-sensitive ones. In addition, the up-front cost of setting up private and alternative networks fell and sources of indirect competition enabling the bypass of the PTOs' network (e.g. by using leased lines or call-back services) grew. Telecommunications services became strategic for a whole range of economic sectors, such as banking, tourism and manufacturing. 5. Combined, these common changes represented mounting forces which were destabilizing national policies. If pricing policies did not keep pace with technological progress, existing imbalances between the prices and costs of services would increase. Growing cross-subsidies were problematic in so far as such subsidies were supported mainly by business users. Discrepancies between prices and costs sharpened the incentive for business users to press for policy change (and in particular to remove cross-subsidies and open markets to competition). The financial implications of the status quo for PTOs were far from trivial. Widening imbalances put their most pro table markets under increasing threat. They artificially augmented the attractiveness for business users to take advantage of available arbitrage opportunities which could deprive PTOs of consequent profits. But more importantly, in a world in which competition was a technological reality, the plausible liberalization of markets was rendering PTOs' revenues particularly vulnerable to new market entrants. New competitors, acting as cherry pickers, could have undercut PTOs' over-priced services on long-distance markets and, in so doing, creamed off the market. Ultimately, PTOs could have been left with their loss-making services. 6. Parallel to these developments, changes in the international regulatory environment also contributed to destabilizing domestic policies. Early US regulatory reforms created competitive dynamics that spread world-wide and created tensions and pressures on national tariff structures. In addition, between 1980 and 2000 the cartel foundation of PTOs for international communications, organized through the International Telecommunications Union, was drastically weakened by deregulatory progress achieved within the framework of the World Trade Organization (Deane 2000). Thus, PTOs' ability to keep artificially high international rates was severely constrained. Finally, the last two decades saw the development of a comprehensive regulatory framework at the EC level which, in addition to ending monopolies, introduced harmonization principles in the field of tariffs. Although the regulation and the setting of tariffs were deemed to be a national matter, the Commission sought to remove cross-subsidies between services, arguing that it impeded both the completion of the common market and the functioning of competition in telecommunications. To this end, as early as 1990, the Commission included the principle of cost orientation in a Directive and stated that it would apply this principle to all services provided by dominant operators in the future. 7. By calling into question pricing practices, international factors can be understood as the main drivers of domestic policy changes. The trends and features identified are in fact congruent and consistent with these external pressures. Despite dissimilar pricing rules and actors involved in policymaking, it appears that national suppliers and policy-makers have implemented decisions which have produced similar results. The differences in the timing of changes between countries, however, suggest that, contrary to the implicit 'political model' of some international political economists, internationally driven changes are not swiftly and uniformly translated to the domestic level

What's the difference between a shift in functions, a shift in ownership and a shift in responsibilities? Are they the same? If not, how do they differ?

1. The provision of rail services: the government transfers responsibility for running the rails, without transferring the ownership. 2. There might be a distinction between who operates the service and who owns the assets. 3. In Italian telecommunications, the cables are owned by the state but used/operated by private companies.

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Introduction

1. The study defines internationalisation of markets as the appearance of new or strengthened factors that put pressures on national policy makers to open up domestic markets but are outside the control of those policy makers. The book argues that internationalisation of markets can take the form of trade, capital flows, or economic shocks, but is also broader, including policy forms—that is decisions by overseas policy makers and international organisations. 2. The study therefore looks at three forms of internationalisation. One is transnational technological and economic developments. The other two are policy forms: regulatory reforms in the largest world economy, the US; supranational regulation of markets by the European Union (EU). Each form can give rise to pressures to open domestic markets. Transnational technological and economic developments can alter costs to aid-cross-border flows and put pressure on national monopolies and public ownership. The US accounts for 40%-50% of the world market in sectors such as securities trading, telecommunications and airline services, and even electricity and postal services; American regulatory reforms can offer not only an example of liberalisation for other nations but also affect competition in the world market and stimulate overseas expansion by large US firms in ways that undermine national monopolies and public ownership abroad. EU regulation can establish legal frameworks that open domestic markets to competition and set rules to ensure that such competition is 'fair and effective'; it can also give rise to forces that alter competitive pressures on suppliers, weaken public ownership, and undermine governments holding regulatory powers. 3. Investigation of the effects of these three forms of internationalisation on key economic institutions reveals often surprising results. Five central findings from the cases can be underlined: transnational technological and economic developments were met with institutional inertia; policy forms of internationalisation had significant influence on institutional reform; the carriers of internationalisation were domestic actors, and its mechanisms were regulatory competition, opportunities offered by EU regulation for domestic actors and selective learning from overseas examples; radical reform of deeply rooted sectoral institutions had been introduced by 2005 that were similar across the four countries; but change took place through nationally specific routes. 4. Thus overall, the book suggests that a policy analysis approach is well suited to understand the effects of internationalisation of markets on national institutional reform. It includes policy forms of internationalisation as well as technological and economic ones. Indeed, the study argues that policy forms of internationalisation are more influential than the latter because they operate directly through the domestic policy process. They affect the strategies and coalitions of powerful domestic actors. They offer fear of loss of business for existing national incumbent suppliers and provide political impetus and legitimation for institutional reform. Hence they contribute to undermining well-entrenched and long standing economic institutions and to aiding the spread of similar new institutions, albeit through different routes due to contrasts in the domestic politics and structures of nations.

There's a difference between formal institutions and behaviour.

1. You may formally say, the government's not responsible, and yet the government is held responsible. 2. And vice versa. 3. If the electricity prices go up sharply, people tend to blame the government. If mobile telephone prices go up, people don't tend to blame the government. To what extent is the government held responsible for the provision of a service? How does this map onto, or not map onto, formal responsibilities?

What is the regulatory state?

1. Opposite of the positive state 2. Majone 1994, 1996, 1997

The transfer of risks

Have they been shifted to the private sector? The accountants are often very keen to work out, who has the real risk? Who will pay ultimately?

Diffusion

Ideological. Institutional isomorphism.

If you own an asset, do you necessarily control it?

If there's strong regulation of the asset, the regulators will exercise a degree of control. You own the asset, but you can't own it as it wishes.

Market failure

Market failure describes any situation where the individual incentives for rational behavior do not lead to rational outcomes for the group. Put another way, each individual makes the correct decision for him/herself, but those prove to be the wrong decisions for the group.

Week 5

Overseeing Competition: Independent Regulatory Agencies

Public interest theory

Politicians and governments act in a benevolent way.

Economic

Post-Keynesianism, and following the stagflation of the 1970s.

WEEK 3

REGULATORY REFORM IN THE DEVELOPED WORLD

Is control the same as ownership? What are the differences?

Radio-spectrum ... The state owns the resources, but the private company manages it.

The Sources of Rights

Rights come from the Constitution, international agreements, court decisions, legal doctrines

Formal independence

Sanctioned by law

Informal institutions/Norms of Two Regimes

See below

Elected politicians were directly accountable for the functioning of these industries

They were the ones in charge of taking decisions. (Directly = if people did not like the operations, would not vote for the same candidate).

There is a market

This means there is competition. Norms come from economy: cost based prices and efficiency.

Prices (informal)

1. 1980: Norms about prices 2. Today: There is a market

Peru

1. Government privatised many enterprises but, in particular, telecommunications. There was a public enterprise providing telco services. The whole company was privatised. 2. A Spanish private company purchased the company, and provided the services in a monopolistic way. 3. (Ownership and competition are separate).

"Policy Learning in Embedded Negotiations: Explaining EU Electricity Liberalization" by Rainer Eising

1. I have demonstrated that the EU institutional setting influences not only bargaining strategies but also basic policy preferences of member states that occupy a central position in EU decision making, even with regard to issues that are not suitable policy learning because they involve entrenched interests and stable domestic arrangements. Even if the intergovernmental approach can explain some domestic causes of member-state preferences, it seems ill-equipped to cope with strategy and preference changes endogenous to EU negotiations. It attributes too much rationality to member-state governments, defines their interests in a rather static way, and underrates the influence of the EU institutional setting on domestic actors 2. My findings show that interstate negotiations in the EU are far more complex than intergovernmentalism posits. Of course, "intergovernmental bargaining is an ubiquitous feature" of EU decision making, but it is "best explained in terms of the embeddedness of governments in integration processes." A "thick" neo-institutional approach is appropriate for conceptualizing such processes, because it can account for the effect of the EU institutional setup on preference formation and strategic action. I look at four institutional mechanisms that can facilitate cooperative outcomes: (1) norms that provide standards of behavior and outcomes, changing configurations of actors and opportunities, (3) Council decision routines that support policy learning and include standard mechanisms for resolving conflicts, and (4) vertical differentiation within the Council system that can unblock issue-specific rigidity 3. First, the rules of the game in the EU as a whole differ from those in the member states individually. Member-state negotiations are embedded in formal and informal norms because of actor heterogeneity and uncertainty about the political agenda. The consensus norm, the reciprocity norm, and the concept of market integration structured the strategic context of member-state negotiations and limited the outcomes and strategies available to them. While the concept of market integration immediately supported the sectoral liberalization, the procedural and substantive fairness norms ensured that the member states' fundamental concerns would be treated fairly. Thus, the intersubjectively shared norms made a cooperative outcome easier to reach and facilitated debate about the merits and drawbacks of proposals. Given that informal norms and understandings play a central role in the formal EU framework, they can also be expected to play an important role in "treaty-making" decisions, an area where formal rules provide even less guidance for member states 4. Second, the EU institutional setting continually reconfigures coalitions of support and opposition in relation to member states' domestic settings. It brings different actors into the game and changes the opportunities for the pursuit of interests. In particular, it empowers supranational organizations that favor integration by providing them with formal rights in the decision-making process: The European Commission initiated the liberalization debate and mediated the Council negotiations in a way that supported market liberalization 5. Third, the EU decision routines not only provide standardized mechanisms for resolving issue-specific conflicts among member states but also increase the amount of information about the consequences of policy change. Member states are particularly likely to learn if the discussed proposals promote new ideas; if the proposals are complex; or if the domestic situations are multidimensional, so that neither the EU rules nor their effect on the domestic structures can be easily assessed. These learning processes are likely to result in member states' changing their preferences if the processes appear to reveal that current domestic arrangements have limited efficiency or are inconsistent. In general, more context-specific and complementary expertise on the domestic level will be necessary to stabilize such preference changes. This was the case not only in Germany but also in several other member states where the scope of liberalization clearly surpasses the minimum requirements of the EU directive. Finally, the vertical differentiation of the Council, ranging from its working groups to the heads of state, helps to resolve profound interest conflicts. Shifting the level of negotiations upward subjects issue-specific concerns to broader political considerations that can support, though not necessarily dictate, a cooperative outcome. In the case of electricity liberalization, French and German sectoral interests were overruled by macro-political considerations in favor of liberalization and integration.

In 1980, which industries were privately owned where?

1. In 1980, AT&T in the US was privately owned. 2. In the US, electricity companies were privately owned. Today, most countries have some industries that are privately owned.

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 11

1. In the mid-1960s, economic institutions for airline transportation in Britain, France, West Germany, and Italy were similar to those in other network industries: suppliers were publicly owned, there was little competition and regulatory powers were held by governments. These national institutions were largely maintained until the late 1980s in the three latter countries. However, Britain engaged in modest reforms in the late 1960s and early 1970s, and then in the late 1980s, privatised its incumbent and engaged in liberalisation of domestic and European flights. It did so mostly for domestic reasons. Thus in 1987, just before EU regulation started, there were important diffrences between Britain and the other three countries which had largely maintained post-war institutions (see Table 11.1). 2. After 1988 and especially from the mid-1990s onwards, significant reforms of privatisation and liberalisation were undertaken in France, Germany, and Italy. These were driven by governments and airline managements despite considerable domestic opposition, especially from trade unions and employees. The result is that in 2005, the position had altered, towards a regulated competitive market of privatised suppliers, with considerable similarities across the four nations (Table 11.2). 3. The airline transportation sector allows development or confirmation of three general arguments that arise from previous chapters. First, like electricity, it shows that transnational technological and economic factors are not a necessary condition for policy forms of internationalisation to be significant in decision-making nor for sectoral institutional reform. Indeed, the major changes came after the mid-1990s when the airline market was technologically and economically relatively stable. Conversely, despite the internationalised nature of airline transportation, major transnational technological and economic developments in the 1970s and 1980s such as oil price shocks in 1973-4, 1979, and 1990, large airline losses and the need to invest in new aircraft, were met with major institutional inertia in the decades before 1990. 4. The airline sector allows development of a second line of argument, namely that overseas reforms operate through regulatory competition rather than being copied. US deregulation of airlines in the late 1970s was followed by lower fares, expansion of the industry and greater efficiency. Nevertheless, policy makers in France, Germany, and Italy largely rejected the US example. Interestingly, US reforms also had limited ideational effects in Britain: although the US offered an attractive example for British policy makers, when American institutions or policies conflicted with domestic interests, Britain did not follow the US example or succumb to pressure from US policy makers, but chose to protect the incumbent, BA. 5. (p.234) In contrast, regulatory reforms in the US increased the international competitiveness of US airlines (e.g. the hub and spoke organisation of the vast US industry is financially bankrupt through still flying airlines). Britain feared such competition and acted to respond to it. In turn, policy makers in France, Germany, and Italy feared regulatory competition from overseas, especially from airlines in Britain; they worried that BA's privatisation, cost-cutting and international alliances threatened their own flag carriers. Although concerned about competition from US airlines, they also saw opportunities to create international alliances with them. Thus, as in other sectors, Britain acted as a Trojan horse for liberalisation in Europe. 6. A third and related finding is that Britain followed a different reform path to France, Germany, and Italy. It reformed earlier and mainly for domestic reasons. Insofar as international factors played a part, it was through looking at the US as a source of competition as much as an example. In contrast, the other three nations modified their institutions later, and for both domestic and international reasons. The latter included regulatory competition from Britain and EU regulation. The EU acted both through sectoral legislation and application of general competition law, whereby governments traded Commission approval of mergers and takeovers by incumbents' airlines and state aid to those airlines in return for liberalisation and privatisation. More generally, the EU both altered the environment of airline transportation, making continuation of subsidies and protection more difficult, and was used in domestic debates to legitimate change. 7. The chapter thus confirms three findings from previous cases: policy forms of internationalisation have effects independent of transnational technological and economic developments; US reforms operate through inspiring and legitimating change in Britain (but not wholesale copying) and through regulatory competition; Britain followed its own reform path that differed from that of France, Germany, and Italy but also then influenced those three countries through fear of regulatory competition.

"The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation" by Brian Levy and Pablo Spiller

1. The evidence presented in the previous section can be interpreted as follows. First, private utilities were aggressive investors whenever the three restraining mechanisms identified in Tables 2-4 were in place (in Chile, 1958-70 and post-1987; in Jamaica, pre-1962 and post-1987; in the U.K., post-1984). By contrast, out of the remaining four cases where the three mechanisms were not in place, only Argentina has experienced any significant private investment by telecommunications utilities (although only two years have elapsed since privatization). And that experience has been accompanied by unusually high rates of return. 2. Second, there were substantial variations in the specific forms of the three mechanisms. These variations appear to derive from the nature of each country's exogenous institutions. Chile incorporated substantive restraints into its regulatory incentive structures by specifying precisely how regulated prices are to be determined. Jamaica and the U.K. limited administrative discretion by granting the regulated company freedom to set prices subject to some overall price constraints (rate of return, in the case of Jamaica, price cap in the case of the U.K.) and by limiting the ability of the regulator to interfere with such decisions. Restraints on changing the regulatory system were also in place in those three countries during the periods when the regulatory incentive structures limited administrative discretion. The character of these restraints, however, varied across the three countries, with the variations consistent with the countries' exogenous institutional endowments: the U.K. and Jamaica used licenses, while Chile used specific regulatory legislation. 3. Third, all three countries whose regulatory systems have successfully constrained the discretionary power of regulators have independent and well regarded judiciaries. And in all three countries, these judiciaries have a record of hearing regulatory disputes and resolving them impartially. Thus, while in seven of the nine regulatory episodes discussed here, countries were endowed with exogenous institutions capable of restraining arbitrary administrative action, in only five of these seven episodes did governments use these exogenous endowments to put in place regulatory systems that restrained arbitrary administrative action, and, in turn, were successful in attracting private investment. The remaining two episodes—Jamaica between 1962 and 1975, and Chile before the subagreements of 1958 and 1967—appear to be cases of missed opportunities. In both episodes there was a basic flaw in the design of regulatory governance—a failure to build substantive regulatory restraints into the system itself. Chile's 1930 law imposed a ceiling (but no floor, until amended in 1958) on rate of return, and gave the government the right to intervene in the company's operations under vaguely defined circumstances. Jamaica's regulatory system between 1966 and 1975 was modeled on the U.S. system and promoted participation in an open-ended regulatory process by a wide range of interest groups—but without the procedural and judicial safeguards that traditionally have protected utilities in the U.S. Consequently, in both episodes private utilities eventually failed to invest, and the resulting conflicts with government culminated in nationalization. 4. The two remaining cases, Philippines and Argentina, are more of a mixed bag. In the Philippines the exogenous domestic institutions historically have provided an inadequate foundation upon which to erect a regulatory system capable of restraining administrative discretion. Private ownership seems to be based on rents extracted through the political process. For all their historical weaknesses, Argentina's political institutions may provide some basis for making credible commitments, as long as the judiciary achieves a modicum of independent credibility and enforcement capability. If democracy becomes a permanent feature of Argentina, then power is likely to be more fragmented than it is at present, both between the executive and the legislature and within the legislature itself. Thus, regulatory reforms that limit administrative discretion, either through licenses with very specific and limiting provisions or through very specific legislation, may prove difficult to change and may thereby provide investors with safeguards for future investments. The Philippines' stable political institutions, however, seem to frustrate even such a mildly positive assessment 5. Our analysis suggests that the foundation of a successful regulatory policy consists of the development of a regulatory governance structure that is adequate, given the nature of the country's institutions, to constrain arbitrary administrative action and that induces private investment to take place. An exclusive focus on regulatory governance, however, is inadequate, as it offers only limited guidance as to what should be the specific content of substantive regulatory rules. Thus, a unified approach to regulatory policy must incorporate regulatory incentives (that is, rules concerning pricing, entry, and interconnection) into the analysis as well as consider the impact of the specific content of regulatory rules on the efficiency with which private utilities perform. Exclusive emphasis on the latter, however, may result in a totally inadequate regulatory structure. 6. At this point it may be useful to speculate on what alternatives are available to countries that lack the crucial exogenous formal and informal institutions discussed here. Our discussion suggests that in those countries private investment will require the development of alternative safeguards. One example of a safeguarding mechanism is a privatization program that distributes share ownership (and thus a stake in the performance of the privatized company) among a broad part of the population. Building a broad base of shareholders was important in the privatization of telecommunications in the U.K., and played a modest role in the Chilean, Argentinean, and Jamaican telecommunications privatizations (but was an important component of other Chilean utility privatizations; see Spiller, 1993). Attempts at widespread ownership require the prior development of a stock market, with relatively well developed security regulations, which may be lacking in some countries. Similarly, widespread ownership may require the development of private institutional investors (e.g. pension funds, insurance companies) that provide a low-cost conduit for widespread and diversified stock ownership. The U.K., Chile, and to some extent Jamaica have developed these types of institutions, thus facilitating the further development of investment safeguards. A second option is to privatize enterprises sequentially (and to have sequential sales of shares in individual enterprises). Since the success of the later steps of a sequenced program depends upon whether the privatizing government abides by the agreements made in the earlier steps, the costs to government of reneging on its early agreements can be high. Among the cases studied, Argentina provides the clearest example of this approach. Its privatization of telecommunications was the first dramatic step in a sweeping program to privatize public enterprises. The potential impact on the remainder of the program afforded the private buyers of the telecommunications utility some confidence that the Argentinean government would refrain from ex post administrative expropriation. Unless the required institutions develop as the privatization process progresses, investors will be increasingly reluctant to invest, because of fears that the end of the privatization period may unravel the government's self-restraint. 7. As for international substitutes for missing national foundations, Jamaica and the Philippines in the 1950s come closest of all the countries studied to using this mechanism. Jamaica's judicial system continues to recognize the Privy Council in London as the final arbiter of Jamaican court decisions, a feature that may partially account for its continued credibility. Even though the Philippines was formally granted independence from the United States in 1946, for the subsequent 15 years the continuity of pre-independence institutions , the strong leverage of the United States, and specific agreements that protected U.S. investors provided a predictable and safe environment that facilitated investment by both Filipino and U.S. investors. 8. The potential exists to go much further in using international institutions as substitutes for weaknesses in domestic commitment capability. One innovation that has begun to receive attention is for an international institution like the World Bank to provide private investors (and lenders) with guarantees against noncommercial risk, including the risk of administrative expropriation. These guarantees are provided at the request of the host country of the investment. In the event of private investors calling in the guarantee, the host country becomes liable to repay the international institution the value of the guarantee. A failure to repay would provoke a costly rupture of the country's relationship with an important international institution. Through such guarantees, the country's good standing in the international community and its continuing commitment to regulatory restraint are held hostage to each other—providing some commitment against administrative expropriation 9. In sum, the success of a regulatory system depends on how well it fits with a country's prevailing institutions. If a country lacks the requisite institutions or erects a regulatory system that is incompatible with its institutional endowment, efforts at privatization may end in disappointment, recrimination, and the resurgence of demands for renationalization

"The British regulatory state: high modernism and hyper-innovation" by Michael Moran

1. The heart of the argument of this book is that the emergent British regulatory state amounts to an incomplete reconciliation with the conditions of modernity: in other words, with governing arrangements where codified knowledge matters more than tacit knowledge; where codified rules matter more than understandings; where instrumental achievement matters more than traditionally occupied position; and where measurable accountability matters more than elite solidarity. 2. Why is this reconciliation incomplete? There are broadly three reasons: the historical circumstances of the reconciliation itself; the inherent problems in realizing the ambitions of high modernity, especially in Britain; and the evolving character of the animal that is being reshaped—the British state itself. 3. The first and most important mark of the historical changes described in these pages is that they amount to a forced reconciliation: a shotgun marriage between the new state and the old oligarchies who ruled Britain even in the half-century of formal democracy after 1918. That shotgun marriage was forced, to emphasize another dominant theme of this book, by the revolutionary consequences of twin crises: the crisis of economic (under) performance and the crisis of the system of government itself. It was also a revolution with a distinctive political cast, because it was largely a revolution from above: the great changes in market practices, state structures, and self-regulatory arrangements were largely initiated by one set of elites—notably in the great Thatcher reforms—against some of the interests at the heart of the old club system. Some of the most important sources of resistance included: parts of the civil service elite that the Thatcherites encountered when they first entered office; traditional domestic economic elites, such as those who ruled in the City before the great competitive reforms of the 1980s; professional elites such as the consultants who ruled so much of the old NHS; and parts of the academic elite that we encountered in our examination of the new world of university assessment. The consequences of the ensuing struggles between these elites and the forces of high modernism are scattered through the pages of this book. 4. These consequences include the creation of tortuous, bizarre institutional formulas and constitutional ideologies that serve the function of preserving elite autonomy even after crises have forced the abandonment of the heart of club government. That, in summary, is the history of the strange evolution of 'self-regulatory' institutions in the financial markets from the 1980s to the present day, and of the reconstruction of accountancy regulation also documented in Chapter 4. In financial markets, the language of self-regulation was used to describe the old club world; it was then used to describe the very different structure created in 1986 in the Financial Services Act; and it is even used to describe the system now presided over by the Financial Services Authority, the most comprehensively empowered financial regulator in any of the leading world financial centres. In the new world of accounting regulation—in the institutions organized under the umbrella of the Accountancy Foundation—we have seen such a blurring of the line between the public and private that nobody could possibly tell where the public sphere begins and private interests end. That arrangement is ideal for protecting powerful interests from public accountability. But the language is not mere fiction, though mystification is part of its purpose. Even the Financial Services Authority, as we have seen, has maintained important institutional features—such as its status as a company limited by guarantee—to try to preserve it as the property of interests in the markets; and even in 1995, as we saw in the last section, banking regulators were still working with many of the key assumptions of the old club world. 5. The incomplete reconciliation has also included reforms—like the regulatory framework for the privatized industries—that involved attempts to preserve the discretion and 'flexibility' that had been the hallmark of club rule. In some other cases, old elites have reconstituted, regrouped, and captured the new world of regulation: that, as I argued in Chapter 6, has been the story of the regulation of higher education. 6. The incomplete reconciliation is also due to the persistence of powerful cultural traits from the old governing order. The single most important of these is what Dyson has nicely characterized as constitutional anthropomorphism, a trait that lies at the base of much of the hyper-politicization in the newly emergent system. Constitutional anthropomorphism refers to the extreme personalization of authority at the heart of British government, and it is a spoor of one of the most traditional traits of all—the original historical expression of public authority in the person of the monarch. Its traditional constitutional expression is in doctrines of individual ministerial responsibility; its institutional expression is in the way ministerial heads of departments are little monarchs in their own kingdom; its everyday political expression is in the way individual ministerial reputation—both its advancement and its destruction—lies at the heart of partisan politics. One consequence is that in a crisis new modes of arms length regulation are swept aside by the reassertion of ministerial authority. That is the lesson of the great crisis of rail privatization in 2001/2 discussed in Chapter 5, and the crisis in the government of prisons discussed in Chapter 6. Nor could it have been otherwise: given the persistence of constitutional anthropomorphism, it would have been political suicide for any Secretary of State to have maintained a hands off relationship with the railways. (The fact that it was also suicidally dangerous to intervene only shows the way agents are trapped by historical circumstance. The rail crisis did, indeed, contribute to the resignation from office of the Secretary of State, Stephen Byers, in 2002.) But the influence of constitutional anthropomorphism is not confined to moments of high crisis. It has reshaped the everyday conduct of policy from the centre. The destruction of the autonomy of so many of the old club domains—in the professions, in service markets, in key public institutions like health and school education—has exposed those domains to the attentions of the central state. The result—as we saw in Chapter 6 in domains like education and health—is a series of linked developments: micro-management of policy, involving Ministerial attention to the minutiae of policy delivery, especially across the span of the welfare state; the multiplication of policy initiatives needed to serve the symbolic demands of the partisan battle; and the manipulation of some of the key features of the new modernity—such as performance indicators—to serve that partisan battle. Hyperpoliticization and hyper-innovation, thus, go together. 7. The dilemma for the new regulatory state, however, is that neither a partial nor a full reconciliation with modernity provides a stable resting point. This brings us to the second main source of the incomplete reconciliation with modernity. I have sought throughout to argue that the regulatory state in Britain amounts to a quintessential project of high modernism. As such, its ambitions are ensnared in the problems of high modernity: in the problems of achieving a central synoptic vision, and of converting that vision into control. The signs of the ambition are everywhere, and form much of the substance of earlier chapters: the investment in intelligence gathering and in surveillance of both individuals and institutions; the colonization of new domains, like the formerly relatively autonomous domains of sport and the arts; the symbiosis between different regulated domains in the attempt to realize new modes of social engineering, such as the crossover between the regulation of sport and the regulation of diet in pursuit of creating a healthier population; the drive to shape the capacities and substantive knowledge of the population through close control of the school system; the rise of a new era of grand projects, ranging from symbolic edifices like the Millennium Dome to prestigious high-technology enterprises like the great IT programmes discussed in the last section. Scott's study of authoritarian high modernism in the twentieth century showed how and why modernism and policy fiasco go together. In a society marked by liberal freedoms and democratic institutions, nothing on the scale of the 'great leap forward' fiascos of authoritarian high modernism is possible. But, as the preceding section showed, at least some of the fiascos in the new regulatory state are a reflection of the limits of the modernist enterprise. 8. But there are also more contingent problems that are special to Britain, and these bring us to the third and final source of the incomplete reconciliation: the changing character of the British state itself. The greatest burst of modernism that administered the death blows to club government came with Thatcherism. The great Thatcherite reforming programmes were, however, only realizable through the exploitation of entirely traditional features of the British state: notably, empowerment of a new metropolitan elite through the old conventions of Parliamentary majoritarianism. Throughout the 1980s and 1990s that very constitutional settlement dissolved. One process of dissolution, against which Thatcherites railed, but with which in government they had been forced into complicity, came from outside: from the increasing transfer of policy competence to new centres like Brussels and (after the creation of the Euro-Zone) to Frankfurt. The contradictions of the Thatcherite position are epitomized by the case of the Single Market Programme: a massive step in the transfer of policy competence from the domestic arena, the legislation enabling its domestic implementation was passed through the Commons by Mrs Thatcher's government in 1986 using the huge majority that had been a product of the Falklands-inspired victory in the General Election of 1983. A second process of dissolution was quickened by the very successes of Thatcherite radicalism, and by reaction against the way Thatcherism exploited the conventions of Parliamentary majoritarianism. The reforms that were nominally carried out in the name of a United Kingdom government were in reality the work of a government whose political base, and whose interest group base, gradually shrank to the metropolitan world of south-east England. The extraordinary electoral geography revealed after the 1997 general election—with the Conservatives annihilated as a parliamentary force in Scotland and Wales—thus completed the conditions for the devolution reforms introduced by the new Labour Government. Midwinter and McGarvey, for example, present convincing evidence that the onward march of the regulatory state has indeed been halted in Scotland. And, as a bonus, the removal from office of a Conservative Party with residual attachments to Northern Irish Unionism also completed the conditions for the beginnings of devolved government in Northern Ireland after the 1998 Good Friday Agreement. In short, the very state that the Conservatives had modernized after 1979 itself began to dissolve. 9. The twin processes of devolution of policy competence 'upwards' to Europe, and 'downwards' to the formerly subject national components of the United Kingdom, are of course part of Rhodes's famous image of a 'hollowed out' state. That hollowing out has left the new British regulatory state in a strange condition. After the revolution that swept away the old world of club government, the state has endowed itself with modernist ambitions, and with many modernist institutions and practices. But it is doubtful that it any longer has the capacities—either the policy competence or the symbolic capital—to effectively realize those ambitions.

Some Notes on the Dichotomy Sketched Above

1. This is an oversimplification, and of course there were lots of nuances. However, the overall movement at large is this. 2. Also, interesting to point out that many of the concepts we use nowadays in relation to these industries (efficiency, market, market price) did not exist before regulatory reform. 3. These two situations depicted above have been described in the literature as the Positive State and the Regulatory State (Majone). 4. What had been an American exception has become widespread

Quid pro quo

1. some countries wanted more liberalization than others. 2. In telecoms, reregulation happened under the regular EU procedure. Reregulation was necessary to ensure that competition existed because of threat posed by vertical integration, among other things.

Stigler

Capture 1. Firms demand regulation 2. Regulators sell regulation 3. They exchange votes and/or money 4. Firms receive regulation 5. Transaction costs shape coordination A. Small number of actors: low costs of organization B. Large number of actors: high costs of organization 6. Diffuse consumers face free-riding problems: with many actors, hard to track down free-riders

We talk about consumers

We have contracts, many legal rights, and a right to complain in front of courts and regulators.

''The Rise of the regulatory state'' by Michael Moran

1. I have argued in this chapter that the idea of the regulatory state is ambiguous, and likewise that the practice of the most important examples of regulatory states is ambiguous, especially in impact on business interests. The idea is ambiguous because the core image of governing which it offers—an idea of steering and control borrowed from physical systems—converts in political life into two very different images of the act of governing. The two are starkly contrasted in the images of "light touch" steering in the modern governance literature, and the more sinister images of authoritarian steering suggested by Plato's pilots or the murderous "Great Helmsman." More important still, I have argued that the modern image of a regulatory state has been appropriated and developed in very different national and historical circumstances, and its practice reflects those individual circumstances. Nevertheless, one common feature does emerge in the relationship between business interests and regulatory states: just as meaning and practice are ambiguous in general terms, so the impact on business interests in real live regulatory states is ambiguous. This ambiguity—or even better, contradictory character— is most starkly illustrated by the greatest of all regulatory states, the American, which from the perspective of business is a kind of two‐headed beast, one with a benign face, the other snarling in a hostile fashion. But this tendency for the regulatory state to be simultaneously a friend and an enemy of business is, we have seen, also present in the case of the European Union and in the most important "regulatory (member) state" in the Union. 2. There are many reasons for the divided identity of these modern regulatory states, but the common feature of the cases examined here is that almost all work under conditions of democratic capitalism—albeit often a funny kind of democracy and a funny kind of capitalism. And beyond the particular national or regional settings, capitalist democracy imposes great forces on the regulatory state, which constantly unsettle its relations with business. Whatever the ambitions of political and economic elites to "depoliticize" regulatory decision‐making, the influence of democratic competition constantly breaks in. That is the importance of the "democracy" in "capitalist democracy." But a key feature of these capitalist economies also constantly unsettles relations. All experience Schumpeter's ceaseless creative destruction. In other words, the processes of economic competition and innovation constantly destroy some business interests and create new ones. This creative destruction means that the identity of business interests is constantly being remade, and its relationship to the regulatory state constantly unsettled. There is no settled answer to the question: what does the regulatory state mean for business? There is no settled answer because both democracy and capitalism are dynamic, restless social creations, and the regulatory state is the product of both. 3. Creativity and destruction were never more apparent than in the great financial crisis of autumn 2008. The reader will immediately recognize destruction, as banks collapsed and the global financial system threatened to implode. Creativity might be thought less apparent. But in a few short weeks the regulatory state in Europe underwent dramatic change, and in its wake followed change in the US. Financial regulation in both the Eurozone and the UK had followed the principles of the regulatory state sketched by Majone: a Madisonian, technocratic ruling order which excluded democratic politicians in favor of non‐majoritarian regulatory institutions. In the crisis of 2007-8 that regulatory state was weighed in the balance and found wanting. Confronted by crisis the bankers and the technocratic regulators froze, petrified like rabbits before a stoat. Now, the great agents of transformation are not the central bankers and financial regulators who until recently reigned supreme. The agents of transformation are democratic governments driven by fear of the electoral consequences of macroeconomic collapse. The crisis produced rapid learning and innovation—a common social function of any crisis. But it was politicians who learnt most rapidly, not central bankers still trapped in the mind world of the long boom. The epistemic convergence that occurred killed the old regulatory state—and is creating a new one. Across the capitalist world it turned banks into public utilities. Every big capitalist economy has taken significant public ownership stakes in the banking industry. The leader in innovation was the United Kingdom. That is not surprising, for the UK economy teetered most precariously on the extraordinary financial pyramid revealed by the crash of September-October 2008. But the UK was soon followed by other major EU economies, by frenzied coordination among the G7, and then—astonishingly—by the Bush administration in Washington. Even the crown jewels of the old regulatory state—central bank independence in setting short‐term interest rates—may be lost to the politicians Old regulatory states are dying, and new, more democratically shaped, formations being born.

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 8

1. In the mid-1960s, Britain had similar sectoral institutions to those in other European countries such as France and West Germany: a government department, the Post Office, combining telecommunications and postal services, enjoyed a legal monopoly over most of the sector; the government held regulatory powers. Major problems in supply occurred in the 1960s and 1970s that arose in large measure because transnational technological and economic developments met institutionally-related constraints. Yet only modest reforms were made in 1969 and more far-reaching changes were blocked. However, between 1980 and 1984, radical reforms were introduced that reversed century-old institutions; thereafter reform continued towards a liberalised market with a privatised incumbent and an independent sectoral regulator. 2. Four general findings concerning internationalisation and institutional reform can be drawn from the history of telecommunications in Britain between 1965 and 2005. 3. First, the case shows that the political 'market' for institutions responds poorly to economic difficulties. In the 1960s and 1970s, transnational technological and economic developments were not dealt with successfully and contributed to major problems such as long waiting lists, failure to modernise the network, and inadequate supply of new services and equipment. Many policy makers, including the government and the telecommunications side of the PO, blamed institutional arrangements. Yet only modest reforms were introduced in 1969. Despite continuing problems and criticisms of the institutional arrangements, no further changes were made. 4. Second, the British experience illustrates how countries can arrive at similar institutional outcomes for different reasons and through diverse processes. In Britain, reform was largely undertaken for domestic reasons. The most radical reforms came in the 1980s, well before similar changes in the other three nations. Insofar as internationalisation was significant, it was through the influence of the US, whereas Europeanisation played little role. These features stand in contrast to France, Germany, and Italy (analysed in Chapter 9). This distinctly British path is seen in other sectors. 5. The central role of the government is a third finding. The government often initiated change. It was able to do so even when other actors were not pressing for new institutions. This is best illustrated over privatisation in 1984, which at first was strongly opposed by most sectoral actors. The government was a key source of proposals and impetus for reform. 6. Finally, the case shows the role of Americanisation in British institutional debates. US regulatory institutions offered examples of alternative arrangements and were used as sources of new ideas—for instance on liberalisation or in designing independent regulatory authorities. Occasionally they were also presented as a source of regulatory competition, as British policy makers worried about keeping (p.173) upwith the US. However, policy learning from the US was limited: British policy makers did not undertake in-depth studies or analyse the impacts of US reforms. Moreover, when the US example ran into domestic obstacles, it was not followed; thus for instance, the breakup of AT&T was not copied for BT, despite support by Mrs Thatcher as Prime Minister in 1982-3. Thus British policy makers did not import the US model: rather, they looked at the US and selected elements that attracted them and aided the pursuit of interests grounded in domestic politics. The main function of the US example was to legitimate change or present a menu of alternative institutional features from which British policy makers could then select, according to their domestic interests.

Matters of Competition (formal)

1. 1980: These industries were legal monopolies. 2. Today: Competition

"The Economic Theory of Regulation after a Decade of Deregulation" by Sam Peltzman, Michael E. Levine and Roger G. Noll

1. The paper left many participants disappointed that a "meta-theory" has not emerged which can adequately explain when, and in what sectors, regulation is put into place and when and where it is dismantled. Consequently, participants defended a variety of eclectic or special case theories and offered various macroeconomic or economic disturbance explanations for the deregulation movement of the 1970s. Nancy Rose suggested that regulatory action takes place when there are substantial disruptions in the national economy. Many of the regulations that have recently been dismantled had their origins during the Depression and accompanying economic disruptions of the 1930s, she noted. Likewise, the industries that have recently been deregulated were in many instances industries that were severely affected by two major disruptive economic events of the 1970s: the surge in oil prices (airlines, trucking, natural gas, petroleum, and electric utilities) and the increase in volatility and levels of interest rates (banking and financial markets). 2. Robert Hall agreed, noting that "depression and war give us high taxes and regulation," whose burdens must then be worked off gradually over time. He observed that the recent period of deregulation preceded only slightly the large tax cuts of 1981, and suggested that the two events represented the final working off of the consequences of the Depression and World War II. Paul Joskow commented that economic disruptions often change the distribution of political power and create opportunities for public policy entrepreneurs to rearrange things to their advantage. He favors a theoretical approach that considers the interactions among economic dislocations of many kinds and integrates aspects of the economic theory of regulation with the other theories. In the case of airlines and trucks, he feels the entrepreneurial influence of Alfred Kahn and Elizabeth Bailey cannot be overstated. They and the other regulators had a policy agenda and used the administrative process, and the lags in the administrative process, to their advantage to accomplish certain changes. The process gave them a "window of time, perhaps a year when the public had a chance to see what some of the benefits of deregulation would be to them," Joskow observed. This enabled them to identify a constituency for their proposed reforms, which made it more likely that the reforms would be ratified by legislation and the courts. 3. Alfred Kahn agreed that what he called the. "demonstration effect" is important. He suggested that changes in the economic conditions of the industry, together with a macroeconomic environment of stagflation, set up conditions for deregulation in the airlines, where there were weak unions and most of the rents had already been dissipated. Deregulation in trucking then followed partly because the lessons learned from airline deregulation were transferred to trucking by the same political coalition, consisting of "[Edward] Kennedy, Ralph Nader, the Consumer Federation of America, Common Cause, the National Association of Manufacturers, and the National Federation of Independent Small Businesses." 4. William Nordhaus also stressed political factors, arguing that the bunching of regulation or deregulation movements across different sectors of the economy within short periods of time suggests that the ideology of the policymakers in power is an important influence. But that is tempered by the efficiency considerations that operate if the efficiency losses from political action get too large relative to the rents being redistributed. That explains why wartime price controls and allocation mechanisms are always quickly dismantled, he said. 5. Robert Crandall noted that an overall political or economic theory of regulation must be able to explain why regulation was expanding at such a rapid rate in areas like health, safety, and environmental regulation at the same time that regulatory constraints were being relaxed in other areas. And it should also be able to explain international anomalies, such as the fact that many other countries still do not allow private microwave businesses to compete with the primary providers of long-distance telecommunications service.

Week 11

The Regulatory State in Network Regulation 1. How useful is the regulatory state model? 2. Do we have one regulatory state of several in the regulation of European networks?

Two Key Categories

1. REGULATORY INSTITUTIONS IN THE 80'S FOR NETWORK INDUSTRIES 2. REGULATORY INSTITUTIONS TODAY FOR NETWORK INDUSTRIES

Meseguer

Emulation > rational learning. 2 ways to speak of institutions 1. Cross-National Emulation 2. Cross-Sectoral Emulation Meseguer disregards coercion

Aim

To analyze possible explanations for regulatory reforms and to analyze how they have affected the role of the state in network industries

"Delegation to Independent Regulatory Agencies: Pressures, Functions and Contextual Mediation" by Mark Thatcher

1. Principal-agent frameworks offer an excellent starting point to analyse delegation to IRAs. They point to the functional reasons that lead elected officials to choose delegate, such as desires to shift blame, the need for credible commitments and to respond to greater technical and international demands on national policy makers. In Western Europe, delegation to IRAs aided elected officials to face new or increased pressures, such those as arising from privatisation, liberalisation, technological and economic developments, clashes between public opinion and desirable objectives, and the effects of supranational organisations. 2. Yet a purely functionalist and formal institutional account of delegation is inadequate. Its limits can be seen through comparison across countries and policy domains and over time. Despite facing similar pressures, countries have made diverse choices over delegation to independent regulatory agencies. Britain has had the greatest delegation in the 1980s and 1990s, establishing independent agencies in both the regulation of competition and in social and environmental fields. Fewer agencies have been created in other countries. In terms of new agencies and delegation in the 1980s and 1990s, Germany has delegated least. On several occasions, the findings run counter to those expected. France and Italy have had less delegation than Britain, despite facing greater problems of credible commitment. There have been many differences in the timing of delegation, its extent and its institutional form across nations. 3. Conversely, cross-domain comparison within countries shows that, despite functional pressures for delegation, different choices have been made over whether to establish independent agencies. Thus, in certain domains, independent agencies have become the norm - notably telecommunications and general competition regulation. Other domains have many fewer agencies - for instance, gender and racial equality, the environment and water. Finally, the same institutional form has sometimes been copied across domains within a country despite significant differences in the pressures for delegation. 4. Functional pressures do not determine a single institutional response. Contextual factors strongly influence political choices by mediating pressures for delegation, institutional responses to those pressures and the effects of delegation. In some countries and/or domains, policy learning, state traditions, and structures encourage policy makers to respond to pressures and problems by delegating to IRAs. Britain is an example where contextual factors have aided delegation: policy problems are focused on the central government executive; thanks to state traditions and the influence of learning from the United States, delegation to independent regulatory agencies is often proposed as an institutional response. 5. However, in other countries and domains, contextual factors can retard or prevent delegation to IRAs. Alternative models of institutional structures can rival IRAs. Weak political leadership, numerous veto points and constitutional obstacles can make delegation to IRAs difficult and slow. The German federal system and state traditions hindered delegation to IRAs, despite pressures such as supranational regulation or privatisation and liberalisation; instead, regulatory bodies within ministries have been used. In France and Italy, delegation to IRAs only spread after initial successful agencies had been established; it remains largely limited to the regulation of competition, with few public interest IRAs. 6. The importance of contextual factors is also visible in decisions over the institutional form of IRAs. In the face of similar problems, national policymakers have different choices over the extent of delegation, the powers delegated, and the controls imposed on independent regulatory agencies. Even in a domain such as telecommunications, characterised by powerful transnational forces, supranational regulation and much cross-national policy learning, significant differences remain in the institutional form of IRAs. Conversely, the same forms are copied across domains within nations, despite differing pressures.

"Withering in the Heat? In Search of the Regulatory State in the Commonwealth Caribbean" by Martin Lodge and Lindsay Stirton

1. At the outset, it was noted that the "rise" of the regulatory state claim represents a hypothesis that can be assessed in the light of empirical evidence. The "regulatory state" in the two states and the two sectors "withered" to some extent in that different reform trajectories were evident, and different types of institutional arrangements were employed, some providing for more formal and actual independent regulatory authority, formalized relationships, and ownership patterns. The regulatory state also "withered" to different degrees in the sense that the paradigmatic features of the regulatory state (as set out in Table 1) were substantially modified (and arguably weakened) in their implementation. 2. As a very broad explanation for institutional change in the Caribbean, the regulatory state hypothesis has received some support: Both Jamaica and Trinidad and Tobago have implemented reforms involving privatization and market liberalization, delegation of policymaking to independent agencies, and formalization of relationships. However, the hypothesis has proved less effective in explaining differences in the extent of reforms across sectors than across countries. In part, this has been because the variables are difficult to measure (e.g., the extent to which policies aim to promote efficiency or distributional objectives) or depend on unavailable data. At the same time, even where the hypothesis does suggest differences on which relevant data are available, observations run counter to the predictions. For example, other than as a policy and legislative drafting "mistake," why was there not a genuine delegation to the OUR in the five years following the 1995 legislation? And if it was a mistake, why did Jamaica not pay the price of its "incompetence" in the form of lower telecommunications sector development (which was comparable with Trinidad and Tobago at the beginning of the 1990s)? 3. The "withering" of the regulatory state in the comparative analysis in the Caribbean therefore occurred at two levels, the empirical, in that institutional arrangements showed substantial variety that went beyond the usual properties associated with the regulatory state, and the analytical, in that this institutional variety only partially supported the regulatory state hypothesis. It may be that this formulation was particularly functional, but it was derived from the implicit and explicit assumptions of the foundational accounts of the supposed rise of the regulatory state in contexts previously defined by state-owned network industries. 4. While, therefore, the regulatory state hypothesis provides for some mileage in predicting institutional arrangements given particular contexts and circumstances, it cannot account for institutional variety and differences in the speed of regulatory change. Even when considering two lesser developed states with broadly similar institutions, with resource dependency on international organizations, and the presence of international expertise and transnational companies, there was a diversity of approaches that was adopted as a result of the interaction between actors rather than single-factor or structurally determined patterns.

Legal Principles

1. Equality 2. Universality 3. Reasonable Cost

"Beyond delegation: transnational regulatory regimes and the EU regulatory state" by Burkard Eberlein and Edgar Grande

1. Regulation, as a specific form for publicly supervising and monitoring market processes, is increasing in importance in Europe, as a consequence of privatization, liberalization and internal market integration. However, establishing regulatory authority in Europe has proved to be much more complicated than Majone's Europeanization thesis suggested - and it has led to various unintended consequences. In the EU, the supranational level seems particularly suited to becoming the preferred level of public regulation, since its centre of activities and its policy-making machinery are located in the area of regulatory policy and there is much need for uniform European rules. Yet, divergent interests of member states run counter to the goal of delegating regulatory competencies to the European level, thus the chances of a 'positive' re-regulation of negative market integration are limited here, too. As a consequence, the EU's formal powers and its institutional capacities have so far remained underdeveloped. European regulation extends above all to the area of 'social regulation' (e.g. environment and consumer protection), where it is essentially oriented in a complementary fashion towards the creation of the internal market. In the area of the 'economic regulation' of market power, by contrast, European regulation plays a less significant role. The bulk of regulatory activity here lies unambiguously at member-state level. 2. This is, however, only partially a confirmation of the nationalization thesis. Adopting a regulatory regime perspective, our analysis has shown that the European level of the 'regulatory state' is much more important than the EU's formal powers and institutional capacities would suggest - even in the sphere of economic regulation, where positive integration is regarded as particularly difficult and unlikely. This is because the building of the European 'regulatory state' is at least partly coming about differently than was to be expected. Regulatory policy has partly succeeded in evading the existing political blockages, and a back road to the Europeanization of public regulation has been found. A key role here is played by the transnational regulatory networks that have arisen at the European level over the past few years. These networks, bringing together experts from national regulatory authorities and European bodies, informally develop common 'best-practice' rules and procedures for regulation in a given sector. Through information exchange and networking oriented to professional standards, they obtain de facto co-ordination or even the harmonization of regulatory practice, without infringing on national prerogatives. These transnational regulatory networks are responsible for the fact that, in the sphere of regulatory policy, despite the existing regulation dilemma, we can see a relatively high degree of substantive Europeanization, even in areas where the obstacles to European re-regulation are particularly high. To be sure, this back road to the soft harmonization of regulation is not always available. Especially with politically explosive distributive conflicts, there is a threat of falling back into blockage because of diverging member state interests. 3. The area of regulatory policy thus does not just confirm the more general presumption that an essential feature of the transformation of political authority in Europe consists of the formation of network-type modes of governance. In this area one can also see a peculiar, and in our view politically extremely significant, shift in the problem, which has so far been overlooked by research on Europe: the formation of informal regulatory networks indicates that blocking positive integration and refusing to transfer formal powers to the European level may very well be counterproductive. For while it has resulted in weak supranational institutions with a limited radius of action, the member states have not been able to profit from this as much as many had hoped. Although they have retained their formal powers, they have not been able to prevent European-level regulation from gaining in importance. In those cases in which informalization has remained open as an escape route, the consequence has been that 'the regulatory state' in Europe has taken on a different, more informal form than was expected (or feared). 4. The informalization of political decision-making processes that we have observed in the area of regulatory policy is by no means a peculiarity of the EU. In modern constitutional states, informal forms of governance are generally regarded as indispensable, and there is much to be said in favour of the view that they have taken on even more importance with the emergence of 'negotiating democracies' , given the great value they attach to consensus-oriented decision-making. In view of this, the EU, whose decision-making processes are typified even more than those of its member states by non-hierarchical, interwoven negotiation-based systems of decision-making with multiple veto positions and strongly divergent interests, should be particularly dependent on escape routes or back roads outside of the formal institutions and procedures if it is to avoid getting stuck in decision blockages, or if it is to ward off the costs of such blockages. The high hurdles that must be jumped in order to establish formal decision-making structures and the rigidities of such structures practically compel informal escape strategies. It is no coincidence that the EU has proved to be a particularly fruitful ground for the growth of policy networks of the most varied types, and given the complicated agreement procedure among Council, Commission and Parliament in the legislative process, it is hardly surprising that numerous informal institutions have developed here. While we cannot rule out the possibility that these informal institutions may continue to formalize procedures and strengthen formal institutions, it can nevertheless be presumed, on the basis of the given structural features of the European multi-level system, that informal forms of governance will continue to play a great part in the future too. 5. Finally, what is one to think of this informalization of the European political process? Informal forms of governance have to be assessed from two points of view: their functionality and their legitimacy. Their functionality is generally assessed 'thoroughly positively' in the political science literature: 'the informality of the decision-making processes guarantees an outcome that really solves the problems, or at least prevents complete blockage.' This is also true for the area of regulatory policy we have studied. Here, they make an essential contribution to closing the existing regulatory lacunae at the European level, despite underdeveloped supranational competences. This finding is confirmed by further case studies on the EU's problem-solving capacity, which have shown that it is specifically small-scale informal arrangements that frequently contribute to the functioning of the European multi-level system 6. In this article, we have exclusively focused on the emergence and effectiveness of informalization. However, we are well aware of the fact that informalization raises unresolved problems of democratic legitimacy. Informalization, as we know, privileges 'decision-relevant' or 'blockage-capable' interests, while excluding others. Access to informal decision-making bodies like the transnational regulatory networks we have studied is necessarily selective, and it is not subject to any classical democratic control. The effectiveness of such networks often specifically requires that paths to decisions, or influences, not be disclosed. From the viewpoint of democratic legitimacy, informal forms of governance must accordingly be regarded as dubious. Hence, it is very possible that the functionally effective back road of informal governance may end up in a democratic cul-de-sac.

Why should regulation be used?

1. To protect people's rights 2. Equity purposes Public service doctrine and universal service doctrine 3. Procedural justice

Why We Should Regulate These Industries and What Regulation Means

Economic perspective: correct market failures

Rights

Essential for membership in a given society

.Public Goods

Two categories 1. Industries 2. Services

Technological and economic factors

1. Efficiency pressures toward privatization: a) indirect competition b) direct competition. This assumes that privatization is efficient 2. Technical change: lower entry costs lead to more competition 3. Role of the EU: establishment of common market 4. Linked markets: competition between companies in different countries Together, all these factors pressure companies and reduces their ability to cross-subsidize

"Regulating and deregulating the public utilities 1830-2010" by Judith Clifton, Pierre Lanthier and Harm Schröter

1. Both studies argue that utility regulation can be organised, generally speaking, into three successive 'waves', whilst also recognising that many alternative paths to utility organisation and regulation were pursued simultaneously. In general terms, they argue that a 'first wave' can be identified, particularly when infrastructure is initially constructed, where the high amount of investment required in sectors such as electricity, telecommunications and railways, as well as perceptions of great risk, made private alliances of entrepreneurs and families with banks and holdings essential as financiers. The state was involved in its capacity of adjudicating and granting rights of way, as well as regulating prices and service quality. Nevertheless, on occasions, the state acted as financier, especially when there were shortages, as in the case of the railways in France and Scandinavia, but also for strategic reasons, such as in Belgium. 2. The following 'wave' of infrastructure regulation occurred gradually, from the end of the nineteenth century, being consolidated from the interwar period, and was characterised by the growing role of the state in infrastructure finance, management and, often, ownership. During this period, regional and national networks were becoming technologically possible and, as new nation states were emerging, the importance of national security questions intensified 3. Then, just as this stage was nearing completion, during the 1970s, the third wave began, which bore much in common with the first wave as regards the increased role of the domestic and foreign private sector and of market forces. One fascinating difference though, comparing the first and third stages is that now it was the public utility enterprises themselves who were the protagonists of this development. The upshot of this was that a significant number of former utility monopolies - particularly those based in the European Union - emerged in a short time span to become some of the world's largest multinational corporations. These three waves of infrastructure regulation clearly reflect broader changes in the world economy and economic policy, whereby ideas, ideologies and policymakers assign different weights to the participation of the state and the market in governance (Toninelli, 2000). In the contemporary period, we are still in the third, market-driven phase, though there is by now substantial evidence that all is not perfect 4. The central argument we wish to make here, in the light of this mixed evidence during this third wave, is that history can provide invaluable insights into important issues of utility regulation, and provide lessons towards future debates, but that history was sidelined or marginalised when economists and policymakers enthusiastically embraced the question of how to reform the utilities from the 1970s. 5. From the end of the nineteenth century, the state's role gradually increased in the management and ownership of utilities. This intervention was justified by a complex mix of economic, military, political and social arguments. Firstly, from the economic perspective, utilities were understood as exhibiting particular features such as market failures (particularly due to the problem of the natural monopoly), high sunk costs and network economies. It was therefore sustained that services of this nature should be provided by a single enterprise or organisation, such as an electricity central board, at the local or national level. Secondly, from the military perspective, utilities were responsible for providing communication, energy and transportation, all critical services in the defense of the nation. In the context of the aftermath of two, recent, world wars, the vital physical as well as psychological role played by infrastructure in defending the nation were still at the forefront of policymakers' minds (Taylor, 2003). Ultimate government control over infrastructure services, whether through ownership and/or regulation, was therefore seen as essential. Thirdly, from the political perspective, a government's interest in regulating the utilities stemmed from its interests in influencing network development as geopolitical spaces themselves changed. 6. Finally, socially motivated influences on regulation of public utilities, understood as public services, included governments' will to shape national redistributive policies. General welfare considerations were prioritised over and above individual benefit, since the latter was associated with fragmenting society and regions, and of being regressive, potentially undermining national and social collective action. In the case of the utilities, policies included the subsidisation of important loss making utilities with more profitable ones, hence sustaining jobs and services for communities across the whole range of services, as well as cross-subsidisation policies, where network take-up and use in lower socio-economic households or in geographical peripheries was facilitated through subsidised prices, extracted from more profitable parts of the service, such as services more usually used by richer segments of society or from the hub. To sum up, in most countries around the world, it was held that the state should assume a predominant role in the regulation of utilities, very often as regards ownership, and nearly always, as regards its responsibilities as overseer. But this approach was soon to change substantially 7. With a view to addressing what had been identified as some of the key problems of utility performance in the second wave, proponents of reform stressed that new policies were needed to ensure utilities attained superior performance results, delivered better service quality and choice to users at lower prices (Kessides, 2004). Now, utility regulation would be supported by policies including privatisation, liberalisation and deregulation. The push to the new policy paradigm was partly fuelled by technological change, which was particularly significant in telecommunications due to convergence and digitalisation, relevant in the cases of electricity, gas and transportation, though less so in sectors such as water 8. But the change in policy paradigm was also associated with a renewed attention by policymakers and scholars to particular economic and managerial theories, particularly those influenced by public choice, which held that publicly-owned bureaucracies represented an inevitable obstacle to efficiency due to the incentive problem. To rectify this, services provided by utilities, just as other industrial goods and services, should be increasingly subject to pressures from competition from the market, even if unbundling policies to separate competitive and non-competitive elements were required, or the government had to find other means of promoting competition in markets that were essentially monopolistic. 9. Hindsight, provided by over three decades of experience of utility privatisation, liberalisation and deregulation, accompanied by a growing body of empirical studies on the effects of reform, reveals that the experience of utility reform across different sectors and countries worldwide was mixed. 10. Problems caused by infrastructure reform were multiple and complex. Privatisation policies brought in sorely needed investors, but inevitably on an uneven scale around the world, since the location, sector and related prospects for profit, mattered. In other words, profit-oriented private firms, sometimes in collaboration with governments, cream-skimmed infrastructure projects. 11. Downplaying - or ignoring - the lessons of history on the complexities of utility regulation came at a cost, most dramatically, during the 2000s, when new forms of terrorism used public utilities to organise (mobile telephony, internet) and attack (postal services, airlines, metros and buses) citizens and organisations around the world. The way in which governments believed their control over utilities had become less important from the 1970s has since been subject to re-examination.

Professor says that now we have to think what factors make each explanation more or less likely

1. For instance, cultural similarities between certain developing countries might make countries more prone to diffusion. 2. Also, technological change might be a factor that affect the spread of reform. Telecoms are more likely to be object of technological changes. 3. Other factors, such as sectors highly unionized can make a difference

Regulation in legal terms

1. For lawyer, regulation is a set of coercive rules from the state 2. Legal rights vary by the time and place

Grand Corps

1. French elite schools: ENA, Polytechnique 2. These are the most selective 3. This elite colonized top posts in private/public industry, politics and administration 4. This elite is very cohesive e.g. D'Estaing, Hollande, Chirac: all ENArques 5. Heads of equipment manufacturers/suppliers in UK were not part of Oxbridge elite 6. In France, elite straddled politics, administration, suppliers and equipment manufacturers: this allowed for coordination 7. In America, equipment providers were very well protected

What Actually Happens?

1. French protect their markets. French use social obligations and ability to create French competitor e.g. GDF-Suez 2. Britain allows mergers: foreign control

"Public-interest services revisited" by Adrienne Héritier

1. How do the different claims fare in the light of the empirical data on public service performance presented above? According to the 'technology hypothesis', one would expect the sector with the higher technological development to offer a better basis for the provision of public services. The development of telecommunications technology has been revolutionary in the past decades. The use of microwave technology in transmission led to a dramatic decrease in costs. The same development occurred in computer technology. By comparison, technological innovation in the rail sector is much less large-scale, efficiency-enhancing and thereby cost-reducing. 2. Our empirical data across the two sectors clearly substantiate this hypothesis. Technological innovation and economic growth rates in the telecommunications sector are pronounced and in uence favourably the quantity and quality of service provision in terms of accessibility, continuity and affordability. This is most clear in the case of France, where the increase in quality sets in before the relatively late and modest liberalization. Comparing the performance of France before reform with the performance of the UK and Germany after reform, the provision of public services in France is at the same level as in the UK and Germany. 3. Conversely, the rail sector has not been characterized by a great degree of technological progress, generating self-sustained growth, which then facilitates the provision of better quality public services. Technological progress in the rail sector requires large-scale investment in long-term infrastructure. For this purpose, the rail sectors which suffered from under-investment before reform in all three countries, and depend(ed) on public subsidies, could not embark on the road to self-generated growth, but have once again had to rely on state support. In two countries, France and Germany, modern railway technology (TGVs in France and the ICE and Transrapid in Germany) is heavily subsidized by government. Their services - being very expensive - do not comply with the requirements of 'affordability'. In short, a low level of technological innovation in the railway industry before and after regulatory reform is linked with rather poor public service performance. 4. According to the 'liberalization hypothesis', one would expect that the countries and sectors with a high degree of liberalization - in terms of market creation/(international) competition and privatization - would show a higher degree of public service performance. If the level of technology is held constant, does the degree of liberalization offer an additional explanation for more or less public service provision? An answer has to be sought by comparing countries with varying degrees of liberalization within one sector. By comparing the UK's and France's rail sectors, the most and least liberalized rail industries are compared. If the liberalization hypothesis holds up, public service provision in the UK should be clearly higher than in France. The evidence lends some support to this. Yet, while the UK shows a larger increase in passenger kilometres and the numbers of passengers than France, the growth in France - after a previous decline - is quite substantial too. This is reinforced by the public funds being spent in the two industries: state aid constitutes 0.45 per cent of GDP in France, compared to 0.19 per cent in the UK. This means that, indeed, to some extent the liberalization hypothesis is borne out in the UK, that liberalization creates more accessibility to the railways. However, the empirical data on the UK also indicate the limits of liberalization in public service provision. While the number of passengers increased, the quality of services tended to decline, as indicated, for example, by the extent of overcrowding. In other words, when faced with the conflict between profit and investment, the private providers tended not to invest more; for example, they tended not to add more carriages but to expect passengers to accept more overcrowding. 5. In the case of telecommunications, comparing the impact of the degree of liberalization, the UK and France once again constitute two extreme cases, being the most and the least liberalized system, respectively. Accordingly, one would expect that public services in France would be inferior to these in the UK. However, as mentioned above, the empirical data do not bear out this claim. What is striking is that, by contrast, performance levels across countries even confirm the 'technology hypothesis'. In short, gauging the liberalization and the technology hypotheses against the empirical data shows that the technology hypothesis trumps the liberalization hypothesis. 6. There is a caveat, however, concerning the type of competition prevailing in rail and telecommunications. The rail industry, as opposed to telecommunications, is subject to two levels of competition: the intermodal competition between different kinds of transport - that is, air transport and individual automobile transport - as well as intra-modal competition between different rail service operators. The first level of competition is fierce, and rail transport has persistently been losing out for various reasons, one being that, unlike the other two modes of transport, the rail industry has had to provide for its own infrastructure - the track network. This differs from individual transport and air transport. Hence, one might conclude that competition under such unequal preconditions, or in the absence of a level playing field, is to the disadvantage of the rail industry, and indeed has repercussions on the second level, i.e. that of intra-modal competition, and its possible impact on service provision. 7. As the empirical evidence in the rail sector shows, there is an increase in services offered because of liberalization. However, the conflict between profitability and public service sets limits to the character of public service. Once this limit is reached, the public service can only be provided if it is imposed politically. 8. This brings us to the question of the extent to which public services are politically prescribed in the two sectors and the three countries. As has been shown, the 'technology hypothesis' goes the furthest in explaining the level of service performance. If there is such technology-driven growth in a sector, political intervention to guarantee public service performance is not as necessary. By contrast, in a problem-ridden sector with little cost-reducing technological innovation, such as the rail sector - subject to strong intermodal competition without a level playing eld - political intervention is needed all the more in order to correct profitability motives, and make redistributive objectives possible. In fact, the statutory provisions in all the countries under investigation, and both sectors, explicitly provide for public service goals in telecommunications and the rail sector. Liberalization has not been introduced in a 'pure' form in any of these countries; instead, it has been tamed by regulatory restrictions that impose requirements on network and service providers and set public service requirements by price regulation in telecommunications. In the sector where technological innovation drastically increased the level of public services, telecommunications, we also witness a redefinition of the notion of public service. This concept is being widened and now includes new services rendered possible through technological development; for example, access to the Internet and an ISDN telephone link. What is striking is that the public service provisions - comparing rail services in the UK and Germany - are particularly detailed in the country with the more far-reaching liberalization, the UK. In all franchise contracts with rail service providers, the required performance levels are set out in a clearly specified form. 9. Opting politically to correct markets in order to provide public services also requires an entire administrative apparatus to control whether, in fact, these services are provided. So to what extent do the 'implementation hypotheses' bear scrutiny in view of the empirical insights about implementation? First, it can clearly be seen that, indeed, liberalization does not fully conflict with public service provision unless there is a clear confliict between the principal's and the agent's interest ('goal confliict hypothesis'). Does the empirical evidence show that there are such conflicts? And if it does, do private providers discard public service objectives? Or do they, on the contrary - and against their economic interests - still offer public services? We are most likely to find such goal conflict when the conflicts are not neutralized by economic growth and technological innovation, but when there is little growth and a scarcity of resources, while at the same time private ownership and competition are most developed. This has been the typical state of affairs in the British railways. Here the evidence is mixed. The data demonstrate several instances in which, if a conflict indeed exists, economic interests prevail. This is the case, for example, when, in spite of a heavy passenger load, service operators do not add more carriages; or when, in the face of poor travelling conditions, large bonuses are paid to management, while there is little investment in new rolling stock; or when Railtrack, after a major accident, restricts speed and pays high shareholder dividends, instead of investing in new tracks. The opposite evidence, i.e. that there is compliance with public service goals in spite of conflicting interests in economic profitability, could be said to exist if all complaints and poor conditions were dealt with speedily and satisfactorily. There is evidence to that effect, too for example, when costly measures are taken to improve the quality of services and the infrastructure, as some service lines have done. 10. Given that there will, to some extent, always be a conflict between the goals of the regulator and the regulatee, institutional structures have to be established and regulatory instruments introduced in order to secure the provision of public services. The most interesting empirical case is again the British rail sector, where liberalization and the prescription of public service obligations are most developed and clearly expressed. In Germany and France, public service obligations are not nearly as detailed, nor are they as actively subject to monitoring practices. Given these facts, typical mistakes in drawing up regulatory contracts and choosing agents are most evident in the British case. The 'adverse selection' and the 'contract design' hypotheses are borne out here. Evidence to that effect is that the operating franchises were dissolved and renegotiated much earlier than originally planned. When this was done, different agents, e.g. licence operators, were chosen, and the contracts were redefined to include commitments both to investment and to compliance with public service goals. Railtrack was deprived of its company status under private law and put into administration - drastic evidence that it was considered to have been the 'wrong agent'. 10. With respect to the effectiveness of the regulatory instruments used, it is again the British case, with its highly elaborate system of instruments and incentives and disincentives, which is the most telling. There are two contradictory claims: first, that 'command-and-control' instruments are more effective; second, that incentive-setting is more effective. To what extent do the empirical data support one or the other hypothesis? First, it is notable that the instruments have not played much of a role in telecommunications because - as pointed out - the technological development of the sector and its drastic economic growth have resulted in profits for all the stake-holders in the sector. In the rail sector, the picture is mixed. In France, these instruments are hardly used at all because liberalization is very limited. Germany relies on market incentivization. Its policy mainly aims at enhancing competition in order to improve service provision, in particular opening access to the network for new railway undertakings. By contrast, in the most liberalized system, i.e. the UK, paradoxically they do play the most important role. Here a myriad of incentivization instruments are used in connection with command-and-control instruments. These instruments include an intensive monitoring procedure; and if it is found that there has been failure to comply with service performance, as de ned in the contracts, fines are imposed. And, indeed, many fines have been levied in the past years. If, however, there is over-achievement, bonuses are paid by the regulatory authorities. This has less frequently been the case. Hence, in the British case we find a partial empirical confirmation of the 'instrument hypotheses', in that the instruments are widely used, at least when measured in terms of the fines levied. However, it is not possible to empirically assess their impact on service performance since there is no comparable situation in which they were not applied. It has been argued that imposing fines on service operators has not been effective, and, indeed, that the franchisees preferred paying the fines to investing in costlier service enhancement measures. 11. Going beyond a dyadic relationship between the principal and the agent, it has finally been claimed that multiple third-party actors who have a stake in the regulatory field are engaged in monitoring the regulatee. Accordingly, it is expected that an agent's performance in such fields will be superior to the agent's performance when there is a dyadic relationship, because the other actors provide the regulator with additional information about the regulatee's performance, to which he would otherwise not have access. The available data do not allow for performance to be compared under otherwise equal conditions when there is a dyadic relationship, as opposed to performance in a regulatory field with multiple third-party fire-bell functions. However, it can be noted that the British railway industry is subject to monitoring by multiple actors: the rail regulator, the SRA, the ministry, the shareholders (and the City) and the Health and Safety Executive. Together, they produce an enormous amount of data on the performance of the network and service providers. Additionally, improved institutional modes of customer representation mean that companies are under pressure to comply with public-interest goals. 'The process has become more public; there are no more negotiations behind closed doors'. There are open discussions on the extent to which shareholders' interests, as opposed to consumers' interests, should be honoured, as was done in the Railtrack consultation process. This discussion is less pronounced in the German and French rail industries, where privatization is not as pronounced and is still unfolding. However, in all cases, the regulation of the liberalized utilities has been subject to continuous substantive and institutional scrutiny.

JQ Wilson

1. Concentrated benefits lead to interest group politics 2. Many network industries: benefits are highly concentrated; costs are highly diffuse 3. Very complicated challenging price structure 4. Consumer organizations help diminish capture 5. Norms/duties help serve consumers

Principal agent framework

1. Create agency, delegate power to it, but put in place controls to regulate the regulator 2. Intergovernmentalists argue that agencies follow national preferences 3. Supranationalists argue that agencies exceed mandate 4. There's never full independence for agencies from government

More Pointers

1. Debates are about whether countries are copying, being coerced, efficiency, politics (both domestic and international) 2. Distinguish always between empirical and explanatory side 3. Don't swallow question, hook, line and sinker

"Regulatory Capture: A Review" by E. Dal Bo

1. I have attempted two main tasks in this review. One was to present in an accessible way the main theoretical frameworks that academic economists use to think about regulatory capture. The other one was to review available evidence on what factors may affect capture and what impact capture may have on regulatory outcomes. The main lessons from prevailing theories are that capture is possible because firms have private information that is hard for citizens or their political representatives to obtain. This implies that the emergence of regulatory agencies should be associated to the production of useful, industry-specific, information. However, regulatory agencies can be captured. An example is when firms induce regulators to hide information that could be used to offer consumers a better deal 2. The theory we reviewed in section III prescribes responses that tie regulators' pay to their informational performance. Such use of wage incentives appears impractical, given the difficulty of contracting on regulatory outcomes and on the information produced by agencies. Alternatives based on the use of above-market wages and monitoring to induce regulators to want to keep their posts also appear limited when taking into account the size of the stakes involved. These responses may then have to be complemented with more-involved institutional building: the creation of bureaucratic procedures that allow various stakeholders to share information, the creation of legislative committees that specialize in monitoring the regulator, and possibly the creation of consumer advocate groups. These elements are all present, to some extent and with regional variations, in the current regulatory complex of the United States 3. Other theories emphasize that the provision of positive incentives (such as bribes or future industry employment) may not be the only way to influence regulators. The provision of 'trouble' may also work. The provision of trouble, for instance in the form of actions that trigger a reputational damage (or a direct utility loss) for the regulator, has the potential negatively to affect the pool of talent that can be attracted to regulation. This will be especially important if less talented regulators are more gullible and therefore more vulnerable to informational influence from political and industry sources. Negative incentives can play a larger role when regulatory employment is weak in terms of stability or time horizons. In such situations regulators may have more to lose from harming powerful firm interests. The view that collusion will be easier to sustain in long-run relationships calls for term limits on agency employment. However, term limits that are too short may make regulators hostages to an extreme need not to 'rock the boat'. The optimal tenure length should balance the two opposing concerns that have been studied. 4. In addition to incentives, interest groups may also offer information with the hopes of ensuring more favourable treatment. One possibility that is, to my knowledge, uninvestigated empirically is that firms may out-consult regulators. Thus, regulators may come to view the world the way firms do, not because they have been captured through incentives, but because they have been convinced. More evidence on persuasion and on whether bad funding of regulatory agencies makes it more likely would be valuable 5. The empirical evidence on the causes and consequences of regulatory capture is scarce. Interesting work has been done on the role of monitoring at curbing graft and procurement abuses, but direct tests are still lacking of how asymmetric information raises the probability of regulatory capture. Moreover, common-agency models that abstract from asymmetric-information problems have been shown to fit the data on trade policy quite well. We chose as our main model in section III one that puts asymmetric information at its centre, because it would seem that capture would be very unlikely were wrongdoing immediately visible to citizens.(The only exception would be when citizens are powerless to punish governments that are known to be ineffective.) However, empirical research has not yet fully confirmed this presumption. 7. The empirical literature on capture, especially in its early years, devoted more attention to the role of the individual characteristics of regulators and the effects of the revolving doors. Those with industry background have been shown to be more lenient towards industry, but not particularly so once one controls for political affiliations. Posterior industry employment does not seem to have a robust effect on regulatory decisions, except in the last year of regulatory tenures. Term limits in regulatory bodies, however, seem to make regulation more lenient, perhaps because regulators are more concerned about their reputations with the market. An important open question in connection with the revolving door doors is whether firms employ former regulators mainly because of their technical expertise, or because of their lobbying potential. 8. The personal characteristics of regulators may be responsible for the observation that the way in which regulators are appointed seems to make a difference to regulatory outcomes. Much in the same way in which Supreme Court judges reveal the inclination of the presidents that appoint them, regulators may owe their stance to the governors or legislatures that place them in their jobs. Recent work has shown that elected regulators tend to have a more pro-consumer stance. This may reflect both the fact that regulators are responsive to the prevailing pressures (and the electorate is a powerful one), or that pro-consumer regulators self-select into running for office. More work is needed to disentangle the selection and incentives effects stemming from different methods for selecting regulators. Whether having elected regulators is a good idea may depend on whether the main concern is capture by firms or pandering to populist views on utility pricing. Beyond ideology, evidence is extremely scarce on whether the talent, professionalism, and funding of regulators matter, providing another possibility for future empirical research 9. A final, important issue to consider is that of the costs of capture. Is capture a big problem? On the one hand, capture could have large distributive consequences when it transfers income from, say, consumers to firms. This could be enough of a reason for the political principal to want to curb capture. Moreover, capture may cause net wealth losses. Measuring these is another area in which more research should be done. Lacking a direct estimate of how much wealth is destroyed by captured regulation, I would like to offer an indirect indication that capture can be very costly to society

Competition

1. In many industries, there is even a legal right to compete. 2. Competition supposed to give you cost-based pricing in which providers don't care about affordability with a few exceptions

"Sterile Debates and Dubious Generalisations: European Integration Theory Tested by Telecommunications and Electricity" by Susanne Schmidt

1. In this paper I have argued that the frequent fascination in the literature with dichotomous theoretical debates on European integration runs the risk of hinging on empirical idiosyncrasies. I have taken the example of the dominant theoretical debate, focusing on the relative importance of supranationalist versus intergovernmentalist explanations of European integration." On the basis of two case studies I have aimed to show that each could be used to take up one side of the debate, but that important aspects of these integration processes were missed in this way. Given the heterogeneous development of European integration, including both sectoral integration processes and grand bargains, it is hardly surprising that single cases can be found to support each of the different sides of a debate. 2. Enquiring into national actors interests as well as into the influence of actors and institutions on the supranational level reveals important interaction effects that were previously missed. Compared to what appears at first sight, intergovernmental and supranational aspects are much more prevalent in the respective development of the other sector. In telecommunications policy, the Commission's use of competition law enjoys significant support among member-state governments. With regard to their domestic situation, it is much easier for national governments to enact controversial reforms if supported by the European Commission. For that reason, there is often behind-the-scenes support for supranational measures that are publicly being criticised, which is generally overlooked when interpreting these instances of supranational leadership 3. While the supranational context facilitates the realisation of national interests in telecommunications reform, the electricity case provides another example of interaction between the national and the supranational level. In fact, electricity makes a much stronger case for demonstrating the impact of supranationalism than does telecommunications, because of the French resistance to liberalisation and the pressure put on France to change its domestic system. The implicit veto possibility which an intergovernmentalist position would accord to large member states could not explain the development of European electricity policy. Although the supranational legal framework is less strictly applied than national ones, the opportunities it offers to supranational or private action are difficult for governments to block. In view of the fact that a change of the Treaty is rarely an available option, they have to adapt to its principles, as do the dominant sectoral actors. In view of this constraint, the French opposition to electricity policy gives rise to complex interaction processes, involving the different European institutions, the member-state governments, and private actors. Attempts at dealing strategically with the different relevant avenues are ascribed great importance here, and the interdependence between the decisions of different national and supranational actors adds significant contingency and uncertainty to the policy-making process. 4. Interestingly, the interdependence faced by actors due to the internal market is not strikingly different between the two sectors, though one might have assumed this, judging from the extent of European telecommunications policy as compared to the dearth of common electricity policy. Beyond the underlying functionalist rationale for common policies, a significant difference that could be established is the incumbents' capability to inhibit the application of European competition law. Given their established cooperative relationships, electricity suppliers are well-placed to counter third-party legal proceedings since their long-term interests in maintaining their monopolies are matched by their short-term interests to keep their extensive mutual business relations undisturbed. However, the cooperation among the electricity suppliers could not prevent the Commission from pursuing the infringement procedures which finally generated enough pressure for the Council to reach an agreement. In telecommunications, in contrast, the PITs have no comparable venue of control. Here, third parties are often interested in becoming suppliers themselves. And among the PTTs rapid sectoral change has already started the competition to expand into new areas at an early stage. It is no longer taboo to enter into each other's turf. Similarly, major equipment suppliers, as the other defenders of the old order, have gradually changed their position in the hope that the 'global player' activity of their national operator will facilitate their access to foreign markets. 5. The difference between the sectors studied is too great for the analysis to reveal a single variable responsible for the different degrees of success in constituting European policies. However, the importance of the underlying sectoral characteristics is clearly established. The significant heterogeneity of national electricity systems hardly makes it possible to define a single policy proposal that would be in keeping with the very different situations. With two proposals, however, the problem of reciprocity implies just as many difficulties which could only be overcome by including a safeguard clause into the directive. Moreover, the barriers to integration imposed by the heterogeneous situation at the member-state level are not restricted to legislative action, but also impact on the application of the Treaty by the Commission. Thus, only five countries are affected by the proceedings against import and export monopolies, although there is just as little trade among the non-affected member states. The great heterogeneity among the member states makes it difficult to approach them all by means of a single legal provision. 5. Correspondingly, the homogeneous national situation in telecommunications has greatly facilitated the formulation and acceptance of European policies, a point which is hardly mentioned in case studies of European telecommunications policy. In addition, the significant rate of technical change and market growth in telecommunications has helped the Commission to increase the relevance of supranational policy-making. In many instances, it is of no avail for member states to oppose liberalisation measures, since it is simply a matter of whether the Commission will formally liberalise or liberalisation will proceed de facto in the markets. At best, opposition could result in a very short-lived victory, and it is likely that the Commission's recent venture at liberalising alternative networks without a previous Council resolution endorsing this measure rests on this premise. At the same time, significant growth rates help overcome distributional issues since they allow the former monopolies to also benefit from growth. Of course, these favourable circumstances offer an opportunity for the Commission to set precedents in the use of its competences. But the difficulties encountered in the electricity case show that even with a precedent remaining constraints may still be significant. 6. With the complex pattern of interaction between the strategies of supranational and national actors, the analysis of the two sectors shows how very selective the two theoretical perspectives necessarily are in addressing decision-making processes. In this respect it can be assumed that concepts of European multi-level governance will represent a major advance for the analysis of European integration.

Tactical

1. Led by elected politicians, for political benefits and electoral gains. This is about party political benefits. 2. For example, the Chirac government sought to differentiate itself from the preceding Socialist government.

"Not Steering but Drowning: Policy Catastrophes and the Regulatory State" by Michael Moran

1. My purpose in this article has been to subject what I have in shorthand called`the regulatory state' to an immanent critique: to take its ambitions seriously and to reflect on why, where they have not been realised, they have not been realised. The ambition to steer more intelligently and to row more purposefully lay behind the growth of the regulatory state within the state' behind the whole institutional revolution in British government over the last quarter-century. While there can obviously be dispute about some of the central ideas guiding the changes (the imputed separation of pol-icy-making from implementation, the intellectual foundations of audit, the meaning of `economy' and `effectiveness'), the ambitions are uncontestable to create a public service able and willing to formulate policy more intelligently and to deliver it with closer attention to both the rights and the wishes of citizens. 2. Through the hard work and creativity of many public servants there have been real gains both in the economy and in the responsiveness with which public services are delivered. Herein lies part of the importance of disasters, for a single disaster can wipe out the gains of twenty years of hard work. The NHS has, at least since the Griffiths-inspired reforms of the mid-1980s, been struggling hard to de-liver services that prolong healthy life.These efforts have probably had some success. The BSE catastrophe is destroy-ing those saved lives. In local government, after the great economic crisis of the mid-1970s, local authorities embarked on a long campaign which is still continuing to deliver services more economically and efficiently, again with some success. The cost of the poll tax fiasco has wiped out the savings. 3. In short, these fiascos are fatally compromising the ambitions of the regulatory state. Fiascos will occur in the future, but an important point of any immanent critique is to heighten our awareness of where the greatest dangers lie. My purpose in this final section is to review the relative dangers of the five kinds of politics that I have identified as sources of catastrophe. 4. Icon politics is potentially a great source of future fiascos. The temptations are plain. In the last couple of decades, government has stripped itself of many of the great ambitions that it acquired in the middle decades of the twentieth century, notably in economic management. The growing authority and pervasiveness of the European Union has hollowed outWhitehall from the top, while the devolution measures passed by Labour since1997 are hollowing it out from the bot-tom. Support for iconic projects domes, stadia, opera houses, international championships in sports both popular and obscure helps fill the gap, and fill it in ways that are obviously attractive to democratically elected politicians. It is virtually inherent in the nature of iconic projects that estimating their worth involves an unusually high number of in-tangibles that are resistant to the measurement and evaluation characteristic of the regulatory state. Thus two linked features, the intangibles, together with the likelihood that the projects will be appropriated for decision by actors in high politics themselves least interested in, and least well equipped for, complex evaluation give to iconic projects a uniquely high potential for fiasco 5. Great leap forward politics was peculiarly the produce of the age of crisis in Britain of a feeling that the depths of the British decline had produced such pathologically incompetent institutions, like British Rail, that only a dramatic rupture with the past could cure the patient. How far this mood continues to shape reform will depend in part on whether the sense of crisis among the British policy elite fades as the memory of the great crises of the1970s fades 6. Confrontation politics was likewise the product of a particular policy-making style that developed in the 1980s; a style that again owed much to beliefs about the origins of the British economic crisis. It produced a desire to be seen to `stand up to' vested interests and a mode of making policy that dismissed the importance of consultation and compromise. Although changes in personalities at the centre of high politics ,notably the end of Mrs Thatcher's rule as Prime Minister produced a change in style, there is no evidence that the essential institutional features of this confrontational system have altered. Indeed, the distrust of ex-tended consultation with affected interests, dislike of commissions of inquiry, and a predilection for swift-acting task forces formed from the elite members of the core executive now seem to be institutionalised features of British government. 7. In confrontation politics we hear an echo of an older tradition in British public life: the tradition that gave politics a providential cast. The notion that political projects were shaped by providence of God or of history once suffused our political life. Since few policy-makers inBritain today are either Hegelians or teleological Christians, we presently hear little openly about providence. But the years of Thatcherite triumphalism had providential echoes: Britain's role in the world was to lead inspirationally into the new era of free markets. Both right and left in Britain are prey to this providentialism; to a belief that the country's fate is to lead the world in economic liberalism, or in giving a moral lead (the core of the old case for nuclear unilateralism), or in pioneering a Third Way. 8. Esoteric politics is in decline. As its best example, the case of the City, illustrates, it was the product of traditional institutional and cultural configurations which had managed to survive beyond the conditions in which they were born. The succession of scandals and regulatory failures that afflicted the City throughout the last quarter of the twentieth century helped deal it fatal blows. The signs of this are evident in the transformation ofCity regulation in recent years, with responsibility for banking regulation taken away from the Bank of England; the dismantling of the self-regulatory system created by the Financial Services Act1986; and the creation of a new FinancialServices Authority, a legally empowered regulatory agency that can operate as a fully fledged, accountable public institution. 9. Symbiotic politics holds the most imponderables for the regulatory state. The case of MAFF and BSE shows the extraordinarily destructive consequences of fusing public institutions and private interests.That episode was the product originally of the crisis of food supply in the 1940s.But the regulatory state, by its very nature, has greatly expanded the possibilities for symbiosis, since substantial parts of its operations involve the regulation of private interests by specialised agencies.If we do not police the FSA rigorously, for example, we risk replacing the pathologies of esotericism by the pathologies of symbiosis. Weak regulation was prob-ably a contributory cause of the rail fiasco n the early stages of privatisation. The early years of the National Lottery, too, were bedevilled by peculiarly close relations between the regulator andCamelot. The history of a much greater regulatory state, the American, is a testimony to the problem. Even a political culture like that of the US, where the attachment to secrecy is much weaker than in Britain, has not been immune to disastrous fusions between regulator and regulated.

35 years ago

1. Ownership by public sector 2. Licensing 3. Legal monopolies 4. Regulation in hand of ministers. Regulation done by the government. Direct regulation through ownership. Indirect regulation through price, costs 5. Ministries had the power over network industries. 6. They took the decisions about prices, expansion, or maintaining the monopolies. 7. Accountability was direct through elections.

REGULATORY STATE (today)

1. Private ownership 2. Independence Regulatory Agencies 3. Parliamentarian committees 4. Experts 5. Courts 6. Regulation to correct market failures 7. Non-majoritarian institutions 8. Arena: influence on the rule-making 9. Formalised relationship 10. Transparency 11. Supranational regulation

POSITIVE STATE (1980)

1. Public ownership 2. Government Departments 3. Legislatures 4. Spending and Taxing 5. Income redistribution 6. Majoritarian institutions 7. Direct accountability 8. Arena: influence on redistribution 9. Informal arrangements

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 12

1. Postal services appear an unlikely candidate for internationalisation and alteration of sectoral economic institutions. On the one hand, there have been domestic obstacles to reform. These include the very long historical roots of post offices, the power of their numerous employees and their considerable national symbolism. On the other hand, internationalisation pressures have been limited. Transnational technological and economic developments have been minor compared with those in telecommunications or securities trading. Unlike the other sectors, the US has not provided an example of reform, but instead has retained public ownership. The main form of internationalisation has been EU regulation, which developed from the early 1990s onwards, albeit that it remains less comprehensive or detailed than in telecommunications, electricity, or securities trading. 2. Yet despite these unpropitious factors, significant reform occurred in all four countries. Before 1997, change differed across the four. Initially, Britain led the way, making the PO a public corporation in 1969 and then separating it from telecommunications in 1981. Similar changes took place partially and later in the other three nations between 1989 and 1994. However, in the 1990s, it was Germany that moved furthest, transforming Deutsche Post into a private law limited company and planning its privatisation, liberalising services and creating a sectoral regulator. Interestingly, Britain did not transfer the privatisation and liberalisation of other network sectors into postal services—privatisation was ruled out by Mrs Thatcher in the 1980s and then blocked in the early 1990s. Thus cross-sectoral institutional isomorphism within Britain failed to operate. The result was that considerable divergence across the four countries developed. Tables 12.1 and 12.2 compare the institutional positions in 1985 and 1996. 3. After 1997, reform spread and cross-national differences diminished, notably concerning liberalisation and to a lesser extent the existence of a sectoral regulator. Thus by 2005, sectoral institutions had been considerably altered compared to 1996 and several cross-national differences in the degree of competition had been ended (Table 12.3). 4. Several factors were at work in the reforms, including the desire to reduce postal losses. However, EU legal requirements were important. Thus EU directives set the pace of liberalisation, and Britain, France, and Italy all followed EU requirements, the last two somewhat reluctantly. Germany had planned to open its markets further and earlier than EU requirements, but after 2001 held back to match the EU's pace of change, not wishing to go it alone. The Commission pressured recalcitrant member states—France and Italy—to transpose its directive correctly, an important factor given their lack of enthusiasm for liberalisation. 5. But the effects of EU regulation went further than its legal requirements. It offered occasions for reform, as member states needed to transpose EU directives. It provided justifications for moving postal operators towards being enterprises ready for competition. By liberalising postal markets, it offered reasons for overseas expansion by previously national operators. It could also be used as a threat, through entry of more efficient suppliers. Thus EU regulation provided incentives and threats for postal operators that contributed to a broad rethinking of postal institutions. 6. Postal services appear to be staid and stable, far removed from the rapidly internationalised sectors such as telecommunications. Yet by 2005, postal operators had moved from being civil service administrations to corporations, with new ambitions to become international firms. A novel regulatory framework of liberalisation, rules governing competition, and sectoral regulators was in place. 7. The chapter thus shows the power of EU regulation in sectoral institutional reform. Despite the absence of major technological and economic changes or the US as an example and pressure, the EU played a significant role in the development of a new institutional framework that overturned very deeply-rooted features. At the same time, its role varied. In France and Italy, its influence was visible, as it was used to justify change. In Germany, it led to slower liberalisation than planned, as the EU timetable for competition was adopted. However, in Britain, although changes were made to meet EU requirements, as well as for other reasons, they were not legitimated by reference to the EU. Thus as in other sectors, the receptiveness of Britain to EU regulation remained low. Nevertheless, the outcome by 2005 was that the four countries had adopted similar reforms and moved towards a liberalised regulated market.

There are two sets of literature dealing with the relationships surrounding IRAs

1. Relationship between regulatory agency and politicians: independence/delegation; 2. Relationship between regulatory agency and industry: capture.

Factors Influencing Independence in Practice

1. Removal/reversal of agencies' policies 2. Expertise of Regulator 3. Resources of Regulator 4. Creation of oversight agency/appeals board 5. Improve accountability procedures: have media attack them 6. Appointment process e.g Maggetti: regulators can lack expertise but have a political affiliation 7. Extent of Politicization of Sector 8. Litigiousness/Extent of Judicial Review Note: politicians want to blame shift in terms of saying regulator is independent. If regulator didn't say they were independent, could be challenged in court. Independence in practice is much harder to tell. Is increased budget a reward for doing politicians' bidding? You can have observational equivalence.

"When Institutions No Longer Matter: Reform of Telecommunications and Electricity in Germany, France and Britain" by Ian Bartle

1. The evolution of pricing policies of British and French PTOs does not corroborate commonly accepted HI contentions concerning the impact of national institutions on economic outcomes. Although the comparison of national institutional frameworks, their reforms and contrasts would have led us to expect specific patterns of policy outcomes in terms of dynamics and trajectory through the operation of the mechanisms advocated by HI, the article has accumulated empirical evidence that challenges HI in two essential respects. 2. First, institutional changes were not followed by systematic and concomitant bending of price developments or trend reversals. Indeed, the institutional reforms in Britain in 1981 and 1984 as well as those in France in 1990 and 1996/97 have not produced marked changes. At most, institutional alterations were followed by an acceleration of existing trends but did not clearly break away from pre-existing ones. More fundamentally, the data show evidence of trend reversal and/or sharp acceleration (e.g. local calls and rentals in France) occurring before institutional changes, great changes in trends and even reversal of price developments taking place within the context of stable institutions (e.g. local charges in Britain in the 1990s and in France in the mid-1980s). Second, a sequence of divergence-convergence has admittedly been observed but has not been systematic and its timing does not t the predictions of HI. The process of convergence of absolute levels has preceded institutional convergence as the regulatory frameworks in Britain and France were broadly similar at the overall level only from 1996/97. Telephony charges did diverge increasingly during the 1980s but the underlying trends which sustained such a process existed before and were merely speeded up following the British reforms of the early 1980s.20 Thus, no clear and systematic links can be identified between institutions and outcomes. 3. How then can this puzzle be unravelled? The similar directions of change and indeed convergence of pricing policies, despite marked cross-national institutional contrasts, strongly suggest that forces common to Britain and France were at work and may have been more decisive than institutions. In other words, they may have counterbalanced the effect of national institutions and even overcome their resistance to change. Indeed, the most straightforward and convincing explanation for the pattern of outcomes appears to be the sweeping international forces with which the telecommunications sector has been confronted from the late 1960s onwards. 4. Technological and economic developments as well as radical changes in the international regulatory environment have actually constituted mutually enforcing pressures challenging policy legacies and undermining the sustainability of pricing policies. New technologies with radically different economic characteristics became commercially available from the late 1960s and at an accelerating pace in the 1980s and 1990s. This tide of innovation fundamentally altered the level and structure of network costs in a way that contradicted policy legacies. While new technologies overall offered the prospect of much lower costs, higher profits for PTOs or a combination. of these, they have had three fundamental impacts on the balance of costs. First, they drastically reduced the importance of the distance factor as a cost driver for calls; the cost of long-distance, including international, calls fell much more rapidly and by a wider extent than local calls. Second, they increased the relative percentage of switching costs relative to those of transmission. And finally, the relative proportion of non-traffic sensitive costs rose in comparison to usage-sensitive ones. In addition, the up-front cost of setting up private and alternative networks fell and sources of indirect competition enabling the bypass of the PTOs' network (e.g. by using leased lines or call-back services) grew. Telecommunications services became strategic for a whole range of economic sectors, such as banking, tourism and manufacturing. 5. Combined, these common changes represented mounting forces which were destabilizing national policies. If pricing policies did not keep pace with technological progress, existing imbalances between the prices and costs of services would increase. Growing cross-subsidies were problematic in so far as such subsidies were supported mainly by business users. Discrepancies between prices and costs sharpened the incentive for business users to press for policy change (and in particular to remove cross-subsidies and open markets to competition). The financial implications of the status quo for PTOs were far from trivial. Widening imbalances put their most pro table markets under increasing threat. They artificially augmented the attractiveness for business users to take advantage of available arbitrage opportunities which could deprive PTOs of consequent profits. But more importantly, in a world in which competition was a technological reality, the plausible liberalization of markets was rendering PTOs' revenues particularly vulnerable to new market entrants. New competitors, acting as cherry pickers, could have undercut PTOs' over-priced services on long-distance markets and, in so doing, creamed off the market. Ultimately, PTOs could have been left with their loss-making services. 6. Parallel to these developments, changes in the international regulatory environment also contributed to destabilizing domestic policies. Early US regulatory reforms created competitive dynamics that spread world-wide and created tensions and pressures on national tariff structures. In addition, between 1980 and 2000 the cartel foundation of PTOs for international communications, organized through the International Telecommunications Union, was drastically weakened by deregulatory progress achieved within the framework of the World Trade Organization (Deane 2000). Thus, PTOs' ability to keep artificially high international rates was severely constrained. Finally, the last two decades saw the development of a comprehensive regulatory framework at the EC level which, in addition to ending monopolies, introduced harmonization principles in the field of tariffs. Although the regulation and the setting of tariffs were deemed to be a national matter, the Commission sought to remove cross-subsidies between services, arguing that it impeded both the completion of the common market and the functioning of competition in telecommunications. To this end, as early as 1990, the Commission included the principle of cost orientation in a Directive and stated that it would apply this principle to all services provided by dominant operators in the future. 7. By calling into question pricing practices, international factors can be understood as the main drivers of domestic policy changes. The trends and features identified are in fact congruent and consistent with these external pressures. Despite dissimilar pricing rules and actors involved in policymaking, it appears that national suppliers and policy-makers have implemented decisions which have produced similar results. The differences in the timing of changes between countries, however, suggest that, contrary to the implicit 'political model' of some international political economists, internationally driven changes are not swiftly and uniformly translated to the domestic level

"Political Bias in Policy Convergence: Privatization Choices in Latin America" by M. Victoria Murillo

1. This article shows that despite the policy convergence toward privatization of public utilities in Latin America, there was variation in its implementation. The political bias of the privatizing government influenced this variation by shaping the choice of institutions and selling conditions. Both dimensions have a strong effect in the post-privatization scenario because they affect the power distribution of actors in the new privatized markets and their ability to influence subsequent regulatory changes 2. This argument builds upon a growing literature on the politics of privatization. It differs from previous work, however, in that it does not restrict political influence to policy preferences for privatization. Nor does it limit it to the successful implementation of a technically defined policy based on executive authority, fiscal crisis, or concessions to fend off political opposition. By focusing on implementation, the article de fines this influence in terms of the different dimensions of the privatization of public utilities. In doing so, it explains the different choices of privatizing policymakers in Chile, Argentina, and Mexico. Moreover, the political bias of privatizing governments explains the formation of diverse institutional preferences contingent on the privatizing government, which are left unexplained by alternative theories based on convergence in the competition for foreign capital, regime differences, state capture or industry-specific technological differences 3. The political bias hypothesis involves cognitive and strategic dimensions that help to explain the origins of institutional preferences for policymakers. Prior beliefs influence how policymakers adopting new policies process information about the world. While they do not distort information so as to produce "selective perception," they also do not discard all of their prior beliefs because these are related to their own socialization and to that of their core constituencies, who indirectly affect their survival in office. The different starting points provided by the political beliefs of policymakers and their allies explain the differences in implementation of the policies shaped by external pressures by investors or international institutions and internal influence of technocrats for policy diffusion. 4. Additionally, beneficiaries of privatization are not limited to those defined by economic or political efficiency; they depend on the political constituencies of the government. The effect of political bias, both through beliefs and through constituencies, generates preferences for different institutional choices. The institutions that emerge from those choices then later influence the interactions of current and future actors in privatized markets. Once institutional choices are taken, some roads are closed. Nonetheless, the institutional choices are not locked into the path dependency of domestic institutions, because they are contingent on a process of preference formation, which in turn depends on the political bias of the privatizing government. Hence, political bias explains the variation in institutional preferences at the time of public utility privatization across similar cases, which seem all to be moving in the direction of policy convergence 6. This argument has several implications for pursuing new avenues of research. First, if political incentives explain policy choices undertaken at the time of privatization, these incentives should have an influence on the policy alternatives available for political parties competing with privatizers. Electoral competition should provide incentives for alternative policy options in response to demands generated by asymmetric markets. Electoral competitors of privatizing governments should seek to attract new investors and consumers to their coalitions by promoting regulatory reforms that reduce the gains of incumbent companies. Yet after privatization, the demands of providers and consumers, along with technological change and the constellation of coalitions in the state institutions, should define the limits of what policymakers can do to follow their political incentives and ideological orientations. 7. As predicted by the political bias hypothesis, governments that succeeded the privatizing ones in the three countries studied committed to regulatory change in the privatized industries. In Chile the democratic transition brought to power a center-left coalition that defended the interests of consumers and new entrants (at the expense of the original beneficiaries of the privatization process) by promoting regulatory change in telecommunications in 1994 and in electricity in 1999. In Argentina the coalition between the centrist UCR (Radical Civic Union) and center-left FREPASO (Front for a Country with Solidarity) also promoted and implemented changes in telecommunications. A new regulation established in 2000 facilitated competition and thus benefited consumers and new entrants at the expense of the original beneficiaries of privatization. In Mexico the center-right PAN (National Action Party) administration has proposed a new law to Congress that would facilitate competition in telecommunications and abolish the investment requirements established for new investors in the previous law. 8. Finally, the importance of telecommunications and electricity for economic development and public satisfaction suggests the political salience of these industries. These are industries where the assets are relatively valuable for distributing gains among constituencies. These features seem to limit the applicability of the notion of political bias to other policy areas of high political importance and distributive consequences. Further research into other countries' economic policies is necessary to assess the scope of the political bias hypothesis in explaining preference formation for policy-making.

What is the EU and how does it work?

EU was set up as the European Coal and Steel Community to prevent another world war from occurring on the basis of interdependence through trade

Pragmatic

Led by administrators (unelected officials) and politicians, to respond to particular needs. Politically uncontroversial (this may be because the territory is not politicised, or has been politically neutralised already).

Is there a right to a mobile telephone in the United Kingdom?

No.

Sociological explanations

Not Based on Efficiency 1. Coercive - forced to adopt changes e.g. on account of EU pressure 2. Normative - a set of rules dictate that change must happen e.g. EU directives 3. Mimetic - imitation. Monkey see, monkey do under conditions of uncertainty Based on Efficiency Concerns 1. Competitive - adopt changes in response to competitive pressures e.g. telecom reform in Europe in response to pressure from BT

Exam Guidance

Professor begins the seminar saying that it is necessary, for the exam especially, to challenge the assumptions in the questions, not just to swallow them. We have to be critical about the question.

These industries were legal monopolies

Remember legal monopoly ≠ public ownership. It meant that, as citizen if you didn't like the service, there were no other operators to switch to.

Principal agent problem

The principal-agent problem develops when a principal creates an environment in which an agent's incentives don't align with its own. Generally, the onus is on the principal to create incentives for the agent to ensure they act as the principal wants. This includes everything from financial incentives to avoidance of information asymmetry.

Grid

fixed network that brings goods and services to consumers. Network doesn't have to be physical, but does have to have some sort of transmission mechanism

"European integration and supranational governance" by Wayne Sandholtz and Alec Stone Sweet

1. A decade ago, telecommunications in the EU was a patchwork of state monopolies. Governments clearly preferred to retain control of the PTTs, for a number of reasons: the historic public utility, natural monopoly ideology surrounding telecommunications in Europe; the capacity to use the PTTs as instruments of industrial and employment policies; and the revenues generated by the telecommunications monopolies. Furthermore, the Treaty made no mention of telecommunications and there was a standing presumption that certain articles protected the PTTs from EU competition rules. Yet today the liberalization of telecommunications is being driven primarily at the EU level. In the language of our continuum, telecommunications policymaking has moved substantially from the intergovernmental pole toward the supranational. 2. Intergovernmentalist theory cannot explain this movement. The inter‐governmentalist account sees no independent role for the Commission, the ECJ, and transnational groups. The EU telecommunications regime would therefore be the result of a string of compromises each of which embodied the preferences of the most reluctant state. But as the empirical record shows, the key steps in liberalizing telecommunications at the EU level consisted of unilateral Art. 90 directives from the Commission. The Commission resorted to Art. 90 precisely because the member‐states were, with the UK being the only regular exception, resisting liberalization. If liberalization were proceeding at the pace of the slowest member‐states, there is no question that reform would be far less advanced than it is today. 3. In contrast, our theory of institutionalization explains the empirical record; things happened as we would expect. The fragmented PTT system was increasingly costly both for the increasing number of transactors (users) who relied on cross‐border communications and for the new players who hoped to meet their telecommunications needs. These groups—equipment manufacturers, service providers, business users, consumer groups, and providers of alternative infrastructures—rallied to the Commission's cause in the series of consultations. Those groups pressing for liberalization were the transnational society of telecommunications. 4. Our theory also reserves a place for supranational organizations that can have an independent effect on EU politics and policymaking. For a variety of reasons—having to do with historical path‐dependence, the costs of supervision, and formal EU law—the member‐states cannot always control EU organizations like the Commission and the ECJ. In telecommunications, the Court and the Commission were clearly not simply doing the bidding of either the most powerful or the most reluctant member‐states. As the empirical record shows, Commission initiatives were almost invariably more ambitious (in terms of liberalizing) than most member‐states were willing to contemplate. That is, the member‐states could not have been dictating their preferences to the Commission because the Commission was always ahead of them. Even the British telecommunications reforms came two years after the Commission had formulated the objective of a pan‐European market. The case for the Commission acting independently of member‐state preferences is absolutely clear when the Commission utilized its rule‐making powers under Art. 90 (liberalization of terminals, services, and infrastructures). But even in the first phase (from RACE to the first Green Paper) the Commission had an autonomous impact. 5. Of course it is true that the key legislative pieces in the first phase were voted by the Council of Ministers. But intergovernmental agreements can also be shaped substantially by supranational processes. As the empirical account showed, the Commission's initiatives in the first phase came before member‐state preferences took shape. In fact, most of the member‐states did not define their preferences regarding telecommunications reform until the latter half of the 1980s. The Commission's initiatives had an impact on member‐state thinking and preference formation, by shaping ideas and models, providing focal points for EU decision‐making, and mobilizing influential societal groups. The Commission's impact on policymaking was akin to education, or persuasion. More generally, if the interactions and discourses of the EU significantly shape state preferences, then interstate bargains are not what intergovernmentalists assume them to be. 6. The theoretical framework of this volume and its application in the telecommunications case suggest an answer to the puzzle of why liberalization in the EU has proceeded faster in some domains than in others. For instance, extensive EU liberalization in telecommunications contrasts with far more modest liberalization in the electricity sector. Our theory suggests an explanation. In the case of telecommunications, there was a growing number of powerful business actors with a clear stake in up‐to‐date, cross‐border telecommunications. Users needed advanced services that spanned borders, equipment and service providers wanted to meet that demand. The transactors in telecommunications have no counterpart in electricity. There is nothing inherently cross‐border about energy consumption. The main rationale for electricity liberalization is that it would reduce energy costs in the Union and eliminate price differences across countries. A similar cost‐reduction argument was at play in telecoms liberalization, but there existed in addition concrete business needs for advanced telecommunications services spanning the EU. The Commission could therefore ally with a variety of actors who needed pan‐European telecommunications, but there was no similar constituency in electricity. 7. The factors frequently cited as making the difference between EU outcomes in telecommunications and electricity include favorable ECJ precedents and support among powerful non‐state interests. There was a string of relevant ECJ cases in telecommunications, upon which the Commission could base its actions. There was no similar ECJ record in electricity. But this is no coincidence. The ECJ had developed a jurisprudence relevant to telecommunications precisely because private actors had been taking telecommunications‐related cases to the courts. The ECJ does not choose its policy domains; it can only respond to the cases that are being litigated and referred. Again, actors needing cross‐border telecommunications were seeking remedies in the courts, which produced a body of cases, which in turn undergirded Commission activism. The absence of groups with a similarly compelling need for cross‐border transactions in electricity explains the lack of ECJ precedents in the sector. 8. The telecommunications case shows the interactions among the three dimensions of our continuum: supranational rules, supranational organizations, and transnational society. EU law, driven in crucial instances by the autonomous rule‐making powers of the Commission and the ECJ, has brought an end to the PTT era. The liberalization of telecommunications markets is underway.

Journal of European Public Policy 2002, Special Issue on 'Regulatory Reform in Europe' (Repeat)

1. The phenomena that this volume seeks to explain are threefold: the emergence of regulatory institutions (Gilardi); regulatory policy outcomes (S. Schmidt, V. Schmidt, Drahos and van Waarden, Heritier, Serot); and political outcomes of regulatory reforms (Thatcher). On the first topic, Gilardi asks which factors account for the rise of independent regulatory agencies to which governments have delegated power in different sectors, e.g. electricity, telecommunications, financial markets, food safety and pharmaceuticals. From the second perspective, S. Schmidt investigates the impact of mutual recognition on market integration, on the one hand, and European and domestic regulatory responses in the road haulage and insurance sectors, on the other. Van Waarden and Drahos study the impact of the European Court of Justice rulings and Commission decisions on the content of national competition policies, measuring policy convergence. V. Schmidt investigates national adjustment to European economic policy in sectors, such as energy, telecommunications; she points to different national responses, e.g. inertia, absorption or transformation. Serot focuses on the impact of privatization and the deregulation of telecom prices, finding a clear convergence. Heritier analyses the policy impact of the liberalization of network industries, focusing on the provision of public services in rail transport and telecommunications services, identifying the underlying factors of service performance. Within the third perspective, Mark Thatcher scrutinizes the central political consequences of regulatory reform, e.g. for the relationship between independent regulatory authorities and elected politicians, the relationship with regulatees, decision-making practices and their democratic legitimacy. Thus, the explananda of the contributions in this volume reach from the emergence of new regulatory structures, to the outcomes of these structures at the policy level, including the underlying processes, to the structural impacts of the new structures on national polities. 2. In explaining the new regulatory structures and their impacts at the policy and structural level, all articles either test explicitly stated, and theoretically derived, propositions or at least make plausibility probes of such propositions. Gilardi tests the credibility hypothesis derived from economic institutionalist theory (Majone 2001). That hypothesis claims that elected politicians delegate powers to independent agencies in order to increase the credibility of their policies. From this, Gilardi derives more specific, testable hypotheses, stating a causal relationship between international interdependence and delegation, recent privatization and delegation and, finally, veto players and delegation. There are two con icting views, one arguing that the more veto players there are, the less a political system is able to withdraw independence from an agency, hence the greater its effectiveness, the other claiming that governments in systems with few veto players are likely to find alternative solutions to policy instability, of which delegation is one possibility. In accounting for the emergence of independent regulatory authorities, Gilardi remains within delegation theory. Alternatively, one could argue that independent regulatory authorities have become fashionable and that states just emulate each other in making use of them. 3. S. Schmidt, explaining the different national responses to mutual recognition, builds her argument upon a political institutionalist explanation and points - like Gilardi - to the importance of the number of veto players in the German, as compared to the French, political system. This difference arguably accounts for both the speed and extent of national regulatory responses. Accordingly, she expects Germany to be less capable than France to react swiftly to the consequences of mutual recognition. With the selection of her cases she systematically varies the factors expected to cause different policy outcomes. 4. Van Waarden and Drahos, in seeking to account for the convergence of national competition policies, test a variety of theories of European integration, first making a plausibility argument and then exploring the theories systematically against qualitative and quantitative data: they examine institutionalism, neo-functionalism, liberal intergovernmentalism and the theory of epistemic communities and mutual learning. They discard all except institutionalism and the epistemic community approach. '[C]onvergence has been the result of the gradual . . . pressure and . . . mutual modelling arising from the development of a multi-level split legal system . . . through the lines of communication . . . created by the development of a multi-level epistemic community of legally trained officials' (p. 914). Of course, one may object that it is not so surprising that liberal intergovernmentalist theory would - by definition - be irrelevant, since, as they point out, there has been no policy of positive integration in competition policy. 5. V. Schmidt emphasizes that in order to explain the differences in the economic policy adjustments in France, Britain and Germany it is necessary to simultaneously take a number of factors into account - derived from a variety of different theoretical backgrounds: economic vulnerability, political institutional capacity, policy legacies, policy preferences and discourse. Rather than seeing them as mutually exclusive, she nds them linked in particular ways. As such, in the three countries under discussion they bring about different policy responses in different policy areas. Typical combinations of factors are more likely to produce absorption, inertia or transformation in particular policy areas in particular countries in more general terms. 6. Serot advances a macro-historical institutionalist hypothesis, as opposed to an 'international forces' hypothesis, in order to explain the particular price development in telecommunications: he shows that the international economic environment and technological innovation largely account for the convergence of prices in Great Britain and France and not the overall change in the regulatory structure. 7. Heritier considers three explanatory hypotheses in order to account for the differences in the provision of public services before and after the reforms in rail transport and telecommunications: a technology hypothesis, arguing that the provision of public services is facilitated by large-scale efficiency-enhancing technological innovation; a liberalization hypothesis, claiming that, up to a certain limit, privatization and deregulation favour better services by increasing efficiency; and an institutional, principal-agent theoretical explanation, which views the interaction between regulators and regulatees as a precondition for providing high-quality services. 8. What empirical ndings are presented in the different contributions in order to test or explore the hypotheses put forward? Gilardi measures his dependent variable, e.g. agency independence, which he claims increases as a function of international interdependence, recent privatization and the number of veto players, along different qualitative dimensions which are then summarized in an 'independence index'. The author finds that the economic interdependence hypothesis does not hold, while recent features of privatization/economic regulation and of national institutions (the number of veto players) can largely explain the cross-national variation. These findings support the 'credibility' hypothesis with which the author started out. 9. S. Schmidt, who, in considering the impact of mutual recognition on market integration and domestic policy responses, partially draws on existing qualitative empirical sectoral studies and partially on her own empirical investigations, shows that the extent of national and European regulation is disproportionate to the de facto extent of market integration in the two sectors studied, road haulage and national insurance markets. 10. Van Waarden and Drahos, studying convergence in national competition policies in the Netherlands, Austria and Germany, employ a multi-dimensional empirical measure of what constitutes competition policy, distinguishing between goals and basic principles, scope, application, treatment of cartels, regulation of dominant market position and merger control. On the basis of this fine-grained empirical operationalization, the authors show that convergence in national competition policies can best be explained by an epistemic community approach. 11. V. Schmidt defines the empirical dimensions of her dependent variable 'adjustment' to European policy requirements in terms of absorption, inertia and transformation and illustrates the adjustment processes with empirical information from a range of policy areas, e.g. monetary policy, financial services, telecommunications, electricity, transport, the environment and employment. Depending on a particular link between the factors pointed out, she finds the UK leading the transformation processes, France showing a mixed pattern of adjustment and inertia, and Germany lagging behind in most areas. 12. Serot, when studying the impact of the overall change of institutional structures on the retailing prices in telecommunications, measures price development in a differentiated way. But the absolute and relative figures compared across countries and periods have to be considered with caution since the national measurements vary considerably (the same holds for Heritier's analysis). Still, the trends indicated can be clearly outlined. Serot finds that - against a macro-historical institutionalist claim that owing to reduced differences in the national regulatory frameworks prices should converge - they had converged prior to that time. 13. Heritier, in analysing the impact of liberalization on the provision of services in rail passenger transport and telecommunications, looks at a range of empirical indicators that constitute public services, de ned as accessibility, affordability, continuity and reliability. What emerges from comparing the rail sector and telecommunications - corroborating the findings of Serot - is that the quality of service provision is mainly influenced by technological innovation. 14. Thatcher, studying the empirical changes in political relationships brought about by regulatory reform, works on the basis of newly collected data. He discusses various explanatory approaches, such as principal-agent, capture theory and work on procedural legitimacy, to develop empirical indicators for the above purpose. He finds that independent regulatory authorities have enjoyed conditions favourable to independence from elected politicians. They have also had a degree of separation from business regulatees. He shows how independent regulatory authorities have greatly altered decision-making processes in regulation. 15. In brief, it seems that whether or not political institutions matter depends very much on the particular explanandum (features of services provided as opposed to domestic adjustment to European policy requirements which as such is closely linked to political institutions) and on the particular perspective of the comparison (countries or sectors) which is chosen.

Formal Institutions, 1: Ownership

1. 1980s: public ownership 2. Today: Private ownership, though it is not entirely dominant

EU Bodies

1. Commission 2. Council 3. Parliament 4. European Court of Justice

Systemic

1. Complete reshaping of society, perhaps on ideological grounds. 2. It involves reshaping the expectations of the citizens of the state. 3. e.g. dismantling entitlements to water or Thatcher

What explanations are there for this shift?

1. Economic 2. Diffusion 3. Technology/economic 4. Chick

Public good (economics)

1. A public good is a product that one individual can consume without reducing its availability to another individual, and from which no one is excluded. Economists refer to public goods as "nonrivalrous" and "nonexcludable." National defense, sewer systems, public parks and other basic societal goods can all be considered public goods. 2. This is an economist's definition

General Trends

1. Across sectors, timing varies, but prohibition of special and exclusive rights etc. as part of liberalization and privatization. 2. Then reregulatory directives about fair allocation of licenses, right to interconnect, right to change your supplier, rules about number portability. Number portability is important because it makes easier for consumers to change providers and therefore increases competition.

Greatest changes

1. Actors and Institutions, functions and tools; 2. Policy style 3. Difference in the arena for political conflict. In the class, Bernardo adopted a Deductive approach: starting from the theory - hypothesis and testing.

Norms about prices

1. Affordability for all users 2. Same price, same service for all users 3. There was a right to supply, and no market in the good or service being provided 4. Most countries had a doctrine of equality: same price whether you're in Paris or the Pyrenees

More General Points

1. At the moment, there are debates about whether you should privilege telecom incumbents. 2. For electricity at the moment, there are tensions between desire to fight climate change and the desire for fair competition.

Bernstein

1. Attacked public choice with his life-cycle theory of regulation 2. Agency ages, public attention fades and agency gets captured 3. Regulation starts off in the public interest

Families of explanations for this change

1. Bandwagon 2. Ideology: efficiency - free market is good. Bartle argues that ideas and techno-economic changes matter, contra Thatcher. 3. International factors 4. State actors: politicians privatize to spread blame 5. Interest groups 6. Technological development 7. Diffusion 8. Public interest theory 9. Credible commitment: privatization helps attract investment, leads to stability through IRAs

Peltzman

1. Consumers could be downstream industries 2. Residential consumers are out of the game 3. Big suppliers may be able to organize collective action

Non-functionalist explanations

1. Diffusion: Idea that a certain policy decision in one place can influence a policy decision elsewhere. Many types of diffusion: a. Isomorphism (just copy, even in for different sector) b. Competition (you do something different to distinguish from the other and compete) c. Learning (see, learn, copy what will help you) d. Coercion (you are obliged to apply this certain policy. For instance, World Bank will not lend you money unless...) e. Gilardi adds taken for grantedness, and symbolic imitation, which are both subsumed under the label of emulation. f. Symbolic imitation Emulation, UK not the same as Italy, competition not the same as electricity 2. Learning: UK is best model

What forces have threatened this model?

1. EU liberalization through directives: service providers no longer have a legal monopoly. Thus less of a guarantee of an income 2. Neoliberal ideas: dirigiste is bad 3. Technological development: fixed costs in some parts of the market became higher. Equipment manufacturers required exports to stay afloat, as national market was insufficient. Technological development also led to fragmentation, as standardization of grand projets fell apart. 4. Liberalization "required" IRAs to promote competition/cost-based tariffs: this reduced cross-rate subsidization. Issuing licenses to only British firms would be discriminatory under EU rules. Public procurement cannot be discriminatory under WTO and EU rules. 5. Interest-based explanation: senior management of firms not wanting to be linked to nations

"Network utilities: technological development, market structure and forms of ownership" by Martin Chick

1. Chick contends that rapid technological change drove the privatization of the electricity, telecommunications and airlines sectors in Europe. 2. While technology has certainly advanced at a fast clip since the 1970s, this account is difficult to square with differences between countries and between sectors. In simpler terms, if technology acted as the main motive force of history in this instance, one would expect to see uniform change across countries and sectors at the same time. Rather, what is evident is that, despite the broad trend of privatization, countries shifted ownership and responsibilities to the private sector at different times in different ways and in different sectors. 3. While historians have tended to focus on the policy changes and shifts in ideology concerning the ownership of these industries, for economic historians a fundamental "driver" of such debates has been the technological development and economic characteristics of these industries. It was their economic and technological underpinnings which initially occasioned local government involvement with the utility network industries, and the technological and economic characteristics of these industries often pushed them to larger, ultimately nationwide industrial structures, well before politicians began to implement policies of nationalization. Equally, it was the economic consequences of the technological developments within these industries which provided the opportunity for reintroducing competition into regulated and nationalized monopoly markets, well before political talk of privatization and liberalization became fashionable. Yet while economic historians argue that technological developments were a necessary prerequisite for shifts in political ideology concerning such industries, they were not sufficient in themselves. Indeed some economic historians such as Peter Temin accord a much greater role to ideology over technological development in itself in promoting, in this case, the break‐up of AT&T in the United States. Whatever the case‐by‐case arguments, it does seem likely that without the economic and public finance difficulties which afflicted many national governments from the 1970s, many politicians would have been less interested in pursuing programs of privatization and deregulation which sought to exploit some of the potential for increased competition made possible by previous technological developments. This was as true of manufacturing industry as of the network utilities. 4. Much of this interplay between technological development, economic change, and shifts in political ideology is evident in the network utility industries and perhaps, above all, in the fuel and power industries. These industries included non‐network industries like coal and oil, which often attracted protection and public ownership (partial, in the case of oil) because of political concern with unemployment (coal) and national security (oil, coal). 5. That public ownership faded as an approach to influencing the behavior of these industries reflected as much public finance and agency difficulties as any intrinsic problem in public ownership as such. Public finance problems arose in part out of relative productivity problems which were fundamental to the labor‐intensive personal services component of the public sector. In the 1970s and 1980s these problems were exacerbated by the increase in the number of those drawing unemployment benefit. Agency problems arose from a fundamental paradox bedeviling nationalization. Governments took network industries into public ownership on the assumption that ownership would enhance their control over industries for whose performance they were politically responsible. In fact, public ownership by enhancing responsibility only seemed to weaken control as it strengthened the industry's position in its relationship with government (Chick 1998: chs. 4, 5). That industries were usually nationalized in monopoly form, with that monopoly extending either side of the natural monopoly network component of the industry, simply exaggerated the asymmetries of information bedeviling the government (principal) - agent (industry) relationship in the industry. Yet similar agency problems afflicted relations between regulators and the regulated in the United States, and recent evidence from Europe, where even supposedly liberalized network industries are increasingly characterized by vertical integration, suggests that the balancing of a wish to secure consumers' interests through competition with a concern to provide producers with sufficient incentive to invest in the industry's productive and distributive capacity is still very much work in progress. The conjunction of high sunk costs, low marginal costs over much of the range of output, and the political sensitivity of network utility output is likely to provide the durable basis for government involvement with these network industries, irrespective of changes in fashionable political approaches to forms of ownership and regulation, for many years to come.

Very few legal rights for users

1. Few legal rights for consumers 2. State never went after the managers of these enterprises 3. Nevertheless, public was legally entitled to receive goods or services: in France, service publique remains important

We need to think first

1. Has there been a regulatory reform in developing countries? 2. In all developing countries? From Latin America we name some that went backwards, renationalizating some industries (Venezuela, Ecuador, Bolivia). But forward in Chile, Colombia, Brazil, Jamaica. Chile adopted reforms in the 1970s. Eastern Europe introduced privatization after 1989. East Asian crisis 1997. 3. What kind of reforms have happened? It is different to talk about privatization, liberalization or the creation of IRAs 4. When did it happen? It could be that reform happened in developing countries before than in European ones. It is important to look at the chronological sequence of events. 5. Are there differences between sectors? It might be that the regulatory reform took place regarding some industries but not on all of them.

1980s

1. In many industrialized nations, there were industrial policies for network industries: monopolies of supply, grid A. Telecom 1) Monopoly over supply to final user 2) No monopoly over provision of equipment to telecom companies: same with electricity: no legal monopoly over electricity equipment 3) Equipment manufacturers were private and domestic-oriented and national in orientation e.g. Siemens in Germany; Bombardier, Alstom in France; GEC, Plessy in Britain 4) These were large, private manufacturers who operated in a de facto oligopoly environment: they supplied equipment to legal monopolies 5) That is to say, 2 sets of national champions (network industries and those who supplied them) 6) In 1970s, companies were seen as part of the welfare state, not national champions B. In 1980s, France was most associated with industrial policy 1) Dirigiste: directing 2) Etatiste: statist 3) Grand Projets: big projects C. Grand Projet operation: promotion of national champions e.g. EDF, Suez-Gas, France Telecom 1) service providers were also supporting another group of national champions, many of which were privately owned equipment manufacturers i.e. build a plant using Alstom. 2) Suppliers lived off of providers. To help equipment manufacturers, give big orders to suppliers C. In 1970s/1980s, France built TGV, nuclear power, Alcatel digitalized. 1) Technological innnovation with world-leading technology 2) EDF/DGT/SNCF didn't have much of a choice but ended up creating modern networks: this helped French equipment manufacturers grow and export their world-leading tech. 3) They could innovate, because htey could cooperate upstream with suppliers 4) DGT transferred patents to Alcatel 5) Equipment manufacturers had long-term orders because network industries planned modernization over a long period of time 6) Idea was that France would have world-leading manufacturers 7) Suppliers would guarantee orders to selected national champions D. France wasn't unique, but Britain had competing equipment manufacturers. 1) Britain would also halt investments, because of frequent budget crises 2) Britain failed to build nuclear plants, high-speed rail, and a strong telecom champion E. By mid-1980s, France had the most advanced high speed trains, nuclear power and telecoms. This came from high investment and protection of national champions.

What the Situation Was Like in the Past

1. Industry managers (public - public corporations or public service integration) were accountable to politicians (ministries), who were accountable to legislatures, which in turn were accountable to voters. 2. Therefore, legitimation lies in accountability to voters; In other words, there is a delegation from electors to the government / legislature that provides the service (and at some point delegates some of their duties to public companies), so that voters could punish politicians in case of service failures.

Ideational

1. Institutional isomorphism. 2. Mimetic: If you've got a particular policy problem, look at other countries to see what works elsewhere. Mimetic isomorphism is about blind copying ... it's an example of fashion. Something looks good over here ... I'll follow suit. It's blind copying, rather than rational learning. 3. Rational learning: you look at the other examples, and you ask "would it work here?" 4. Normative: There are technocrats, shaped by schools in which they study, on ideas etc. Normative isomorphism: There are professional norms, among any experts ... Policymakers adopt a policy because it's regarded as being legitimate. It may not be tested. "Best practice" is normative isomorphism. 5. One form is being used in many different context ... it seems unlikely that the seem institutional form is going to be perfect in every context.

Why have regulatory reforms for network industries spread across the world from industrialized to developing countries?

1. It assumes that there has been regulatory reform across the world. 2. It also assumes that it spread from industrialized to developing countries.

How has this scenario changed?

1. It goes without saying that IRAs are non-majoritarian institutions, institutions that have been growing. As an NMA: not formally subject to popular pressure, legislature delegates authority to them, own budget, legal sanctity. Because they're unelected, it could be difficult to hold them accountable. 2.. Overall, Regulatory Agencies (generally independent/IRAs) and politicians are in charge. This means, in the context of principal-agent relationship, that politicians are the principal and the IRAs the agent. Thereby, the IRAs powers have been delegated by politicians (public law), through formal independence which implies some underlying pressures e.g. own budget, while the IRAs are non-majoritarian institutions. The problem is that theoretically it might be very difficult to account hold the IRAs as they are led by not elected officials. In this regard, literature looks at: independence, both formal/legal independence and informal/behavioral independence

Informal independence

1. Italian regulator has to balance tension between excessive costs and company renumeration 2. Concept of independence is controversial and not well settled 3. Independence can be understood in both de facto and de jure terms: in both cases, it is difficult to define 4. Beyond that, there's a conflict between independence and accountability 5. Price of independence is transparency for agencies: the more power delegated to IRAs, the more transparency required 6. We talked about technical knowledge. 7. Then we discussed the idea that independence could be defined as being able to take decisions without political influence. Some of us argued that even a regulatory agency which claims to be independent takes in account political factors in its decisions. 8. Professor highlighted that formal independence, and even more de facto independence were very controversial concepts. Also, when we talk about independence we have to consider independence of agency from the regulatees - this means not to be captured by industry interests. (This is another dimension of the problem of independence because previously we talked only about independence from government and political parties).

Self-interested group

1. Maximisation of power and money among certain actors. 2. Privatisation ... intended to appeal to one's certain friends. TelMex: The Telco was sold to a friend of the President. 3. There are many groups that could benefit: Politicians can benefit (they'll often go to the board a company they privatised); the interests of bureaucrats, through bribery and also through the fact that bureaucrats may be more powerful as owners. 4. Electoral aims 5. Businesses lobbying the government 6. Foreign capital/governments serving their own ends 7. International institutions e.g. EU, IMF

Why is the EU worried about reregulation and why does that worry national regulators?

1. National regulators implement EU law 2. Commission worried about industry capture, lack of harmonization that would hinder investment i.e. don't want a "race to the bottom" along the lines of the Delaware effect as opposed to the California effect 3. EU regulators didn't want countries to protect and promote their own national champions thorugh protectionist measures as well as subsidies. 4. This fear existed because EU directives: A. Are broad B. Have to be transposed C. Implemented by national regulators

"Preventing regulatory capture: special interest influence and how to limit it" by David Moss and Daniel Carpenter

1. Most scholarly edited volumes are narrow and intensely academic; by professors, for professors. Preventing Regulatory Capture has much grander ambitions: it seeks to reorient scholarship of regulation, but also to lend intellectual heft to a rather undisciplined political idea presently coming back into fashion, namely, that special interests exert a profound and corrosive influence on our policymaking system by capturing their regulators. Under the auspices of the Tobin Project, a Cambridge, Massachusetts, non-profit billing itself as "a catalyst for transformative research in the social sciences," the editors have collected impressive contributions from seventeen scholars from several disciplines, as well as a short postscript by the former Chairman of the House Financial Services Committee (James Leach) and the junior senator from Rhode Island (Sheldon Whitehouse). 2. he result is a rich volume that a wide audience would benefit from engaging with. But the book's influence is much likely to be greater among those who never pick it up, and in that regard it is a fascinating case study in how the authority of social science is forged into rhetorical weaponry suitable for political battle. It is worth considering some of the authors' reasons for seeking to reorient capture theory, as well as what that attempt can tell us about the relationship between careful scholarship and political discourse. 3. In the introductory chapter, the two editors establish a cautious tone befitting their well-earned reputations as consummate scholars. Moss (the founder of the Tobin project) was trained as an economic policy historian and has established himself as a leading scholar of regulation. Carpenter has established himself as political science's leading light on America's executive branch, bringing a rare mix of quantitative and qualitative methodological prowess to his work, including Reputation and Power (Princeton University Press, 2010), his impressive tome on the Food and Drug Administration (FDA). 4. Noting that most claims of capture are made without any effort to rigorously establish any well-specified causal claim, they furnish a more precise definition: "Regulatory capture is the result or process by which regulation, in law or application, is consistently or repeatedly directed away from the public interest and toward the interests of the regulated industry, by the intent and action of the industry itself" (13). Bringing "the" public interest into this definition is important. They explain that there can be no claims of capture without strong and well-specified normative ideas about what sorts of policies serve the public interest. Establishing capture requires far more than showing regulated firms getting their way: regulators must be shown abandoning the public interest at industry's behest. 5. This is an exceptionally demanding definition because it is difficult to identify the public interest. Indeed, the authors admit (a bit bashfully, in a footnote) that there is probably not a single case in which it can be satisfied without controversy. They venture that the Civil Aeronautics Board of the early 1970s "would appear to come closest," but even here they note that the evidence of capture is generally weaker than the conventional wisdom implies, with "proof remain[ing] elusive" for "the empirical pervasiveness of the capture itself" (15, FN 29). 6. Some of the book's essays utilize this skeptical approach to claims of capture—especially to question the way that capture was invoked in its 1970s heyday. William Novak rails against the historical assumptions underlying the capture theory first developed in the 1950s by Samuel Huntington and Marver Bernstein and later given harder ideological edges by Gabriel Kolko, James Weinstein, and Martin Sklar on the left and Gary Becker, George Stigler, and Sam Peltzman on the right. According to Novak, the idea that the architects of America's administrative state opened it up to corporate capture by failing to consider institutional design is simply mistaken. The question of public versus private interests was always a central one in the creation of regulatory commissions; although the vocabulary of "capture" was invented in the mid-twentieth century, extensive concern with undue corporate interest went back well into the nineteenth and a preoccupation with "corruption" runs back to the beginning of the Republic and beyond—indeed, it is deeply embedded in the foundations of western political thought. By arguing that regulatory choices favoring industry incumbents resulted from flawed economic thinking rather than purposeful and legitimate political choices, Novak explains the capture theorists of the 1970s "went somewhat astray" (47). 7. Moss and Jonathan B.L. Decker make a narrower indictment of one of the classic tales of the capture genre, which featured the Federal Radio Commission's 1927 decision not to expand the broadcast spectrum. While capture theorists, especially Thomas Hazlett, held this choice up as an exemplar of capture, actually probing the historical record calls it into question. Hazlett relied heavily on one source, Radio Broadcast, to support his story of broadcasters happily limiting available spectrum and thus excluding potential competitors, but it turns out that a wide array of interests opposed spectrum expansion: radio engineers worried about interference from new channels, manufacturers worried about the obsolescence of existing radios, and amateurs objected to having more of the usable spectrum taken by commercial broadcasters. Broadcasters, on the other hand, were split, with some actually providing the strongest support for expansion. Capture theorists' "quick and dirty history" is thus far too much like law office history: profoundly motivated and likely to overlook conflicting evidence, even when it is readily available (207). 8. Two other chapters confront contemporary examples of regulatory failure and push back against little-substantiated capture explanations. Sanford Gordon and Catherine Hafer examine mine safety, where new legislation generally follows news-making accidents. Critics of the Mine Safety and Health Administration see this pattern as evidence of capture: the industry dominates its regulators, with predictable underinvestment in preventative safety leading to accidents, which are followed by ephemeral periods of resistance and adjustment. Gordon and Hafer propose an alternative account of "conditional forbearance," in which the regulatory agency is sensitive to changing political winds, such that choices usually ascribed to agency capture can be understood as "electorally sanctioned pro-business government" (209). In other words, rather than being in thrall to industry views, regulators sometimes favor industry's positions, especially under Republican administrations. That distinction may be too fine for many observers to care about, but the two stories have far different implications. Whereas the capture story implies that accidents could be prevented if only we had more pure-hearted regulators, conditional forbearance acknowledges that there is often balancing between competing values at work (exemplified in the mining context by the perpetual struggle between firms and unions). Having a Democrat or a Republican as a boss changes the weight given to these objectives, as does an accident that shocks the public, but this is far from showing that the firms are effectively dictating terms. 9. Christopher Carrigan explores the purported capture and subsequent regulatory failure of the Minerals Management Service (MMS) in the Department of the Interior leading up to the April 2010 Deepwater Horizon oil spill in the Gulf of Mexico. Carrigan admits that it is easy to make a prima facie case for capture of the MMS: there were documented cases of outright bribery, excessive gift-giving, and other inappropriate relationships between its officials and employees of regulated firms. But he goes deeper into the (now defunct) agency's recent history to exonerate it of the larger capture charge. While many observers have been quick to blame capture for the agency's prioritization of energy production, Carrigan shows that there was a broad public consensus behind this choice. Far from perverting its mandate, MMS was embracing it when it rushed to open 5.8 million acres of previously restricted Gulf property to development. 10. aking the skepticism about capture to its logical conclusion, Judge Posner notes that the original capture theorists were confronted with an entirely different kind of governmental body than contemporary regulatory agencies represent—ones that could be credibly (if hardly unproblematically) understood as embodiments of industry cartelization. But the regulatory landscape changed dramatically beginning in the 1970s, with subject-oriented agencies such as the Environmental Protection Agency and Consumer Product Safety Commission rising to prominence. The older debates about whether ostensibly public-interested regulation actually serves rent-seeking incumbent firms have mostly been displaced by debates about the stringency of regulation. Consequently, Posner sensibly wonders if "perhaps in the interest of clarity the term regulatory capture should be retired" (55).

UK

1. Network Rail is publicly owned. 2. The Train Operating Companies are privately owned. 3. RailTrack was once privately owned, but had to be bailed out. The risks associated with Network Rail fall to the state. The liabilities are added to the state's debt 4. There's debate among accountants as to the extent to which company liabilities fall to the public sector balance sheet. You can't just read it off the legal rules. 5. Network Rail would have battled with Eurostat for ten years.

Causes

1. Perceived failure of previous policies (based on Keynesianism); 2. European Union - Expansion of commission. The only way to expand its powers due to its budgetary constraints; 3. Fiscal constraints (Lodge says "strategic choices in the light of these experiences of control 'exhaustion' via state ownership were also guided by the 'reality' of fiscal constraint, making a policy approach that shifts the costs of 'implementation' to third parties particularly attractive. In other words, the costs of deciding on rules as 8well as on monitoring and sanctioning are significantly less than the costs incurred by the regulated party that is required to alter its behaviour (or production process)". 4. Policy complexity. There is increasing complexity, though not well articulated by Majone. Majone (1994) said "that agencies are justified by the need of expertise in highly complex or technical matters, combined with a rule-making or adjudicative function that is inappropriate for a government department or a court". Also, "the growth of administrative regulation in Europe owes much to these newly articulated perceptions of a mismatch between existing institutional capacities and the growing complexity of policy problems: policing financial markets in an increasingly interdependent world economy; controlling the risks of new products and new technologies; protecting the health and economic interests of consumers without impeding the free flow of goods, services and people across national boundaries; reducing environmental pollution". 5. International competition (openness of markets to pursue efficiency);

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 1

1. Second image reversed and comparative institutionalist literatures offer valuable attempts to integrate internationalisation and domestic politics. A critique of the two has uncovered their strengths as well as their limitations. Following that critique, a policy analysis framework has been set out that encompasses both economic and policy forms of market internationalisation. It allows for both socio-economic and state actors to be the carriers of internationalisation. It seeks both efficiency mechanisms and more political mechanisms for the three forms of internationalisation examined. 2. The analytical framework is now used in the empirical chapters to show that policy forms of internationalisation had more influence on reform of sectoral institutions than transnational technological and economic changes. They did so because their carriers were powerful domestic actors who could interpret and use them for their own purposes. They were both a pressure and an opportunity for these domestic actors. While technological and economic forms of internationalisation were often met with institutional inertia or sometimes cross-national divergence, regulatory reforms in neighbouring nations and supranational regulation contributed to remarkably comprehensive and similar reforms. The implications for SIR and comparative institutionalist frameworks as well as broader questions of why market internationalisation operates in these ways are explored in the final chapter

Privatisation in a political sense

1. Sometimes used as a way of looking at the world - profit, privatisation etc. 2. Thatcher: Doesn't like this use of the term. It mixes up different things. 3. In France, people may say "the spirit of the organisation has been privatised". Thatcher thinks this is unclear.

Changes in EU Regulation re: Electricity

1. System of exclusive rights in telecoms as well as in electricity 2. Privatization was slower and happened later 3. EU legislation in 1998, 2003, 2005, 2009 4. Key point: in electricity, normal EU legislative procedure followed: Article 90 used aggressively in telecoms liberalization

Alternative explanations to the spread of the regulatory reform

1. Technical or economic reasons: A country might consider that this was the most efficient option to follow. Nevertheless, countries may adopt some reforms without learning from each because they're the most efficient. 2. Domestic politics explanations (Murillo, from the reading list) 3. Regulatory competition: More likely to happen among developing countries

What are the differences between regulatory reforms for network industries in industrialized and in developing countries?

1. Thatcher says there are two "different differences" First, are the reforms different? Second, have they been adopted for different reasons? Also, as a third one, are the explanatory factors for developing and industrialized countries different? 2. As an answer to the third question he says that many developing countries are not democracies while many of industrialized countries are "more or less" democratic. 3. Differences in the physical constraints of countries can be relevant. For instance in developing countries, the government may need the investor to develop the infrastructure from almost zero, while in industrialized countries that's not the case. Network inheritance: do you have an old rooted system? E.g. electricity, railway, postal service. Hard to privatize because of mobilized labor force with strong links to politicians 4. Another factor can be the fact that developing countries face international constraints and influences. (If you are a Latin American country, say, you are not in the same position as France, for instance). 5. Another factor can be political instability, usual in some developing countries. This idea brings us to Levy and Spiller and the literature on development of a credible commitment. 6. Different Fiscal Constraints in Developing and Developed World 7. Different Levels of Corruption

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 9

1. Thatcher stressed how policymakers on the Continent privatized their network industries in the face of not only regulatory competition from Britain but also European Union directives, which fundamentally reshaped the politics of these sectors in those nations. 2. In the period between 1988 and 2005 the formal institutions of telecommunications in France, Germany, and Italy were greatly reformed. Initially (from 1988 to .1993), changes were modest, involving separation of posts and telecommunications, limited moves away from civil service status for the operator and a small degree of liberalisation. However, from the mid-1990s reforms were radical. All three countries privatised incumbent operators, ended monopolies across the sector, and established independent sectoral regulators. Well-established institutional features often dating from the nineteenth century, such as public ownership, linkage of posts and telecommunications within government ministries, and public monopolies, were ended. As a result, by the end of 2005, formal institutional structures in the three countries had strongly converged both with each other and with Britain 3. Reforms in France, Germany, and Italy were introduced by coalitions of domestic actors, with governments and the managements of incumbents at its core. Overseas companies (usually in alliance with domestic new entrants) and the European Commission sometimes played a role, but nevertheless, the dominant actors were domestic. Reform coalitions had to overcome strong opposition that involved trade unions, employees, and sometimes political parties. 4. Although reform coalitions were mainly domestic, internationalisation played significant roles that were clearly seen in debates and decisions to modify institutions. Reformers argued that powerful technological and economic factors such as higher demand and the development evermore advanced services and terminal equipment necessitated institutional changes. These factors had already been at work for some time before 1988. However, unlike previous periods, reformers also gave greater attention to regulatory comparisons and competition, especially with Britain. They saw Britain both as an example and as a source of competition, although they did not engage in in-depth studies of the British case. More directly, they were concerned about rival foreign operators, such as BT and AT&T, who were creating international alliances and were presented as a threat in increasingly competitive markets. 5. However, the most important international factor was the EU. It affected domestic reform debates in several ways. First, it provided an external set of legal requirements, especially concerning liberalisation. Second, introducing EU legislation provided occasions for wider reforms such as privatisation or creating new regulatory authorities. Third, the European Commission linked domestic regulatory reform to approval of international alliances that operators and governments claimed were essential to compete with overseas operators (claims that were not based on detailed studies or waiting for the results of such alliances). Finally, the EU provided ammunition for domestic reformers. Sometimes this took the form of legal powers and rights that could be used to attack existing institutions. But often its more important role was to offer arguments that countries had to prepare for a liberalised European market and that this necessitated institutional reforms not required by EU legislation such as privatisation. 6. Telecommunications in France, Germany, and Italy after 1988 can be used to sustain three central arguments about internationalisation and domestic regulatory reform. First, the cases underline the importance of policy forms of internationalisation. Whereas before 1988, transnational technological and economic factors had been met with institutional inertia, thereafter policy forms of internationalisation—overseas reforms and supranational regulation—played significant roles in comprehensive and radical reforms that ended very long-standing institutions. 7. A second issue concerns the carriers and mechanisms whereby internationalisation operated. Particular forms of internationalisation influenced the strategies, coalitions, and resources of domestic actors in the policymaking process. In particular, they affected the desire and ability of governments to create reform coalitions with the leaders of publicly owned incumbents, pointing to the importance of state actors in internationalisation. Overseas firms were rarely major participants (p.201) in decision-making. Moreover, policy forms of internationalisation influenced domestic decision-making because they offered reformers directly useful reasons and arguments. Thus, for instance, EU regulation was used to legitimise changes that were not legally required such as privatisation and creating independent regulatory authorities. Regulatory competition with Britain operated through claims about 'keeping up', fear of BT in international alliances and presenting Britain as an attractive example. However, cross-national learning was limited: in-depth studies of matters such as the success of international alliances or new institutional arrangements in Britain were not undertaken, indicating that the role of overseas examples lays more in legitimating change than learning about new institutional arrangements. 8. Finally, the cases show a continental European 'reform path' that contrasts with that in Britain, and was also seen in stock exchanges, and will be set out for electricity and airlines (Chapters 5, 10, and 11). However, in Britain reforms were largely driven by domestic factors; the most important international factor was the US example and the EU played little role. In contrast, in the three other nations, international factors were central. Moreover, the most relevant overseas example and source of regulatory competition was Britain more than the US. Finally, the most important form of internationalisation was EU regulation. Thus similar outcomes arose later and through different processes and factors than in Britain. Nevertheless, by 2005, France, Germany, and Italy had adopted similar sectoral institutions to those in Britain and, compared with 1988, much convergence had occurred across the four countries.

Economics and technology

1. The economic justification is that, first, private companies seek to maximise profits. As such, they tend to more efficient in the way they provide services. 2. There is a difference between private ownership and public ownership. Private companies are generally free of that bureaucracy, and can operate more efficiently. 3. Regarding technology ... some industries have high levels of innovation. The companies need to invest very fast, to catch-up with technological change. 4. Due to budget constraints, they can't invest in the pace that is needed to invest in the new technologies. Bureaucracy problems > can be less efficient. 5. The argument here is that private sector companies are more efficient, and are more capable of certain types of capital investment. Private is better than public. 6. Because private companies tend to maximise profits, they might not be willing to provide services to unattractive customers. Or they can decrease the quality of the service as well. There are disadvantages. 7. The issue here is ... whether the explanation is a good one. 8. An alternative argument ... How can we disconfirm/disprove that economics explains privatisation?

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 10

1. The case of electricity supply supports and develops the conclusions drawn from analysis of securities trading and telecommunications. Four major arguments can be put forward. First, strong transnational technological and economic developments from the mid-1960s until the mid-1980s were met with little change in domestic economic institutions. This finding mirrors the evidence in other sectors such as securities trading, telecommunications, and airlines (see Chapter 11). 2. A second conclusion is that the four countries took diverse routes to similar institutional frameworks. As in securities trading and telecommunications, Britain stands out as an exception. It reformed before Continental nations. It did so primarily for domestic reasons, and was strongly influenced by its own experiences in telecommunications—that is cross-sectoral isomorphism was important. In terms of internationalisation, Britain remained an island. In contrast, international factors were significant in France, Germany, and Italy. 3. Third, the case of electricity allows more detailed analysis of the effects of reforms in overseas nations. Regulatory competition across nations was relatively weak compared to securities trading and telecommunications. Hence the main potential mechanism for overseas reforms was ideational—through providing an example to be copied or learnt from. The cases show that although policy makers did look at overseas examples, these played little role in domestic debates. The US example was not prominent in Britain and in the other three countries it was either ignored or seen in a negative light following problems with liberalisation after 2000. Equally, policy makers in Germany looked at the British example in the early 1990s, but it was insufficient to overcome interests that opposed liberalisation. Copying or modelling or even citing overseas examples was weak in the absence of those examples affecting the material interests of domestic actors through regulatory competition. 4. Finally, the case of electricity underlines the importance of EU regulation for institutional reforms in France, Germany, and Italy. It played significant roles in the 1990s, despite weak transnational technological and economic pressures for change. It provided a set of legal obligations for member states. EU negotiations aided in altering the preferences of domestic actors through learning and (p.218) changes in their internal distributions of power. Transposition of EU directives created occasions for reform and debate. EU regulation increased pressures on governments and incumbents, mainly through fear of being disadvantaged by less effective institutions in a liberalised European market. It also provided legitimation for reforms that were desired for both international and domestic reasons. But most important of all, it offered national incumbent suppliers opportunities for overseas expansion. Thus, overall, EU regulation aided governments and the managements of incumbents to overcome domestic resistance to change. It offered them both pressures to adapt to competition, but also the alluring prospect of creating international champions operating across several previously closed national markets in Europe. 5. With respect to the overall argument of the study, the case of electricity illustrates the value of a policy analysis approach to internationalisation. The chapter has shown that policy forms of internationalisation influence domestic reform decisions even if transnational technological and economic factors are weak. It also underlines that cross-national policy learning must be linked to the interests and strategies of actors in the domestic policy process: when potential regulatory competition is weak, they pay little attention to overseas reforms. On the other hand, as the cases of securities trading and airlines (Chapter 11) and to a lesser extent telecommunications show, when direct or indirect competition is strong, policy makers pay careful attention to reforms in nations seen as rivals.

Variations in Reform

1. Venezuela, Bolivia reversed reforms 2. Differences cross-national and cross-sectoral e.g. telecoms more privatized than electricity 3. Reforms have spread differently on the basis of country, sector, time 4. Much more likely to be published if you talk about the non-spread of privatization 5. Big difference between law and behavior, particularly in Latin America. 6. Very easy to count sales and changes in the law: have to think about whether this represents change 7. Don't swallow assumption that these changes have swept across countries and changed behavior 8. From industrialized to developing countries: for a long time, some Latin American countries had an independent financial regulator from the 1920s 9. Look at timing of reforms: Chile predated European reforms, but not American reforms

Is the categorisation useful?

1. Well, they're slippery. Different definitions can be used. There's no way of telling whether it was one or the other. They overlap. 2. One should be critical of any categorisation. 3. You might shift provision of a service from the private to the public sector. This may be pragmatic at the outset, but if you started shifting functions and responsibilities, this may be more systemic. [UNCLEAR]

One key control challenge faced by the Minister, despite owning the industry, is described by principal agent theory.

1. Whatever the legal hierarchy, some of the agents have resources (such as information and discretion) that provide them with leverage. 2. Control is therefore is a different concept to ownership.

Factors Influencing Formal Independence (Repeat)

Gilardi: 1. Tenure of head 2. Budgetary power 3. Who appoints head 4. How easy it is to change the law 5. Procedures to reverse the agency's decisions 6. Veto players Formal independence is a continuous variable as is informal independence. Note: these are minimum conditions for independence, but after that, there's continuity.

Political Perspective on Regulation

Regulation is state intervention in pursuit of election, control to serve: 1. Ideas 2. Interests 3. Institutions 4. Legitimacy 5. Money for party and the revolving door Selznick's definition of regulation: "sustained and focused control exercised by a public agency over activities that are valued by the community"

Technology/economic

Technological changes. For example, in telecommunications, the rate of technological change has increased. Hence, it's encouraged private participation.

Functionalist explanations

Theory from the 50's or 60's. As the name suggests, the function is the element we have to take in account 1. Blame-shifting connected to principal-agent framework 2. Credible commitment i.e. Levy and Spiller. Attracts investors a. Time Inconsistency problem: politicians are short-sighted and unreliable. To attract investment, need to provide a stable framework b. Other ways to create policy stability: i. Veto players ii. Long-term contracts c. Binding of self and future parties to IRAs increases credibility of commitment d. Tied to political uncertainty 3. Complex Technical Issues: tied to credibility commitment Thatcher: principal-agent framework is a good starting point, but timing/model varies

We now discuss what is an "independent" regulatory agency.

We discussed one of Gilardi's papers for this week that differentiated between formal independence, and de facto independence.

"The rise of the regulatory state in Europe" by Giandomenico Majone

1. At the beginning of this analysis we noted that European scholars and policy makers began to recognise regulation as a distinct mode of policy making only after deregulation became a popular theme of political discourse. This is only one of several paradoxes, real or presumed, that seem to characterise the development of regulation in Europe during the past two or three decades. Thus, the privatization and/or deregulation of potentially competitive industries have not meant the end of all regulation; on the contrary, they have created the conditions for the rise of a regulatory state to replace the dirigiste state of the past. Where competitive conditions did not yet exist, as in the case of telecommunications, only public regulation could ensure that privatisation did not simply mean the replacement of public monopolies by private ones. 2. Often, deregulation is only a first step towards re-regulation, that is, regulation by other means - economic incentives instead of administrative rules, statutory instead of self-regulation - or at different levels of government - for example, at Community rather than national level. This paradoxical combination of deregulation and re-regulation is what is usually meant by regulatory reform. 3. On the other hand, the experience of countries such as Britain shows that old habits of secretiveness and ministerial interference, characteristic of the management of nationalised industries, continue to persist even after privatization. Serious flaws in the design of institutions to regulate the newly privatized industries can be detected in the choice of a non-participatory model, with none of the public hearings and other procedural characteristics of US regulation; in the creation of a system of agencies linked to particular industries, rather than the pattern of commissions regulating a range of utilities in order to reduce the risk of agency capture; and in the fact that government departments still preserve important regulatory powers, so that the operations of agencies are often dependent on prior decisions of the minister laying down the principles to be applied. The danger, Tony Presser concludes, is that these powers of direction 'could be abused to exert behind-the-scenes pressure on the regulation in much the same way as pressure was put on the nationalised industries by government, precisely the situation which the privatization programme is supposed to render impossible'. 4. Also the stupendous growth of EU regulation has a certain paradoxical quality. By imposing a tight and rigid budget, the member states no doubt wished to restrict as much as possible the competencies and decisional autonomy of the Commission. Accustomed to think of state power primarily in terms of the power of taxing and spending, national leaders did not apparently realise that regulatory activities cannot be controlled by means of the traditional budget constraints: only a 'regulatory budget' could introduce the necessary discipline. In the absence of a regulatory budget procedure, the rule-making power of the Union has proved well-nigh irresistible. Moreover, the growth has been qualitative as well as quantitative. As noted above, in some areas of economic and social regulation EU directives go beyond the levels achieved by the legislation of the most advanced member states. This is another paradox, at least for theories claiming that member states control all stages of Union policy making. 5. Finally, the terms of the debate about the 'democratic deficit' of the Union are often paradoxical when not simply hypocritical. Problems of political accountability can be perceived most clearly at Union level precisely because regulation is at the core of EU policy making. Yet the frequent criticisms that Union institutions lack direct democratic legitimacy also apply to many national institutions, including courts and independent regulatory agencies. The problem of a 'democratic deficit' concerns all regulatory states, not just the Union. The problem has no simple solution, but it can be mitigated by a variety of substantive and procedural means ranging from judicial review to the 'regulatory budget'. The shift to regulation at the national and supranational level is an attempt to improve the procedural and substantive rationality of public policy in a dramatically changing world. However, the changing role of the state raises new conceptual and practical issues that are still poorly understood, let alone resolved.

In this context, two ways to influence on the agency stand out

1. (Ex Ante) Police Patrol: continuous monitoring of IRAs 2. (Ex Post) Fire Alarm: goes off when there's a problem i.e. parties taking agency to court. These affect independence of the agency. A lot of principal-agent theory was developed outside of network industries.

Accountability (formal)

1. 1980: Elected politicians were directly accountable for the functioning of these industries 2. Today: Independent regulatory agencies take decisions on the industry and are indirectly accountable for their functioning.

Strategic Use of Industry (informal)

1. 1980: Industries were used for industrial and strategic purposes. Norms dictated that cross-subsidization could be used for political and strategic purposes. 2. Today: Industries are not used for strategic purposes, with a few exceptions

Cross-subsidization (informal)

1. 1980: Large users, such as business, subsidized residential users. For large users, price was way above cost. Often big firms subsidized small residential users. The prices for large businesses were above cost, while the prices for the poor were below cost. Likewise, in telecoms international calls subsidized domestic calls. These were seen as public services that were parts of people's rights: they were seen as being almost part of the welfare state. 2. Today: non-existent

Public service (informal)

1. 1980: Most countries considered these industries as public services 2. Today: Some of these industries are still considered public services (water, electricity), and some not (railways).

National Boundaries of Two Regimes (formal)

1. 1980: Most industries were mostly regulated at a national not international level 2. Today: Industries are regulated at an international/supranational level

Industrial policy

1. Advance strategic and economic goals 2. There are different approaches to industrial policy 3. Companies are treated unequally: firms are selected and come to be regarded as national champions 4. This is about protecting national champions 5. Industrial policy is often seen as sectoral 6. Debate over whether you can have industrial policy through competition policy

Nowadays

1. Agencies create rules, sanction actors, monitor rules 2. Agencies can also adjudicate disputes: Germany has a BNA; Britain has Ofwat, Oftel, Ofgas etc. UK forerunner with IRAs, which are now widespread 3. The regulatory powers are owned by regulatory agencies. 4. These usually are rule-making, enforcement, and adjudication bodies (not necessarily all of them). 5. According to the graphs in Gilardi's paper from 2005 (page 4 of PDF), currently almost all countries in Western Europe have IRAs in electricity, telecom, competition, food health, environment and pharmaceutical sectors. 6. Thatcher thinks that it is very important in this course to distinguish the different phenomena: one thing is privatization, another thing is liberalization, and another thing is the spread of IRAs. 7. They might have happened in parallel, but we are studying them as separated phenomena, so we should be careful in the use of these concepts. 8. For instance, we cannot just say that privatization is a cause for the existence of IRA because countries could have created other solutions.

"Business-Regulatory Relations: Learning to Play Regulatory Games in European Utility Markets" by David Coen

1. Although a strong trend toward independent regulators was observed across sectors and countries (see Thatcher, this volume), liberalization has not created a uniform European regulatory model. Instead, newly created independent regulators learning to deal with different institutional and business-government arrangements are seen. In each country, regulators have found that they differ in the degree to which they are upwardly accountable to government, horizontally accountable to courts and policy regulators, or downwardly accountable to business. Business too, has learned that how it operates across borders must be in tune with national traditions and institutional opportunities. 2. As the German case illustrates, firms of all sizes appear to be comfortable with strong rule of law, the dominance of antitrust law and the cartel office, and the favored role of associations in regulatory negotiations. However, service providers have found the high level of litigation and overlapping competencies of regulatory institutions hard to manage, closed, and expensive. In response they have lobbied hard for respectively strengthening and creating independent sector regulators. This has meant that business has come into conflict with the cartel offices and ministry in the courts. Thus, in the young and multiple institutional regime, where norms and relationships are still being defined, business has taken a proactive role in attempting to frame the institutional debates. Under these complex and competitive conditions it has been logical for business to withhold information from the regulators and use its knowledge advantage in the courts. 3. In contrast, the U.K. model was perceived of as open to all firms, but it required that business learned a style of conciliatory lobbying, which acted as a hidden access barrier to foreign and new business. The U.K. model evolved in light of high-profile clashes between regulator and firms but, unlike the German model, it benefited from a clear regulatory hierarchy and price-review cycle that made an iterative "trust based" game possible. Nevertheless, while more conflict is seen in the present German regulatory model than its British counterpart, it is possible to envisage that the relationship between regulator and regulatee will stabilize as firms recognize that conflicts and litigation, while winning a battle, do not win wars. 3. Recognizing variance, the questions become whether one can ever expect to see convergence in independent regulators operations, and whether one can expect with time that regulators and business can build stable regulatory alliances based on trust and understanding. The emergence of open coordination and networks of EU regulators will create some pressures for harmonization of soft laws and best regulatory practice. But in the medium term, both national cases show how regulatory agencies work with business to define their domestic regulatory roles and create their own distinct political space from government pressures. Likewise, both markets demonstrate that while distinct regulatory solutions occur, when business and regulators learn to work together, regulation can be a positive sum.

"Regulation, the Regulatory State and European Politics" by Martin Lodge

1. Although issues of 'control' and the organisation of state-owned enterprises had been well established in the field of public administration, the terms 'regulation' and 'regulatory state' hardly featured in the study of European politics 30 years ago. The language of regulation was reserved for students of US public policy. By 2008, regulation is firmly embedded across Europe. However, would an observer in 2028 still consider regulation an important topic, worthy of inclusion in a 50th anniversary issue of West European Politics, or is the area of regulation, especially in the area of European politics, about to go through a terminal mid-life crisis? The rest of this paper considers three potential scenarios, 'fading away', 'plodding along', and 'rejuvenation'. 2. A future of 'fading away' and eventual disappearance is not uncommon in the social sciences (and among social scientists). Concepts and terminologies are regularly 'invented', witness a rapid expansion in terms of academic interest and eventual forgetting, once academic interest has moved on to the next conceptual fad. Alternatively, social concerns may change suddenly or over time, therefore making the study of any particular field less relevant. 3. There are at least two reasons why regulation may fade away from academic interest. One is the lack of a definition and therefore of a clear boundary. While boundary issues are characteristic of (intellectual) adolescence, the traditional definition of regulation as 'the sustained and focused control exercised by a public authority over activities valued by the community' (as defined by Selznick 1985: 363) is only of limited value in the context of European politics, given varieties of 'public authority' ranging from the private, associational, the national state to the supranational and international. Nor does it address questions regarding decision-making rules establishing what is valued by the 'community', and problems arising from cross-border issues. Thus, while traditional definitions provide the literature with many of the initial points of departure for analysis, more contemporary definitions relying on 'intentional use of authority to affect behaviour of a different party according to set standards, involving instruments of information-gathering and behaviour modification' (Black 2002), risk endlessly extending the field of the regulation. One further but related criticism that could be launched at most of the literature on regulatory change in the context of European politics is that the meaning of the texts would hardly change if the word 'policy' were used instead of 'regulation'. Similarly, 'regulation' and 'governance' could also be often used interchangeably. 4. A related reason for a potential fading away from academic attention is exhaustion of intellectual effort. Regulation and 'regulatory state' have been widely utilised to apply frameworks developed elsewhere and therefore have been used as 'dependent variables'. Therefore, a distinct 'regulation' lens has, as yet, not developed - neither has there been a significant debate regarding the nature of the 'state' in the age of the 'regulatory state'. This is not problematic as long as the field is relatively focused, and allows for linkages to other key intellectual debates. However, given the uncertain boundaries of regulation, the inherent risk is that regulation becomes the study of 'everything', and therefore fades away from scholarly attention. 5. The above two arguments assumed a stable 'applied' regulation background. But should those policy concerns as expressed in the earlier section on dilemmas become more acute, then the language of regulation as well as the organisation of regulatory activities may witness considerable change, thereby leading to a displacement of academic interest over time. However, even if such processes were to occur, it is unlikely that 'regulation' as a policy activity in the wider sense, rather than as the institutional arrangements of the 'regulatory state', will fade away because of social irrelevance. Issues of control over economic and state activities (such as energy and prisons) go to the heart of the nature of the state and its capacities and are unlikely to disappear. Questions of how to deal with emerging technologies require regulatory answers. In short, domains under consideration may change, the language of regulation may move on and the organisational infrastructure of the regulatory state may witness rearrangement; but it is unlikely that the underlying issues and questions will disappear, especially in an age where we are supposedly witnessing shifts towards self- and co-regulation in some aspects (such as the environment) and enhanced 'hierarchical' control in others (for example, in the area of justice and civil liberties) 6. Under the scenario of 'plodding along', interest in regulation expands towards new fields and more cases. There are substantial areas in European politics that are left to the regulation-interested student to explore, in particular in the historical, cross-sectoral and cross-national perspective. And it is unlikely, if only some aspects of the 'dilemmas' noted above were to occur, that the field will be short of empirical stories to tell, whether in the areas of the regulation of utility networks, social regulation or those of risk management. Such a future of 'plodding along' (typical of 'normal science') with studies exploring ever more niches that qualify as 'regulation' comes at the risk of increasing marginalisation (through 'niche-isation) and the risk of intellectual overextension and therefore exhaustion. By 2038 we may know more and more about less and less. 7. Under the scenario of rejuvenation, regulation would be a strong candidate for the West European Politics 50th anniversary issue. A decade ago, Baldwin, Scott and Hood (1998) argued that such a future could lie in a stronger focus on the language, cultures and side effects of regulation. Apart from some studies (applying cultural theory), such a shift has not occurred, especially not in the pages of comparative politics journals. There is still need for an improved understanding of the rhetoric of regulation, its unintended consequences and its underlying cultures. In addition, these require advanced methodologies (despite these issues being long-standing concerns). These concerns are not necessarily traditional, placing the field of regulation closer to other aspects of comparative public administration and public policy. If these issues were placed at the heart of European politics, the study of regulation in Europe could become leading, empirically as well as analytically. 8. Empirically, rejuvenation would provide for advances in the study of EU and national level regulation, different understandings of risk regulation in various domains and countries, competing logics within regulatory regimes as well as the evolution of regulatory regimes over time, in particular as we are said to move from an era of liberalisation and emphasis in efficiency towards an era of increased concern about resilience. Labour mobility is challenging established national approaches towards social regulation. In the area of risk, ongoing debates regarding the 'precautionary principle', popular distrust in new technologies and scientific applications to everyday things, such as food or human reproduction, have established policy environments that crystallise many of the above-mentioned dilemmas of the regulatory state. This field for future empirical studies allows for considerable cross-fertilisation between research in regulation and other fields in comparative European politics. Regulation in Europe is inherently about the politics of interest groups, societal values, and demand and supply of EU regulation across domains. Regulation is about the capacity of nation-states to regulate their economy and their society and narrow issues regarding the type of regimes that emerge at the EU level and at the national level. Issues such GM foods have triggered the search for alternative decision-making processes that relate to themes such as new social movements as well as alternative forms of representative politics 9. This conclusion avoids any firm predictions as to the likely future of the study of regulation and the regulatory state. However, the fundamental issues that are at the heart of the study of regulation and the regulatory state are central to the understanding of the state, its relationship to business and its citizens, and the state's distribution of coercive authority; they also highlight the importance of supranational sources of regulation. Similarly, the issue of control over economic, social or technological activities is not something that is going to fade away. As a term, regulation may go out of fashion, but its central concern has been and remains fundamental to the very understanding of the state in Europe and, therefore, of politics in Europe.

Factors Influencing Formal Independence

1. Appointment system/removal system: Who appoints the head or board of the agency? Is it appointed by political parties? Regarding removal, how easy is for the government to remove the head of the agency if they do not agree with actions. 2. Budget independence: If government can influence decisions of the agency by cutting budget, it affects independence. 3. The powers granted to the agency. 4. Tenure

"The rise of the regulatory state in Europe" by Giandomenico Majone (Repeat)

1. At the beginning of this analysis we noted that European scholars and policy makers began to recognise regulation as a distinct mode of policymaking only after deregulation became a popular theme of political discourse. This is only one of several paradoxes, real or presumed, that seem to characterise the development of regulation in Europe during the past two or three decades. Thus, the privatization and/or deregulation of potentially competitive industries have not meant the end of all regulation; on the contrary, they have created the conditions for the rise of a regulatory state to replace the dirigiste state of the past. Where competitive conditions did not yet exist, as in the case of telecommunications, only public regulation could ensure that privatisation did not simply mean the replacement of public monopolies by private ones. 2. Often, deregulation is only a first step towards re-regulation, that is, regulation by other means - economic incentives instead of administrative rules, statutory instead of self-regulation - or at different levels of government - for example, at Community rather than national level. This paradoxical combination of deregulation and re-regulation is what is usually meant by regulatory reform. 3. On the other hand, the experience of countries such as Britain shows that old habits of secretiveness and ministerial interference, characteristic of the management of nationalised industries, continue to persist even after privatization. Serious flaws in the design of institutions to regulate the newly privatized industries can be detected in the choice of a non-participatory model, with none of the public hearings and other procedural characteristics of US regulation; in the creation of a system of agencies linked to particular industries, rather than the pattern of commissions regulating a range of utilities in order to reduce the risk of agency capture; and in the fact that government departments still preserve important regulatory powers, so that the operations of agencies are often dependent on prior decisions of the minister laying down the principles to be applied. The danger, Tony Presser concludes, is that these powers of direction 'could be abused to exert behind-the-scenes pressure on the regulation in much the same way as pressure was put on the nationalised industries by government, precisely the situation which the privatization programme is supposed to render impossible'. 4. Also the stupendous growth of EU regulation has a certain paradoxical quality. By imposing a tight and rigid budget, the member states no doubt wished to restrict as much as possible the competencies and decisional autonomy of the Commission. Accustomed to think of state power primarily in terms of the power of taxing and spending, national leaders did not apparently realise that regulatory activities cannot be controlled by means of the traditional budget constraints: only a 'regulatory budget' could introduce the necessary discipline. In the absence of a regulatory budget procedure, the rule-making power of the Union has proved well-nigh irresistible. Moreover, the growth has been qualitative as well as quantitative. As noted above, in some areas of economic and social regulation EU directives go beyond the levels achieved by the legislation of the most advanced member states. This is another paradox, at least for theories claiming that member states control all stages of Union policy making. 5. Finally, the terms of the debate about the 'democratic deficit' of the Union are often paradoxical when not simply hypocritical. Problems of political accountability can be perceived most clearly at Union level precisely because regulation is at the core of EU policy making. Yet the frequent criticisms that Union institutions lack direct democratic legitimacy also apply to many national institutions, including courts and independent regulatory agencies. The problem of a 'democratic deficit' concerns all regulatory states, not just the Union. The problem has no simple solution, but it can be mitigated by a variety of substantive and procedural means ranging from judicial review to the 'regulatory budget'. The shift to regulation at the national and supranational level is an attempt to improve the procedural and substantive rationality of public policy in a dramatically changing world. However, the changing role of the state raises new conceptual and practical issues that are still poorly understood, let alone resolved.

How to diminish the capture?

1. By making professional norms, usually to look up to consumers or/and including consumers organizations before configuring rules (It should be considered that cost of organization has changed with technology) 2. By increasing mean of accountability: this can be thought from political principals, regulates, public, courts.

"Shrinking the state: the political underpinnings of privatization" by Harvey Feigenbaum, Chris Hamnett, and Jeffrey Henig, Chapter 2

1. Chapter 2 discusses the political underpinnings of privatization. 2. It argues that privatization can best be understood, not as a technical adjustment to changing conditions or as a consequence of economic laws, but as a political phenomenon. It is not a choice among means to achieve recognized social goals but a strategy to realign institutions and decision-making processes so as to privilege the goals of some groups over others. Whereas the administrative and economic perspectives assume that relevant interests are stable, uniform, and apparent, the political perspective focuses on the battle between existing interests and the creation of new ones. The criterion for evaluating privatization alternatives is whether they represent substantial and not easily reversible reductions in state responsibility and capacity 3. The authors propose a typology of three types of privatization: pragmatic, tactical, and systemic, reflecting the assumed motives of their advocates. Pragmatic privatizations generally are carried out by bureaucratic units somewhat insulated from the push and pull of normal political pressures. Tactical privatizations are advocated to achieve the short-term political goals of particular parties, politicians, or interest groups. Systemic privatization strategies are intended to reshape the entire society by fundamentally altering economic and political institutions and by transforming economic and political interests.

What about the "revolving door"?

1. Employees move between industry and agency 2. Braithwaite says dialogue and lack of distance helps regulator

Explanations for the spread of the regulatory reform

1. Emulation/mimicking: just copying without any rational process. Emulation can occur at a cross national level, or at a cross sector level as well. 2. Rational learning: the key difference is that when you learn, there's a process to research, to investigate different institutions, to invest resources in learning about a specific country solution to a problem, and then you research to see whether this solution can be applied to your country, and if so, with what differentiations. Learning can also occur at a cross national or cross sectoral level. 3. Coercion: In one of the readings, they mentioned coercion from financial international institutions as a possible explanation for the spread, although it was disregarded. 4. Normative isophormism: The experts set the rules. You go to the expert to follow the best practices, but there is no learning in the sense of testing whether an specific solution will work for your country. Norms about what it is to be good, even if application in relevant space hasn't been tested. 5. There is also coercive isophormism

"Privatizing public enterprises in the European Union 1960-2002: ideological, pragmatic, inevitable?" by Judith Clifton, Francisco Comín and Daniel Díaz Fuentes

1. Even by the end of the 1990s, Clifton and her coauthors note, the shift in functions had been so dramatic that proponents of privatization in Europe complained about having nearly nothing left to move into private hands 2. Clifton and her coauthors devoted more attention to network sectors and discovered that, in the context of Europe, liberalizing directives from the European Union pushed countries to privatize these industries.

"Regulating infrastructure: monopoly, contracts, and discretion" by Jose Gomez-Ibanez, Chapter 1

1. For G6mez-Ibanez, the governance of public utilities is a long-term contracting problem with no perfect solution. 2. Awarding franchises to private companies is attractive because it encourages ex ante competition, but as a contracting device, is necessarily incomplete as all future contingencies can not be anticipated. 3. Regulatory commissions address this concern but are subject to capture by concerned interest groups. 4. Public ownership is a form of vertical integration-the government that acquires an electricity provider because it cannot commit to treating that provider fairly is akin to the manufacturer that acquires the supplier of a key input because it cannot commit to treating that supplier fairly. 5. Problems with public ownership include patronage and failures to maintain the capital stock. In developing this view, the book treads territory well worn by previous authors such as Victor Goldberg, Oliver Williamson, and Pablo Spiller

"Theorising Utility Regulation" by Tony Prosser

1. I have argued that both the legal model adopted for regulation of public utilities in the UK and the leading critical school of capture theory are inadequate for a proper understanding of regulation, and for prescription about how to improve regulation in practice. In both cases this is due to an unjustified privileging of the relations between regulator and enterprise as the subject of study whilst neglecting the pluralism actually characteristic of regulation. In terms of description and positive analysis of regulation, the regulatory space approach would appear to have much more to offer simply because it does not privilege any particular relationship in explaining or predicting how regulation will operate. However more is needed to provide analytical and evaluative purchase and normative principles as a basis for regulatory reform, as a guide for regulators and indeed for government in exercising its regulatory responsibilities. The answer might seem to be stakeholder theory, but this suffers from vagueness on the nature and weight of interests to be recognised as stakeholders. Proceduralism similarly would seem to have advantages in encouraging a more sensitive regulatory style but also leaves unanswered key questions of determining legitimate interests and their role in participation. 2. In conclusion, my argument has been that study of utility regulation suggests that such regulation is an essentially open process and cannot, and indeed should not, be reduced to any particular logic, economic or otherwise. The bilateral approach and capture theory deny this complexity and so remove the richness from regulatory activity; because of this they are of limited utility either in predicting regulatory behaviour or in providing normative principles of how regulators should act. Public choice and stakeholder theories suffer from similar problems. The simple answer might be to abandon any search for regulatory theory and say that regulation is merely a part of politics and treat it as such. This does not however mean that it is arbitrary or simply a matter of contingent compromises between interests, for some ways do exist for developing more sophisticated regulatory principles without artificially pushing the regulatory process into simplistic theoretical straight jackets

"The audit society: rituals of verification" byMichael Power, Introduction

1. In "The Audit Explosion", a prophetic pamphlet written in 1994, Michael Power, an academic authority on accounting, anticipated the Cynthia Bowers of our day. He predicted that the new craze for targets and reviews would "spread a distinct mentality of administrative control" which would undermine trust and encourage the proliferation of empty gestures. The embrace by government of targets and supervisors would bring a "major shift in power from the public to the professional and from teachers, engineers and managers to overseers," he wrote. Although the form-fillers claimed to deliver transparency and accountability, they were in fact engaged in a "peculiar form of alchemy" that turned workers into "auditees" who did what they had to do to meet a target. 2. Power's predictions were mistaken in two respects only: he did not guess - for how could he? - that the one institution Labour would fail to regulate would be the one all its centre-left history told it had to be regulated - the banking industry. And he failed to appreciate the cost of regulating all those other institutions that did not need armies of auditors descending on them.

"Shrinking the state: the political underpinnings of privatization" by Harvey Feigenbaum, Chris Hamnett, and Jeffrey Henig, Chapter 4

1. In France, privatization by the Socialists after 1983 was limited and pragmatic. After the conservative election victory of 1986, however, it was followed by a larger tactical campaign designed to differentiate the conservative forces from market socialism, as well as to reward allies by giving them access to underpriced public assets. 2. Second, the French and British cases illustrate the limits of the efficiency argument. In France, nationalized industries were already efficient and profitable. Wealth was redistributed, but not created. 3. Moreover, all three cases show how tactical privatization is only a small step away from overt cronyism and an anticorruption backlash. The authors conclude that there is "clearly a limit to the public's willingness to let a coterie of ideologues completely dismantle all the capacities of state intervention" (146). Pragmatic privatization may have the best chance of producing long-lasting effects precisely because it is selective, incremental, and often has low political visibility. 4. Finally, the three case studies demonstrate that even when privatization is backed by powerful global interests and institutions, the form, trajectory, and effects of privatization will depend largely on conditions in specific places at specific points in political time. This is a useful antidote to often-inflated arguments about globalization and political convergence.

"The role of independent regulatory agencies in policy-making: a comparative analysis" by Martino Maggetti

1. In West European countries, we observe an increasing phenomenon of delegating political power from democratic institutions to various non-representative bodies that are not democratically responsive to citizens. The most important and widely diffused type of such bodies corresponds to formally independent regulatory agencies. These agencies often accumulate several powers: rulemaking, monitoring, adjudication, and sanctioning. This article presents a systematic study of their role in policy-making. Specifically, I studied six decision-making processes in three corporatist European countries (the Netherlands, Sweden, Switzerland) and two policy domains (finance, competition). First I combined a structural with a reputational approach, drawing from both documental and survey information about the participation and weight of each actor in the course of the decision-making process under investigation to obtain results about the centrality of IRAs in the course of the related process. My theoretical expectations were then tested with a two-step QCA 2. Results show two crucial empirical findings. First, in line with my first hypothesis, IRAs are highly central in the course of each political decisionmaking process under scrutiny. As the Actor-Process-Event Schemes clearly show, agencies are not only crucial in the implementation phase, but they also actively participate in the entire processes, especially in agenda-setting and pre-parliamentary discussions. Second, following the QCA, a combination of variables that is jointly sufficient to explain the maximal centrality of agencies in policy-making is identified (confirming hypothesises 3 and 5): non-professionalization of the legislature and scarce de facto independence of the IRA in charge from those being regulated. Moreover, the high de facto independence from the political decision-makers is a necessary condition for the outcome. This is the case of the Swiss Federal Banking Commission in the course of the revision of the Stock Exchange Act of 2006 and the Swiss Competition Commission during the revision of the Act on Cartels of 2003. In addition, it should be noted that hypothesis 2, on the role of the politico-administrative culture, and hypothesis 4, on the distinction between sector-specific and general regulation, are not supported by the results. 3. From this piece of research, we can derive two main insights. First, IRAs are the most central actor in policy-making related to their area of competence, more than experts commission, organized interest representatives, and ordinary agencies subordinated to the ministerial level. This point corroborates the arguments about the rise of an age of 'regulocracy' (Levi-Faur 2005) and 'agencification' (Christensen and Laegreid 2005). At the same time, it suggests that the activity of formally independent regulators is not limited to the implementation of the delegated regulatory competencies (i.e. market supervision and technical regulatory functions), but, very interestingly, it shows that they are developing a key political role in law-making. Second, it appears that the level of de facto independence - the distinctive feature of IRAs - may affect their centrality in policy-making, but only in combination with other variables. Indeed, external factors, such as the professionalization of the legislature, can alter the impact of agencies on the decision-making processes. In this regard, further in-depth research is needed, especially concerning the mechanisms underlying the causal relations identified above.

"Shrinking the state: the political underpinnings of privatization" by Harvey Feigenbaum, Chris Hamnett, and Jeffrey Henig, Chapter 3

1. In the UK, pragmatic privatization to alleviate cash shortages in the early Thatcher years evolved into full-blown systemic privatization, whose aim was to eliminate the public sector, reduce the deficit, and move Britain towards an ideological image of a "property-owning democracy." 2. In Britain, poor performance in the nationalized sector in the 1960s and 1970 might suggest that there were gains to be made. But the political decision to maintain the privatized companies as monopolies produced asset stripping, deteriorating service, excess profits, and bloated executive salaries rather than efficiency. 3. Third, the British and U.S. cases suggest the way in which systemic and tactical privatizations can produce political backlash. In the UK, the ideological zealotry of the late Thatcher years resulted in a series of sell-offs—especially the rail and water systems—that could not be justified, and produced the most obvious cases of deteriorating services. The backlash against these played no small part in the decline of the Conservative Party and an increase in government regulatory activity in the 1990s. 4. Moreover, all three cases show how tactical privatization is only a small step away from overt cronyism and an anticorruption backlash. The authors conclude that there is "clearly a limit to the public's willingness to let a coterie of ideologues completely dismantle all the capacities of state intervention" (146). Pragmatic privatization may have the best chance of producing long-lasting effects precisely because it is selective, incremental, and often has low political visibility. 5. Finally, the three case studies demonstrate that even when privatization is backed by powerful global interests and institutions, the form, trajectory, and effects of privatization will depend largely on conditions in specific places at specific points in political time. This is a useful antidote to often-inflated arguments about globalization and political convergence.

"What "Regulatory State"? Explaining the Stability of Public Spending and Redistribution Functions after Regulatory Reforms of Electricity and Rail Services in the United Kingdom and Germany" by Géraldine Pflieger

1. In the two sectors and the two countries, the development of regulation was juxtaposed to taxing and spending. Public spending remains fundamental to both allocation and redistribution. As far as the implementation of reforms in the electricity and rail sectors is concerned, regulation and public spending can be described as strongly complementary in nature, particularly in the rail sector. Just as Levi-Faur (2011) invites us to agree that the regulatory state has become a constitutive element of the welfare state over the last two decades, this study points out that in these two sectors, the reverse is also true: public spending has made the diffusion of regulatory interventions possible. In the electricity sector, liberalisation and the ability to regulate electricity depend closely on states' energy policies. For rail, it is the sector's overall economic model that is the key issue. 2. Nevertheless, our sectoral comparison shows that (1) the varying nature and scope of European regulation, (2) the functional requirements of each sector, (3) the way environmental externalities could be managed, and (4) the way that welfare objectives could be sustained, clearly explain why the railway sector still relies heavily on public funding, whereas in the electricity sector, regulatory interventions are more determinant for the steering of the industry by public authorities. However, it can be observed that a mix of regulation and public spending in the electricity sector exists in order to promote renewable energies. The four factors identified explain both the hybridisation of the tools of state intervention, and the variation of the balance between regulatory intervention and public spending in the electricity and railway sectors. It also shows that both regulation and public spending exist not only to allocate and correct market failures, but also to satisfy redistributive objectives. Those differences in the balance between regulation and public spending in the two sectors are quite similar in the United Kingdom and Germany, showing that the sectoral patterns underlined in the previous section might be more powerful than national ones. 3. The situation observed in the electricity and rail sectors is not a deviant or transitory case where the two sectors will eventually return to the straight and narrow. Taxing and spending in order to allocate or redistribute, a method typical of the "old" positive state that has now been exercised jointly with newly introduced regulation, is still fundamental and enduring in both the countries studied. The emerging regulatory state is not substituted for the positive/welfare state but partly juxtaposed with it, making the structures for governing these sectors much less easy to read.

Testing the theory (indicators of the existence of regulatory state in Europe)

1. Independent Regulatory Agencies in several countries; 2. EU Directives; 3. A new decision-making process style designed by experts 4. Privatisation (the shifting of ownership, which may also indicate delegation from state to private companies in delivering services - i.e. utilities); 5. Competition: A. Number of companies taking part in international markets; B. Number of companies in a specific sector; C. HHI - Herfindahl-Hirschman Index - (Investopedia) The closer a market is to being a monopoly, the higher the market's concentration (and the lower its competition). If, for example, there were only one firm in an industry, that firm would have 100% market share, and the HHI would equal 10,000, indicating a monopoly. If, there were thousands of firms competing, each would have nearly 0% market share, and the HHI would be close to zero, indicating nearly perfect competition. 6. Revolving doors (between Regulators and Regulatees); 7. Number of complaints registered;

"Privatization, restructuring, and regulation of network utilities" by David Newbery, Chapter 1

1. It is not easy to find a succinct summary of this book, but the Introduction sets the scene as follows. Network utilities are natural monopolies, but their heavy investment renders the investor vulnerable. Customers have no choice, but they do have political power. How to devise institutional arrangements to balance these powers and responsibilities? Previous conventional analysis was that such market failure needed public ownership or regulation to set the optimal price. However, the boundaries of the state have shifted since privatisation in Britain and Chile and the fall of state socialism in Eastern Europe. And it is now recognised that regulation is inefficient, not least because of insufficient incentives and information. 2. The institutional solution must enable utilities to finance investment and meet demand, but also ensure efficiency and innovation. Franchise monopoly and public ownership aimed at the first goal; competition is more effective for the second goal but apparently in conflict with the first. The solution is competition to provide services over monopoly networks. The ownership of these networks is relatively unimportant, since empirical evidence suggests little difference in performance, but the competition issue necessitates more complex regulation of the networks. Competition in network services is difficult with government ownership, so privatisation is necessary here. Privatisation without competition is also a problem; hence the importance of restructuring before privatisation. A different form of price control - an incentive price cap in contrast to US rate of return control - is an appropriate concomitant to privatisation 3. Public ownership and traditional cost-of-service regulation of vertically integrated network utilities both run the risk of being trapped in an inefficient equilibrium that reflects the balance of power of the various interest groups. Privatisation, combined with restructuring, preferably involving vertical separation, of public utilities, and liberalising access to private utilities, can disturb this inefficient equilibrium. Together, they offer the twin attractions of enabling competition for network services and facilitating higher-powered regulatory incentive schemes such as price-cap regulation for the core network natural monopoly. Both reforms require that problems of regulatory commitment are solved, ideally by creating confidence that the services are supplied in a competitive market and by effective restraints on regulatory opportunism. The evidence presented in this book suggests that the gains from solving this problem can be substantial, but that new regulatory challenges must be met and overcome

EU Regulation Simulation and Explanations

1. Neofunctionalism: Regulation develops because of an alliance between the Commission, firms that trade across borders and the courts. Spillover is expected, because cross-country liberalization leads to corporate consolidation, which causes domestic companies to lose out. The remaining big corporate players want market access and harmonization as a way to expand and to cut costs. 2. Intergovernmentalism: Interests of each government determine the shape of EU regulation. There could be deadlock or there could be compromise. Nevertheless, it is expected that the Commission will not go beyond the minimum compromise position towards liberalization. 3. Policy transfer: Countries try to upload their regulatory models for other members states to download from the EU. Unclear which model will win out. 4. Integration: EC leads growth of EU regulation. 5. Incrementalism: EU regulation grows through mutual adjustment. 6. Transnational regulatory networks e.g. epistemic communities 7. Policy learning: France learns from the UK or the process is mimetic. In a rational model, there is regulatory competition. 8. Technology: the capital costs are so high that it's too expensive for each country to fund R&D investment.

Network externality

1. Network externality has been defined as a change in the benefit, or surplus, that an agent derives from a good when the number of other agents consuming the same kind of good changes. As fax machines increase in popularity, for example, your fax machine becomes increasingly valuable since you will have greater use for it. 2. Remember: value of the network isn't reflected in the cost being paid 3. Pollution is a negative externality: not reflected in the cost of gas 4. Congestion on roads and transmissions networks is a negative externality 5. This is another feature that defines networks

If you shift ownership from the private to public sectors, is the risk always transferred?

1. No, wherever there's an "essential service" ... Government will often be blamed if the private sector fails to deliver. 2. This varies from sector to sector, and country to country (culture to culture). There isn't necessarily a right answer - it's a very contingent answer. In some countries, the government is blamed. In other countries, it's not.

What is a regulatory institution?

1. Organizations 2. Rules: formal 3. Norms: informal, the way you do things Norms could contradict rules. Lawyers see rules trumping norms. Administrative acts as well as acts of legislatures are laws. Law less powerful than norms in Naples e.g. Mafia rule. Law is also sacrosanct in some countries. For sociologists, unexpressed intentions are much more powerful than laws. Acts can be very specific e.g. apply to one actor. What you're looking for in regulatory institutions depends on your discipline.

"Delegation, Presidential Regimes, and Latin American Regulatory Agencies" by Jacint Jordana and Carles Ramió

1. Political delegation mechanisms intended as formal rules introduced in the design of the regulatory agencies to enhance credible commitments to time-consistent policies, did not generally work as planned in many Latin American countries after their creation. We found a divergence between actual mandates and the formally established fixed terms effected by means of systematic early resignations. We also observed a persistent turnover before the established term - often connected to presidential political cycles - that had a strong impact on agency head stability. Our findings, however, reveal some consistent patterns of behavior. Stronger presidential legislative power reduced effective delegation to some extent, and agencies' organizational strengths protected them from patronage. This made their political supervision the key issue for presidents who did not confront many institutional obstacles to keeping most agency heads under their control (by renewing their appointments or expecting some policy readjustments).Furthermore, we confirmed the existence of some significant differences between the two sectors examined. Having slightly weaker delegation rules, delegation practices were also less effective in telecommunications than in financial services, contrary to expectations about credible commitments. This result can be related to differences in institutional novelty, a conclusion that agrees with Maggetti's findings on the stronger de facto independence of regulatory agencies when they are older 2. Contrary to European practices, the logic of defining regulatory agencies as a new policy actor - a "third force" - has not clearly emerged in Latin American public policy-making. Although we cannot rule out its presence in some cases in the region, what we in fact observed was the emergence of multiple paths to cope with the time-consistency problem. Commitments have sometimes been made credible by means of political delegation, but the creation of strong public organizations with a level of autonomy and a very high professional profile has acted as a functional equivalent to some extent. Finally, locating commitments directly from the elected President and his or her policy instruments has become a common resource in recent years, particularly in cases of weak institutionalization. When strong policy reversals have occurred in the region, these have not necessarily occurred in those countries that have less effective (or formal) rules for political delegation.

Feigenbaum, Hamnett and Henig outline three distinct motivations for privatisation

1. Pragmatic 2. Tactical 3. Systemic

"Understanding regulation: theory, strategy, and practice" by Robert Baldwin and Martin Cave, Chapter 4

1. Public interest A. Main emphasis: Regulator acting in pursuit of public, rather than private, interests. B. Key problems: 1) Difficult to agree a conception of public interest. 2) Regulator disinterested and expert. 3) Scepticism concerning disinterestedness, and public-spiritedness of regulators. 4) Understates influence of economic power and prevalence of capture in regulation. 5)Concern that public interest outcomes often fail to result. 6) Understates competition for power amongst groups. 2. Interest group A. Main emphasis: Regulation as product of relationships between groups and with the state. B. Key problems: 1) Assumes that regulated parties are rational maximizers of own welfare. 2) Role of private economic interests in driving regulation. 3) Difficulty of identifying preferences of parties. 4) Incentives of firms to secure benefits and regulatory rents by capturing regulator. 5) Possibility of altruism and public-spiritedness. Informational limitations may limit self-interestedness of actions. 6) Role of groups and institutions may be underemphasized. 3. Ideas A. Main emphasis: Role of ideas in steering regulatory developments. B. Key problems: 1) It may be hard to separate the force of ideas from the role of economic interests. 2) Institutional Influence of organizational rule and social setting on regulation. 3) How to balance institutional explanations with others in accounting for regulatory changes. 4) Actors seen not purely as individuals but as shaped in action, knowledge, and preference by organizational rule and social environments. 5) Principal-agent issues and problems of democratic control of implementation. 6) Regulatory authority not shaped in principal-agent relationship. 7) Institutional design as shaped by characteristics of political setting (or 'institutional endowment'). 8) To what extent do formal institutional settings require an additional understanding of informal norms and conventions? 9) Institutional processes leading to self-destruction. 10) Over-determination of failure accounts. 11) Regulatory authority diffused between and across public and private organizations. 12) Establishing boundaries of networks and spaces.

"The political economy of telecoms and electricity internationalization in the single market" by Judith Clifton, Daniel Díaz-Fuentes, and Julio Revuelta

1. Regulatory reforms defined broadly as liberalization were a prerequisite for the rise of telecoms and energy multinationals. The internationalization of EU incumbents could not have taken place without liberalization of entry regulation and would have been difficult without progress on unbundling and privatization. However, countries implement liberalization in different ways and speeds. While the rationale behind EU policy-making is that liberalization forces the best firms to become more competitive and, often, internationalize, there remains a perception that some countries delay or restrict liberalization, promoting 'national champions' to takeover other countries' strategic 'jewels in the crown' causing tension. A clearer understanding of state and firm response to liberalization helps shed light on the political economy of market integration. 2. Three main hypotheses on the relationship between internationalization and liberalization were established. The first predicted that incumbents most exposed to earlier and deeper liberalization would internationalize most. The second predicted that incumbents would pressurize states to restrict or delay liberalization, so those with secure financial and political resources would be most able to embark on high-risk adventures abroad. Correlation techniques were used and it was confirmed that no evidence existed on a direct relationship between internationalization and liberalization or ownership. Hypotheses one and two (and secondary hypotheses four and five) were rejected. Hypothesis three asserted that internationalization forces were mediated by rational actors at the country, sectoral and firm levels. Incumbent internationalization could be best understood when multiple institutional layers were considered (internationalization forces; national contexts; sectors and firms). Cluster analysis was used to reveal a diversity of responses to liberalization and internationalization. In general, this diversity can be organized at the country level, with modifications for sectors and, also, for firms. 3. The size of the economy and firms mattered for incumbent internationalization. The single market led to the emergence of multinationals in telecommunications and electricity from Western Europe. Large continental countries, particularly France and Germany, dominated the battle in assuring their respective national incumbents would dominate European multinationals in both sectors. Neither were liberalization 'pace-setters' nor consistent 'laggards': rather, they were 'middle-of-the-roaders'. France was slower-thanaverage to liberalize electricity, while E.ON's early internationalization occurred in near monopolistic conditions. In telecoms, France liberalized at an average pace; Germany was somewhat faster. Spain and Italy took strides to join them. Spain was a 'pace-setter' liberalizing electricity but moved slower in telecoms: faster liberalization did not prevent Endesa from emerging as a leading multinational, whilst Telefonica emerged as a leading world multinational in near monopoly conditions. Spain revealed firm-level differences as Iberdrola and Union Fenosa internationalized more hesitantly than Endesa. Endesa's strong internationalization drive could have been facilitated by its privileged contact with policy-makers, since it had enjoyed significant state participation from its origins in the 1940s, whilst the others had been privately owned. Italy took longer to liberalize both sectors and its incumbents were slower to internationalize; nevertheless, Enel and Telecom Italia occupied positions in the top-five by 2006, Enel's strategy being to 'wait and see' before acquiring Endesa in 2007. So the most international of the EU's multinational telecoms and electricity incumbents emerged from the larger continental economies: France; Germany; Spain; and Italy. Typically, here, complex corporate cross-shareholding arrangements had developed, and many incumbents had been partially owned by national financial institutions since the 19th century. So, whilst there were no automatic relations between the timing and extent of liberalization and incumbent internationalization, most of these multinationals emerged thanks to a slower or middle-of-the-road approach to liberalization, possibly allowing the required time for strategic interaction among actors, befitting 'mixed' and 'co-ordinated' market economies to orchestrate internationalization. The UK, with its highly developed stock market, often typologized as a 'liberal' market economy, characterized by more arms-length relationships between economic agents, embraced liberalization (and privatization) early on and deeply. Today, UK incumbents do not dominate EU multinational rankings in these sectors. BT sacrificed its domination of the rankings, de-internationalizing in order to restructure. The UK is now an attractive site for investment: Telefonica's O2 has already overtaken Vodafone UK, and proposed mergers between Orange and T-Mobile and France Telecom and Deutsche Telekom would put Vodafone further down the UK ranking. In electricity, Scottish Power was taken over by Iberdrola. 4. The smaller economies can be analysed in two main groups. First, the Nordic countries: here, in general, liberalization was implemented quickly, while incumbent internationalization occurred mainly at the sub-regional level, suggesting strong co-ordination efforts. Electricity internationalization was shaped by the prior existence of the trade pooling system. A similar observation could be made for telecommunications: even the blacksheep 'star' internationalizer, Telenor - comparable to Telefonica because it enjoyed relatively delayed liberalization and became very international (as opposed to European) - gained nearly one-quarter of foreign revenue from other Nordic countries. Elsewhere, defensive patterns predominated: in Greece, the Netherlands and Portugal, liberalization was implemented relatively slowly, and incumbents internationalized cautiously. In Belgium, efforts to protect Electrabel via delayed liberalization ultimately failed. 5. The experience of incumbent internationalization shows that political economy approaches which predict firms will internationalize as an automatic response to earlier liberalization at home, or that firms will lobby a government to delay liberalization while aggressively going abroad, are over-deterministic. They may explain some experiences in Europe, but no such generalized patterns are observed. Instead, paths to incumbent internationalization are best understood by taking into account multiple layers of institutional differences: internationalization forces, country, sector and firm characteristics. Further research should enquire in depth the relative importance of the various institutional differences to explain internationalization outcomes

"Varieties of Regulatory Capitalism: Sectors and Nations in the Making of a New Global Order" by David Levi-Faur

1. Regulatory reforms have won immense global popularity and are widely pervasive across regions, countries, and sectors. The advance of the reforms, and consequently of the new global order of "regulatory capitalism" (Levi-Faur 2005; Levi-Faur and Jordana 2005), is conditioned by temporal, spatial, sectoral, national, and international-level variations. These variations form a plethora of regimes and consequently yet another layer of complications for social scientists, who are already plagued by complex methodological and theoretical problems. Yet these variations are not just a burden; they are also a boon as they are the most powerful engines of causal analysis and are essential in order to establish associations between concepts and variables. Moreover, variations often make good puzzles and thus propel our sense of curiosity and enthusiasm. The major aim of this special issue of Governance is to advance comparative research designs able to deal with this reality of multilevel and multidimensional variations in the advance of regulatory reforms. This is done by combining sectors and nations in a stepwise comparative research design that represents an advance in the transparency of comparative inferential process. In the presence of globalization, we regard the need for a more explicit research design and a more comparative approach as a sine qua non for better policy analysis. Much rests on the need to compare sectors, but this should not be taken as a sign of decline in the importance of nations as units of analysis. Nations matter, not only because they have given political analysts important opportunities to produce some of the greatest literature in the study of politics but also because they still exert tremendous effects on the governance of capitalism and modes of regulation (Weiss 2003). The future of the field of comparative public policy depends therefore on much more thoughtful and complex research designs, which explore both cross-national and cross-sectoral variations and similarities (see also Haverland 2006a, 2006b). This special issue of Governance makes a modest move in this direction. To give focus to the dialogue among the contributors, and between the contributors and the readers, all articles in this issue compare the reforms in the governance of the telecommunications and electricity industries. The usefulness of these two sectors for comparative analysis is demonstrated by the increasing number of studies that took this strategy 2. At the same time, the research design advanced here is driven by the need to balance in-depth analysis and knowledge of one case with generalization (Levi-Faur 2004b). This is done by a reflexive process of increasing the number and kind of cases, as well as the number of comparisons, in order to increase the validity of the results without compromising the strengths of case-oriented analysis. Each of our contributors was asked to compare the process of change in the governance of the same two sectors—telecoms and electricity—in two different countries. Thus, the analysis of liberalization in this volume covers the following four pairs: Germany and France (Humphreys and Padgett); Norway and Switzerland (Bartle); Spain and Portugal (Jordana, Levi-Faur, Puig); and Jamaica and Trinidad and Tobago (Lodge and Stirton). All the contributors went beyond the comparisons at the level of sectors and nations and used variations in time and international regimes as an important component of their analysis. Much of the inspiration for this project was drawn from the comparative treatise of Charles Ragin (1987, 1994, 2000; and Ragin and Becker 1992). Although the particular research design put forward here and the formulation of its rationale is original, its rationale rests on the pioneering work of Charles Ragin. The first article in this special issue presents the methodological approach, and sets forth many of the lessons and reflections that were gained during the process of preparation of this issue rather than ex ante insights. We start with methodology because we believe that it raises some issues of major importance for the progress of policy analysis in an interdependent, multilevel, and shrinking world. 3. At the same time this volume captures something of equal importance by expounding the notions of regulatory capitalism and variations in regulatory capitalism. It is suggested that for some purposes the notion of the "regulatory state" is too limited to capture the nature of change in policymaking and governance. True, the regulatory state is one of the most important features of the new order of regulatory capitalism, and it may well be useful in some research contexts. But it does not reflect the intimate relations between regulation and capitalism, the diversity of governance regimes and sectoral variations, the interdependency between sectors, nations, and regions, or the multilevelness of policymaking and governance (see also Braithwaite 2005). Our research design, especially the decision to change countries while keeping the sectors constant, captures some of the characteristics of regulatory capitalism. In order to extend the reach of the analysis, we felt that a review of some of the major works in the field of regulation that make explicit and masterful use of cross-sectoral analysis would be useful. The concluding article therefore suggests a wider overview of the varieties of regulatory capitalism by assembling contributions from public administration (Hood, Rothstein, and Baldwin's The Government of Risk), comparative political economy (Vogel's Freer Markets, More Rules), and international political economy (Braithwaite and Drahos's Global Business Regulation). With this volume, we wish to contribute to the study of regulatory capitalism through reflexive comparative research designs. We hope it will both encourage more studies of multilevel policymaking and narrow the disciplinary gaps between the subdisciplines of public policy and international relations; at the same time it may contribute to a wider application of the comparative method in the study of politics

What are the various forms and types of privatisation?

1. Sale of assets. 2. Contracting out (responsibility remains with the state, delivery).

Public good (law)

1. Should be open to all 2. Tied to doctrine

"Varieties of Capitalism in an Internationalized World: Domestic Institutional Change in European Telecommunications" by Mark Thatcher

1. Telecommunications in Western Europe offer a good case of how international factors can undermine institutional stability and cross-national differences. Britain, France, Germany, and Italy represented examples of different forms of capitalism. Long-established national institutions, supported by powerful coalitions of interests within domestic arenas, existed in telecommunications. Historical institutionalist models would predict that such institutions would be difficult to alter and/or that reform would follow nationally specific paths. Thus nations would maintain different varieties of capitalism. 2. Until the mid-1980s, such predictions held true in telecommunications. Reform attempts were rare and were usually blocked. When changes were introduced, they varied across Britain, France, Germany, and Italy. Moreover, they conformed to national patterns suggested by work on varieties or models of capitalism. However, from the late 1980s onward, rapid change and convergence took place. By the late 1990s, all four countries had privatized, liberalized, and delegated powers to new sectoral independent regulatory authorities. Well-entrenched national institutions were reformed. Differences in domestic settings and past reform paths did not prevent institutional convergence. 3. International pressures for change help explain the pattern of reform. Three international factors have been investigated in detail: transnational technological and economic developments, overseas reforms, and EC regulation. They offer good examples of broader international forces of economic integration or globalization, cross-national policy transfer, and international regulatory regimes. Direct links between these factors and the strategies and coalitions of actors in the domestic politics of institutional reform have been drawn. The international factors pressed actors in the same direction, irrespective of diverse domestic settings. They contributed to reform and cross-national convergence, counteracting the effects of different national contexts. 4. despite powerful international pressures for change that operated in the 1980s, initially, national institutional arrangements were resistant in telecommunications; insofar as reform occurred, it took nationally specific paths. However, by the 1990s, transnational technological and economic developments combined with overseas reforms and EC regulation to offer a powerful cocktail for rapid institutional reform and convergence. Two nonrival hypotheses can be put forward for testing in other domains. One is that varieties of capitalism hold for only limited periods of time but cannot withstand international pressures over the medium term (from the case study, perhaps 10 to 15 years). Domestic settings may delay reform and convergence, but only for relatively limited periods. The other hypothesis is that varieties of capitalism cannot be maintained in domains characterized by powerful combined international forces such as those seen in European telecommunications in the 1990s.

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 9 (Repeat)

1. Thatcher stressed how policymakers on the Continent privatized their network industries in the face of not only regulatory competition from Britain but also European Union directives, which fundamentally reshaped the politics of these sectors in those nations. 2. In the period between 1988 and 2005 the formal institutions of telecommunications in France, Germany, and Italy were greatly reformed. Initially (from 1988 to .1993), changes were modest, involving separation of posts and telecommunications, limited moves away from civil service status for the operator and a small degree of liberalisation. However, from the mid-1990s reforms were radical. All three countries privatised incumbent operators, ended monopolies across the sector, and established independent sectoral regulators. Well-established institutional features often dating from the nineteenth century, such as public ownership, linkage of posts and telecommunications within government ministries, and public monopolies, were ended. As a result, by the end of 2005, formal institutional structures in the three countries had strongly converged both with each other and with Britain 3. Reforms in France, Germany, and Italy were introduced by coalitions of domestic actors, with governments and the managements of incumbents at its core. Overseas companies (usually in alliance with domestic new entrants) and the European Commission sometimes played a role, but nevertheless, the dominant actors were domestic. Reform coalitions had to overcome strong opposition that involved trade unions, employees, and sometimes political parties. 4. Although reform coalitions were mainly domestic, internationalisation played significant roles that were clearly seen in debates and decisions to modify institutions. Reformers argued that powerful technological and economic factors such as higher demand and the development evermore advanced services and terminal equipment necessitated institutional changes. These factors had already been at work for some time before 1988. However, unlike previous periods, reformers also gave greater attention to regulatory comparisons and competition, especially with Britain. They saw Britain both as an example and as a source of competition, although they did not engage in in-depth studies of the British case. More directly, they were concerned about rival foreign operators, such as BT and AT&T, who were creating international alliances and were presented as a threat in increasingly competitive markets. 5. However, the most important international factor was the EU. It affected domestic reform debates in several ways. First, it provided an external set of legal requirements, especially concerning liberalisation. Second, introducing EU legislation provided occasions for wider reforms such as privatisation or creating new regulatory authorities. Third, the European Commission linked domestic regulatory reform to approval of international alliances that operators and governments claimed were essential to compete with overseas operators (claims that were not based on detailed studies or waiting for the results of such alliances). Finally, the EU provided ammunition for domestic reformers. Sometimes this took the form of legal powers and rights that could be used to attack existing institutions. But often its more important role was to offer arguments that countries had to prepare for a liberalised European market and that this necessitated institutional reforms not required by EU legislation such as privatisation. 6. Telecommunications in France, Germany, and Italy after 1988 can be used to sustain three central arguments about internationalisation and domestic regulatory reform. First, the cases underline the importance of policy forms of internationalisation. Whereas before 1988, transnational technological and economic factors had been met with institutional inertia, thereafter policy forms of internationalisation—overseas reforms and supranational regulation—played significant roles in comprehensive and radical reforms that ended very long-standing institutions. 7. A second issue concerns the carriers and mechanisms whereby internationalisation operated. Particular forms of internationalisation influenced the strategies, coalitions, and resources of domestic actors in the policymaking process. In particular, they affected the desire and ability of governments to create reform coalitions with the leaders of publicly owned incumbents, pointing to the importance of state actors in internationalisation. Overseas firms were rarely major participants (p.201) in decision-making. Moreover, policy forms of internationalisation influenced domestic decision-making because they offered reformers directly useful reasons and arguments. Thus, for instance, EU regulation was used to legitimise changes that were not legally required such as privatisation and creating independent regulatory authorities. Regulatory competition with Britain operated through claims about 'keeping up', fear of BT in international alliances and presenting Britain as an attractive example. However, cross-national learning was limited: in-depth studies of matters such as the success of international alliances or new institutional arrangements in Britain were not undertaken, indicating that the role of overseas examples lays more in legitimating change than learning about new institutional arrangements. 8. Finally, the cases show a continental European 'reform path' that contrasts with that in Britain, and was also seen in stock exchanges, and will be set out for electricity and airlines (Chapters 5, 10, and 11). However, in Britain reforms were largely driven by domestic factors; the most important international factor was the US example and the EU played little role. In contrast, in the three other nations, international factors were central. Moreover, the most relevant overseas example and source of regulatory competition was Britain more than the US. Finally, the most important form of internationalisation was EU regulation. Thus similar outcomes arose later and through different processes and factors than in Britain. Nevertheless, by 2005, France, Germany, and Italy had adopted similar sectoral institutions to those in Britain and, compared with 1988, much convergence had occurred across the four countries.

Normal regulatory process

1. The Commission proposes legislation, and the Council and the Parliament have to approve it 2. EU Directives: states are given time to adjust their laws to these Decisions/laws/rules: these are directly binding, and so states must immediately conform to these 3. Members are supposed to transpose directives/decisions into domestic laws 4. Ex. Article 90: 1) special/exclusive rights granted by states i.e. monopoly are forbidden with some exceptions 2) Section III: Commission shall issue directives or decisions without the approval of Council/Parliament. In Council of Ministers, there's a complicated voting system scheme that is supermajoritarian. Votes are cast by national governments through national ministers. Commission can, under Section III, make laws without the approval of Council/Parliament. Article 90 is a major exception.

"Paradoxes of privatization and deregulation" by Giandomenico Majone

1. The article draws three main lessons from recent regulatory developments on both sides of the Atlantic. 2. First, deregulation and privatization have not meant an end to all regulation. On the contrary, newly deregulated or privatized industries lose their pre-existing statutory immunity from competition law and other regulatory requirements. Thus, privatization leads to the creation of new regulatory bodies and to a considerable widening of the scope of agencies to promote competition. 3. Second, experience has revealed the fallacy of assuming that public ownership guarantees public control. The crisis of the nationalized industries is more a failure of regulation than a problem of productive efficiency. Public ownership not only reduced government's ability to regulate the economy, but also interrupted a policy learning process which could have produced, half a century ago, the kind of regulatory institutions which Europe is struggling to develop now. 4. Finally, American deregulation has proved to be considerably more forceful than European privatizations in introducing competition and restructuring key economic sectors such as telecommunications. Differences in styles and methods of regulation explain these different outcomes. A style emphasizing professional independence and public accountability is needed not only to achieve all the benefits of privatization, but also to push through deregulation when economic and technological changes make public oversight no longer necessary.

"The Institutional Foundations of Regulatory Capitalism: The Diffusion of Independent Regulatory Agencies in Western Europe" by Fabrizio Gilardi

1. The institutional foundations of regulatory capitalism, namely, independent regulatory agencies, have spread in allWest European countries and well beyond utilities, financial institutions, and the regulation of competition. This article shows that the three classes of explanations discussed by Levi-Faur (2005)—bottom-up, top-down, and horizontal—all matter in accounting for the diffusion of IRAs. With respect to bottom-up hypotheses, the need to improve credible commitment when privatizing and liberalizing utilities increases the likelihood that an IRA will be established. This likelihood also increases with higher risk of a government being replaced by a coalition of different preferences (political uncertainty), still more if that government's chances of being reelected soon are slim. For both the credibility and political uncertainty problem, veto players, which make policy change more difficult, work as a functional equivalent of delegation for, respectively, improving credible commitment capacity and preventing future governments from changing policy. In the top-down perspective, Europeanization matters. In the telecom domain in particular, directives that required the structural separation of regulation and ownership of telecom operators significantly increased the probability that new IRAs were established. Finally, evidence for the horizontal perspective confirms the hypothesis that individual IRA creations have not been independent. A diffusion process has been at work. The likelihood of IRA creation significantly increases as the number of other existing IRAs is higher, which suggests the presence of an emulation process where the symbolic properties of IRAs are more important than the functions they perform. 2. More generally, this article has raised two issues about the global diffusion of regulatory capitalism. First, any explanation that neglects horizontal factors misses an important point. Common pressures and imposition by powerful organizations matter, but interdependencies among countries are also a fundamental driver of regulatory reforms, indeed of policy change more generally. The literature has just started to acknowledge these interdependent diffusion effects, and more work is needed. Second, the rise of the regulatory state has a very important social (or nonfunctional) component. This component has been largely neglected in the literature. Here too more work is needed, notably to separate empirically the relevance of the various mechanisms subsumed under the label "emulation." 3. To conclude, let me note that an implication of this research is that policy change comes in waves. This is not a new phenomenon; as Levi-Faur (2004, 21-24) showed, the wave of utility privatization was preceded by a wave of nationalization. Therefore, while this article has demonstrated that IRAs are now widespread, it would be a bold claim to say that they are here to stay.

Privatisation and deregulation/liberalisation are not the same

1. The latter is about competition and market-making. 2. You may have a privately owned monopoly company. Grids are typically privately owned, for example. 3. Water industry in Britain. Telecoms - AT&T in the United States was a private monopoly supplier. 4. Conversely, you can have publicly-owned suppliers operating in a competitive industry. Multiple publicly-owned companies competing with each other, and similarly with private sector companies. We need to be careful about what we mean by "privatisation".

How do you hold a regulator accountable?

1. The main way would be through reports to Congress. 2. Main idea is that being independent does not mean that you are not accountable. 3. Contrary, we would expect that the more powers you are given, the more accountable you are. 4. If we look at it from the principal-agent framework, the principal sets control meant to control the action of his agent, for instance budget allocation, reports.

"Regulating business by independent commission" by Marver H. Bernstein

1. The only positive count in Bernstein's indictment of the commissions (his study is ostensibly based upon the work of the. ICC, FTC, FPC, FCC, SEC, NLRB, and CAB) is that "their record is good with respect to the achievement of fairness and equity in administrative adjudication," but even here they have a "tendency to overjudicialize procedures." In general, both administratively and politically they "have not been satisfactory instruments of governmental regulation of business. They have been founded on a basically undemocratic concept of the political process and have helped to perpetuate naive notions about regulation of business, the virtues of group decision, and the uses of expertness" (p. 294). Claims on their behalf for the values of expertness have in practice degenerated. into narrow professionalism; arguments urging the desirability of insulation from popular and partisan influences have in fact increased the commissions' sensitivity and exposure to the pressures of the regulated groups; their broad discretionary powers have not been controlled by firm lines of political responsibility; in policy formulation their performance has been characterized not by adaptability and consistency but by apathy and passiveness. "They have lacked an affirmative concept of the public interest.... As a method for ordering economic relations in society short of governmental ownership and operation, it [regulation by commission] has not proved itself" (p. 296). 2. The author has performed a signal service by systematically reviewing 70 years' experience and 20 years' research with the independent regulatory commission. His approach is not descriptively analytical, like Herring's Public Administration and the Public Interest, or historical, like Cushman's Independent Regulatory Commissions, but avowedly critical and evaluative. His criteria are those of the professional administrator, not in the narrow sense of a technician, but of the trained student of government who has a keen sense of the politics of administration. He has deliberately chosen to take a general view of the performance of the independent commission as a political and administrative instrument, separate and distinct from considerations that might seem important to economists or to specialists interested in the substantive policies or effects of specific regulatory programs. As such, he has increased our understanding of what may be called the "administrative policy" viewpoint. By no means least significant is his definitive demonstration of the administrative shortcomings of independent commissions, and their institutional transformation in political reality away from the goals visualized by their proponents. 3. Reformers and students of public administration who look at the regulatory process from the standpoint of the Chief Executive will find much to applaud and agree with in this book. So will extremists of both Right and Left. On the other side, professional students of public policy in particular fields of regulation, responsible leaders of group organizations with vital stakes in regulatory policy and administration, politicians faced with the duty of sacrificing the best as the price for getting something better, perhaps even some nonspecialist elements of the general public, will feel that the author's analysis is general rather than discriminating, and that he has been more interested in arriving at judgments based upon ambiguous, ethical standards than in proving out a series of limited hypothetical propositions about the nature of commission regulation as it actually functions in the political process. The latter point is ironic, because one of the author's avowed objectives is "to develop a more realistic concept of the process of governmental regulation," and in his ninth chapter he suggests no less than five quite realistic views of administrative regulation, based upon the postulate that regulation cannot be understood apart from its social and political context, and is itself "an intensely political process." 4. The paradox comes about because the author does not employ his "realistic" concepts to analyze the data in the main body of his study. His basic procedure is to expose the discrepancies between "the facts" of commission regulation and selected standards of evaluation. Among the latter are: the beliefs and myths that were used to rationalize the creation and expansion of regulatory commissions (Chs. 1-2); the values of expertness (Ch. 4); "independence," "responsibility" and "the public interest" (Ch. 5); "policy integration," "impartiality," "organizational planning and management," "ethical codes" (Ch. 6); "creativeness in offering incentives for compliance" (Ch. 8). Chapter 3 is an exception: it attempts to test the life-cycle or stages theory of administrative regulation suggested by Graham, Davis, and Redford. Chapter 7 is a useful, but quite separate study of the effects of the Administrative Procedure Act of 1946 upon the operations of independent commissions. In the large, therefore, Bernstein's "realistic concept of the regulatory process" turns out to mean not an operational idea but a perspective, from which the author seeks to persuade the reader that the problems of administrative regulation will be more readily solved if he (1) accepts the insight that regulation is unavoidably political, (2) recognizes the failure of the independent commission to measure up to specified requirements of effective regulation (Ch. 10).

What does privatisation mean?

1. The process of transferring functions from the public sector to the private sector. 2. The transfer of ownership to the private sector.

WEEK 9

1. The role of elected politicians, capture, accountability and legitimacy 2. Two questions arise to debate about the topics above, namely: Who was held responsible for delivering network services in the past? How did the accountability work?

In the NHS, who's responsible for providing your healthcare?

1. The state. You turn up, and they send you for a test ... But who's administering that test? It's publicly funded, but it'll be contracted out. 2. Typically, the tests are contracted out - provided by a third party, but funded by the state. 3. The state has the responsibility, but the service is provided by the private sector. One can imagine the same thing happening in network services. In the UK, who supplies water services? Private companies. Do you have a right to water? Yes. The state has provided a right, but it's provided by the private sector. There are positive externalities arising from access to water. 4. There's therefore a need to distinguish between responsibility, funding and who's providing the service.

"What Role for Learning? The Diffusion of Privatisation in OECD and Latin American Countries" by Covadonga Meseguer

1. The substitution of marketisation for statism has been one of the most important social changes in recent decades. Nationalisation was the hallmark of statism as much as privatisation is of the marketisation of economies. In this paper, I analysed the role that different diffusion mechanisms played in the widespread adoption of this policy, especially in the developing world, in the belief that domestic factors cannot fully explain this trend. Within those mechanisms, I focused on learning from others, thereby also tackling a complicated methodological problem. 2. My working hypothesis was that governments privatised in the light of the experience of those that privatised and those that had not privatised. I showed that the joint sample and the regional samples provide no grounds for rejecting this hypothesis. Yet the dynamics of learning were different in the two regions. One result is very robust in its significance (privatising governments herded on others' decisions); another result is very robust in its non-significance (top-down pressures or coercion did not drive governments' choices to privatise). 3. In Latin America, the decision to sell public enterprises was the consequence of a learning process from own experience and region experience. But the strong effect of the sheer number of others privatising at the same time could not be discounted. Undoubtedly, the change in the climate of opinion in favour of privatisation, especially after the fall of the Communist economies, was a strong motivation to divest in countries motivated by the need to show a commitment to coherent policies. Besides, privatisation was more likely where the political regime was more repressive 4. Somewhat surprisingly, the possibility cannot be ruled out that privatisation in Latin America and the improved efficiency results associated with it exerted some influence on the OECD countries. Indeed, the average rates of growth of Latin American countries that privatised were almost double those in the OECD. Also, privatisation in the OECD countries was favoured by left-wing governments at the same time as contagion could not be ruled out as a strong predictor of privatisation. Again, this behaviour might have been motivated by the need of particular left-wing governments, especially in southern Europe, to signal commitment to the rigorous policies expected in the region. 5. Overall, the answer to the opening question of this paper is that governments privatised, first, as a consequence of a diffusion process, and second, a diffusion process that, meditated by particular regional features, was partially related to learning from experience and strongly related to a process of emulation. Despite this result, one should not too hastily dismiss the capacity of rational learning as an explanatory factor behind policy convergence; rather, I believe, we must go on thinking about ways to refine our empirical tests of learning, whether in its rational or its bounded version.

"Accountability in the Regulatory State" by Colin Scott

1. The transformation of public administration in the United Kingdom has made more transparent the dense networks of accountability within which public power is exercised. The constitutional significance of this observation is to suggest that there is a potential to harness these networks for the purposes of achieving effective accountability or control, even as public power continues to be exercised in more fragmented ways. Outstanding questions for this analysis are whether there are other models of accountability in the regulatory state not captured by the interdependence and redundancy models, and whether it is possible to capture the complete set within an overall theory of extended accountability. Areas requiring further exploration are the role of voluntary organizations (such as prisons campaigners and consumer groups) and the media in rendering public and quasi-public bodies accountable. 2. Each of the two models of extended accountability discussed in this article presents difficulties for public lawyers and more generally. Neither model is directly 'prgrammable' with the public law norms (fairness, legality, rationality, and so on). Interventions to secure appropriate normative outcomes must necessarily be indirect and unpredictable in their effects. The interdependence model carries with it the risk that special interests, such as those of a particular firm or group of firms, may capture the regime through their overall weighting of power within it. The redundancy model presents particular problems. If redundancy per se is a good characteristic for an accountability regime, it is difficult to calculate how much redundancy is sufficient and how to know when an additional layer of accountability is inefficient and to be removed. Equally, there is also the risk within a redundancy model of simultaneous failure of different parts of the system for the same reason. Where, for example, information is successfully hidden from more than one part of the accountability network, there is a risk of complete failure in respect of the matters for which that information is relevant. 3. Close observation of the structures of accountability in the regulatory state suggests that the public lawyer's concerns, premised upon an overformal conception of accountability, if not unfounded are then neglectful of the complex webs of extended accountability which spring up in practice. Indeed, these extended accountability mechanisms already evidence a capacity to hold not only public but also private actors accountable for the exercise of power which is broadly public in character. Whilst not agreeing with Wilks and Freeman that it is possible to conceive of the accountability of a regulatory regime, it is nevertheless helpful to think in terms of the aggregate accountability of each of the actors exercising power within a regime

EU Policies Towards Networks in 1984

1. There was a belief that the EU should not interfere with national monopolies and national ownership 2. The Treaty of Rome stated that the EU could not change the ownership of property in member states. 3. Basic belief at this time: state had the right to maintain publicly owned monopolies. 4. 1986 Common Conformity Directive 5. 1987 Green Paper on Telecommunications 6. Idea of reregulation/privatization 7. Member states weren't allowed to have monopolies 8. There was a series of directives that limited member states' ability to have monopolies from 1988 onwards 9. These liberalizing directives were issued under Article 90 10. Article 90 gives the Commission tremendous power 11. Regulatory directives: aimed at ensuring fair and effective competition e.g. tariffs have to be cost-effective. Directives also required the separation of supply and regulation.

You're the Minister for telecommunications. Can you control the sector?

1. There'll be constitutional limits. 2. There are contractual limits. 3. There may be divisions within the state's functions and entities. The state isn't necessarily one entity. 4. There may be international and external constraints. 5. There may be interest groups acting on the government, such as trade unions and different layers of management. Within departments, there'll be different groups controlling resources and interest groups.

A Note on Developing Countries

1. They need more foreign investment and credible commitment more desperately 2. Many regimes depend on network industries to provide rents for payoffs 3. Political turnover and change is a constant 4. Some formal institutions might work differently e.g. functioning of IRA, actual extent of liberalization

"Toward a More General Theory of Regulation" by Sam Peltzman

1. This article is concerned more with the design than the implementation of a research strategy. Much of the recent work in the theory of regulation has focused on political power relationships: which groups will have the muscle to extract gains from their regulatory process. I have largely begged this issue. In my general model, every identifiable group contains winners and losers, and even where all the winners are in one group they end up shortchanged. This sort of result can hardly illuminate the nature of the underlying power relationships, but that shortcoming is purposeful 2. In the way I have chosen to model the regulatory process, these power relationships play a role analogous to tastes in consumer choice theory. They shape the regulator's utility function. It has proved a highly rewarding research strategy for consumer choice theorists precisely to beg questions of taste formation and concentrate instead on the behavioral effects of changes in constraints in a regime of stable tastes. With some qualification, there is an analogous history in production theory. I am suggesting here that the theory of politics has something to learn from this experience. Even if we can do no more than derive the most general properties of political power functions, there is much to learn about political behavior in a world where the constraints do change. And the specific contribution of economics to this venture will be enhanced if the constraints are those already familiar to economists. I have tried to show here how the most familiar sort of supply-demand apparatus can be converted into a constraint on regulatory behavior. Once this is accomplished the equally familiar analytics of supply-demand changes yield refutable implications about a wide range of regulatory behavior: when regulation will occur, how it will modify the unregulated price structure, even how it will change the division of the gains over time (with no change in relative political strengths 3. Of course, no student of George Stigler can view the derivation of refutable implications as more than a first step. The usefulness of the model developed here awaits tests of these implications, of which the present article is nearly devoid. The limited progress we have made in exploring political "tastes" is my main ground for optimism about the fruitfulness of a return to a more familiar theoretical mode

"The politics of liberalisation: Privatisation and regulation-for-competition in Europe's and Latin America's telecoms and electricity industries" by David Levi-Faur

1. This article opened with the question 'does politics determine learning or does learning determine politics?' This question is especially intriguing in light of the wide diffusion of liberalisation across nations and sectors. Thus, we of necessity moved beyond the general indicators of privatisation (yes or no) and regulatory agencies (yes or no) to more perceptive indicators such as the measure of privatisation (partial or complete), the independence of regulatory agencies (independent or not), the timing of both and the patterns of regulatory reforms. In other words, we shifted some of the discussion from whether liberalisation to how liberalisation. It is an especially intriguing case study because it serves for the argument that 'learning-determines-politics'. Not only is liberalisation widespread to the extent that it is beyond the reach (and interest) of any single actor, but (via the component of regulation-for-competition) it represents significant progress in the way public and private goals are accommodating each other. 2. The interaction between learning and politics in the diffusion of liberalisation was studied by combining insights and levels of analysis of the Policy Sector Approach (PSA) with the National Patterns Approach (NPA).The analytical framework presented in Table 1 allows us to aggregate cases and use descriptive statistics in order to detect similarities across sectors and nations, cross-sectoral variations, cross-national variations and, finally, co-variations across sectors and nations. The four observations that were identified relate different, but complementary, stories on the advance of liberalisation. Each of these is essential in order to portray the broader picture of the diffusion of liberalisation and its interaction with learning. 3. The explanatory framework we employed here for the various patterns of liberalisation belongs to a research tradition that might best be termed 'actor-centred historical institutionalism'. Similarities across countries and sectors in the diffusion of liberalisation were discussed by pointing to the cost-benefit analysis of policy-makers when the bandwagon of liberalisation started to move. Specifically, it was argued that learning was induced by the benefits of emulation in a context of 'herding towards new convention'. New knowledge on the efficiency of liberal governance regimes cannot by itself bring change. It has to be diffused in a way that renders it politically beneficial to jump on the bandwagon and too politically costly to persist on sidelines. The explanation of cross-sectoral variations (namely, the greater propensity of telecoms for privatisation and the creation of SRAs and IRAs) had to move from methodological individualism toward a combination of actor-centred strategies and institutional analysis. Variations in the rewards and risks that the liberalisation of the two sectors represent for policy-makers explain the greater propensity of telecoms for liberalisation. Learning is thus mediated by cost-benefit analysis and the particular structure of incentives that each sector supplies 4. Insights from the literature of historical institutionalism were found to be very useful when cross-national variations were considered. The findings that European states were receptive to learning, voluntary and complex patterns in the transfer of liberalisation, whereas the Latin American states were more receptive to emulative, coercive and simple transfers, were explained with reference to the variations in state formation in the two regions. Learning is mediated also by the capacity of the state to learn and thus strong states learn more than weaker states. This suggests that the creation of strong political and administrative institutions that will be able to promote economic development in Latin America is a much more complex task than suggested by neo-liberals that advocate deregulation. Finally, the greater support that the NPA received in Europe was explained by reference to the variations in the pattern of demand and supply for social support in weak and strong states. It is the weak demand for social support in the relatively weak Latin American states that explains the small variations between the Latin American group and the European one. This leads us to suggest that learning is directly connected to the extent of the demand for social support; and where social support is achieved through public deliberation of the costs and benefits of each option, the door is wide open for greater variations in the governance of different sectors. 5. By exploring the extensive role of regulation-for-competition in the advance of liberalisation, light has been shed on the fact that states (some more than others) gained rather than lost capacities with the restructuring of the governance structures in telecoms and electricity. Surely, liberalisation originated not in the state but in powerful interest groups, political visionaries, epistemic communities, international organisations and powerful governments. Their ability to transmit their ideas is highly impressive even in a world that is already defined as 'global' and 'interdependent'.Yet when the time was ripe for the idea to spread, states became critical agents both by mediating the process and, more importantly, by shaping its particular format by their capacities to learn. All in all, we portray the process of liberalisation as a new chapter in the ongoing tale of the state-building process that started in fifteenth-century Europe. Fortunately for some, highly unfortunate for others, this tale kept its original outline when transmitted across continents and generations. Thus, those of us who thought that liberalisation and the so-called 'retreat of the state' might result in 'a new Europe' in Latin America are likely to be disappointed. Unfortunately, it takes more than liberalisation and free markets to become 'European'.

"From the Positive to the Regulatory State: Causes and Consequences of Changes in the Mode of Governance" by Giandomenico Majone

1. This paper has attempted to provide a rough sketch of the most significant consequences entailed by a shift from a mode of governance based on direct state intervention, supported by the power to tax and spend, to one characterised by rule-making and extensive delegation of powers to institutions operating at arm's length from government. The evidence and arguments presented in the preceding pages support our initial hypothesis that Chandler's thesis holds also in the public sector. As we saw, the structural changes induced by the strategic choices made by governments since the late 1970s are manifold and far reaching: new actors and institutional arrangements, new arenas of political conflict, different styles of policy-making, more complex standards of legitimacy and methods of accountability. 2. Limits of space did not allow more than passing references to Chandler's question about the reasons for delays in developing the structures needed to implement the new strategies. To deal adequately with this question would require detailed country-by-country analyses, or even comparative investigations of particular industrial sectors such as telecommunications. Even without the benefit of such book-length studies, however, it is possible to surmise that the institutional and intellectual legacy of the interventionist state is a major impediment to the speedy adjustment of governance structures to the new strategies. This can be seen, for example, in the widespread reluctance to accept all the implications of agency independence. 3. As was argued in section 6, delegation of powers to a politically independent agency is an important means whereby governments can commit themselves to regulatory strategies that would not be credible in the absence of such delegation. Now, while European governments are aware of the importance of policy credibility in an increasingly interdependent world, and are thus prepared to accept the independence of national and European regulators in principle, in practice they are often driven by considerations of political expedience to interfere with the regulator's decisions. Thus, the way in which the French 'independent administrative authorities' have been designed and their powers defined still leaves a considerable margin of influence to the central government. Even the relatively powerful Council for Competition does not have the authority to initiate investigations; that power remains in the hands of government. In fact, the 1986 competition law fails to take its own logic to its ultimate conclusion, preserving a considerable margin of arbitration and discretion to the central government and, in particular, strengthening the power of the Minister of Economics in relation to mergers 4. In Britain, too, the legacy of the interventionist past is apparent in the design of the agencies created to regulate the privatised public utilities. Many important regulatory powers have been given directly to government rather than to the new agencies, whose operations depend at any rate on prior decisions of the Minister as to the principles to be applied. The danger is that such powers of discretion 'could be abused to exert behind-the-scenes pressure on the regulator in much the same way as pressure was put on the nationalized industries'. In Britain, as elsewhere in Europe, it is still an open question how the limits of the political independence of regulators are to be defined 5. The question of agency independence is only one example, though a particularly revealing one, of the difficulties experienced at both national and European levels in adapting traditional structures to new regulatory strategies. It would be unwise to assume that such difficulties can be overcome in a short time, but also to forget that international competition takes place not only among producers of goods and services but, increasingly, among regulatory regimes as well. Regulatory competition will reward regimes in which institutional innovations do not lag too far behind the new strategies

"Shrinking the state: the political underpinnings of privatization" by Harvey Feigenbaum, Chris Hamnett, and Jeffrey Henig

1. Though Feigenbaum and his coauthors had no doubts abut the importance of parties and the nature of state in explaining this phenomenon, they asserted that American and French leaders followed the lead of Britain's Margaret Thatcher in their shifting of functions from the public to the private sector. While this claim certainly has merit, it should not be taken as gospel, since their concern was with privatization writ large, not necessarily that of network industries. 2. The central thesis is that privatization is rooted not in economics but in politics, particularly the motives and designs of leading politicians. The authors develop this thesis by examining the evolution of privatization in three settings, the United Kingdom, France, and the United States. In each country, national politicians link the rhetoric of privatization to ideological or partisan goals. Their underlying motivation is not the quest for economic efficiency but the quest for a smaller welfare state or a larger victory in the next election. 3. The authors substantiate their argument by immersing themselves in the nuances of each case. For example, they note that France's candidates for privatization were already profitable and efficient and that the United Kingdom sometimes substituted a private monopoly for a public monopoly. If economic efficiency were the real motivation, the authors argue, then these countries' conservative leaders would have privatized fewer assets and moved at a more deliberate pace. 4. To understand both cross-national and longitudinal variations, the authors introduce a typology rooted in a political understanding of privatization. Systemic privatization is an attempt to shrink the welfare state by privatizing large assets as rapidly as possible. Tactical privatization is an attempt to gain an electoral advantage by privatizing at an opportune time. Pragmatic privatization is an attempt to solve a particular problem through a tailor-made solution, such as contracting out. The first two forms are intensely political, and the third is not. 5. The story line in each country is strikingly different. In Britain, pragmatic privatization led to systemic privatization, which eventually triggered a backlash. In France, pragmatic privatization yielded to tactical privatization, which later mutated into a different version of pragmatic privatization. In the United States, pragmatic privatization never quite evolved into something else. Instead, pragmatic initiatives were coopted by advocates of systemic change, who ultimately settled for more modest reforms.

Aim 2

1. To analyze why independent regulatory agencies have emerged in network regulation, their institutional design and their behavior 2. We first compare the situation 35 years ago and now.

Chick

1. Until the 1950s, energy consumption was low. It was in the hand of private actors. Then there's economic growth. The state took things into its hands and laid down the basic infrastructure. When the network was laid down, then there was another change in ownership. 2. It makes sense that, in some periods of time, that if you want to build certain forms of infrastructure, you need the state's power. 3. The European Union ... ] 4. Competition now more possible 5. In some industries, capital costs have risen, and it's been difficult for them to raise funds 6. Public ownership is less efficient than private ownership

"The Third Force? Independent Regulatory Agencies and Elected Politicians in Europe" by Mark Thatcher

1. Whereas previously regulation of markets in Europe was largely a matter between governments and suppliers, today there are also IRAs that are organizationally and legally separated from government. However, do they constitute a third force in practice? Using the PA framework, the use of key formal controls by elected politicians in practice has been examined. The data suggest that elected politicians have made limited use of their powers of appointment to select party loyalists (with the partial exception of Italy). Nor have they forced out IRA members before the end of their terms, even when governments have changed, with most IRA members serving their full terms. The result has been IRAs with longer lasting members than the majority of ministers or governments. Equally, elected politicians have made almost no use of powers to overturn IRA decisions. Indeed, they have frequently increased the powers of IRAs in subsequent reforms. These results were not expected when IRAs were created. Moreover, they mostly apply across the four countries, despite differing national traditions and "varieties of capitalism." 2. Thus, IRAs are a "third force" in terms of constituting a separate group of actors from elected politicians. However, whether they are a third force in terms of their independence in practice depends on understanding why elected politicians rarely used their formal controls. Using the PA framework as a starting point, two interpretations of the evidence of use of formal controls have been offered. The first is that elected politicians have found methods other than applying the formal controls investigated to ensure that IRAs follow their preferences. It would suggest that agency losses have been low as IRAs have followed the desires of elected politicians, hence IRA autonomy in practice has also been low. The second interpretation is that elected politicians have found that the benefits of IRA autonomy in practice and the costs of applying their formal control outweigh agency losses from the autonomy that IRAs have enjoyed in practice. In this case, IRAs possess real autonomy from elected politicians and hence are a third force. 3. How can one adjudicate between the two very different interpretations of IRA independence in practice? Ultimately, agency autonomy is seen in policy making and implementation. However, any study that relies on external data—for example, decisions taken or public statements—faces the problem of "observational equivalence" as the same evidence can be used to support IRA independence or the converse. Indeed both IRAs and elected politicians have incentives to misrepresent their true positions—for instance, politicians may not wish to admit that IRAs are out of their control if those IRAs are seen as successful or take popular decisions. In the opposite circumstances, if IRAs are making unpopular choices or are seen as unsuccessful, politicians may not wish to acknowledge that they in fact control those IRAs. Hence, detailed case studies showing the preferences of elected politicians and IRAs and relations between them are required. The two interpretations suggest paths for such research. They invite analysis of the choices of different forms of control enjoyed by elected politicians, their relative effectiveness, and their costs and benefits. The first interpretation of low agency losses directs the article's attention to mechanisms other than the formal controls investigated—be these anticipation by IRAs of use of formal controls, the role of third parties, or informal controls—that enable elected politicians to prevent agency losses. The second interpretation points toward the factors that influence the costs of applying formal controls and/or the value of IRA independence. Detailed historical case studies using process tracing are needed to see whether elected politicians fail to use their formal controls as expected because they have better alternative methods of controlling their agents or whether they allow those agents considerable independence because of the high costs of control and the benefits of agent autonomy.

Guiding Questions

1. Why have regulatory reforms for network industries spread across the world from industrialized to developing countries? 2. What are the differences between regulatory reforms for network industries in industrialized and in developing countries?

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, pages 165-169

1. it is most helpful to examine the example of privatization of network industries par excellence: Britain in the 1980s and 1990s. Though all governments have shifted functions in some form or another in the last forty years, few have done so as quickly or as enthusiastically as the British one. Furthermore, this paradigmatic test case allows us to see which of the various factors identified above really mattered and which were quite frankly inconsequential. Finally, to give this account more analytical leverage, the focus will be on the telecommunications sector, which has experienced not only tremendous technological change but also stands out as a prime example of a network industry. 2. A review of this case underscores the decisive role played by domestic political forces. As Thatcher makes clear, technological and economic change in the sector resulted in little change in regulatory policy. In the 1960s and 1970s, the government, which controlled telecommunications through its ownership of the Post Office (PO), did little, despite the onslaught of wrenching technological and economic development. Unlike its counterparts elsewhere, it did not invest in new technology. At most, it granted the PO more autonomy. 3. The most sweeping reforms occurred under Margaret Thatcher and her Conservative government between 1980 and 1984. Though her party had not made privatization of telecommunications a major campaign plank, her government not only separated the PO from British Telecom (BT) but also sold shares in the latter. In carrying out the last of these two initiatives, they encountered fierce resistance from suppliers dependent on BT sales as well as more traditional enemies such as trade unions and other left-wing groups. Even members of the Conservative Party feared that BT would become a private monopoly inimical to the public interest. Nevertheless, the government pressed ahead, confident in its ability to reduce the size of the state and its expensive commitment to BT and emboldened by support from the management of the soon-to-be private company. Though some British politicians did indeed wish to emulate the regulatory scheme of their American counterparts, this desire does not seem to have as crucial as the shift in political power.

Natural monopoly

1. the most technically efficient means of production is one firm due to falling marginal costs and increasing economies of scale, continuing until one firm dominates the entire market, if competition is left unchecked 2. For network industries, can expect by economic theory to have natural monopolies e.g. electricity transmission, gas, water

IRAs

Accountability to 1. Public 2. Regulatees 3. Courts 4. Political principals Requirements to publish

Universal service doctrine

Everyone has access to a good/service at a reasonable price

Shifts in ownership

Examples: 1. Peru 2. UK

Independent regulatory agencies take decisions on the industry and are indirectly accountable for their functioning.

Indirectly = They are not elected, so cannot be directly accountable. Accountability happens through the judiciary system, and through popular scrutiny and transparency. Political accountability is limited. Utilities in Britain give you the right to complain.

Self interest

Key concept: Rent-seeking. Identified three interest groups: 1. Politicians: Interest in being less accountable, therefore interested in shifting away responsibilities. Also, interested in obtaining support for reelection giving people lower prices. 2. Industries: Their interest is profit. By opening networks to competition, incumbents can control entry and charge fees for that. Also management of industries is happy to liberalize because they also obtain higher profits. 3. Public: Their interest is to obtain lower prices and to have a choice of providers. When we say the public, we refer specially to large users (if liberalized, they will stop subsidizing small users) and the rich who stand to gain from lower rates, as the poor will see higher rates. If you're a telecom company, being able to expand abroad is important

Pareto efficiency

Pareto efficiency, also known as "Pareto optimality," is an economic state where resources are allocated in the most efficient manner, and it is obtained when a distribution strategy exists where one party's situation cannot be improved without making another party's situation worse. Pareto efficiency does not imply equality or fairness.

Week 10

Regulatory reform in developing countries

EU Parliament

Short summary: Composed of MEPs. MEPs are elected by each country. Some countries are overrepresented, other countries are underrepresented 1. The European Parliament is the EU's law-making body. It is directly elected by EU voters every 5 years. The last elections were in May 2014. 2. What does the Parliament do? The Parliament has 3 main roles: A. Legislative 1) Passing EU laws, together with the Council of the EU, based on European Commission proposals 2) Deciding on international agreements 3) Deciding on enlargements 4) Reviewing the Commission's work programme and asking it to propose legislation B. Supervisory 1) Democratic scrutiny of all EU institutions 2) Electing the Commission President and approving the Commission as a body. Possibility of voting a motion of censure, obliging the Commission to resign 3) Granting discharge, i.e. approving the way EU budgets have been spent 4) Examining citizens' petitions and setting up inquiries 5) Discussing monetary policy with the European Central Bank 6) Questioning Commission and Council 7) Election observations C. Budgetary 1) Establishing the EU budget, together with the Council 2) Approving the EU's long-term budget, the "Multiannual Financial Framework" 3. Composition: The number of MEPs for each country is roughly proportionate to its population, but this is by degressive proportionality: no country can have fewer than 6 or more than 96 MEPs and the total number cannot exceed 751 (750 plus the President). MEPs are grouped by political affiliation, not by nationality. The President represents Parliament to other EU institutions and the outside world and gives the final go-ahead to the EU budget. 4. How does the Parliament work? Parliament's work comprises two main stages: A. Committees - to prepare legislation. The Parliament numbers 20 committees and two subcommittees, each handling a particular policy area. The committees examine proposals for legislation, and MEPs and political groups can put forward amendments or propose to reject a bill. These issues are also debated within the political groups. B. Plenary sessions - to pass legislation. This is when all the MEPs gather in the chamber to give a final vote on the proposed legislation and the proposed amendments. Normally held in Strasbourg for four days a month, but sometimes there are additional sessions in Brussels.

EU Commission

Short summary: Has a monopoly over the proposing of legislation. Composed of 28 Commissioners, 1 from every member state Commissioners are appointed. There's a President and Vice President. Each Commissioner is assigned to specific policy areas by the president. The Council nominates people who are ratified by the Parliament. Though people pledge to serve the EU, they are often politicians with an eye towards forwarding their own causes 1. The European Commission is the EU's politically independent executive arm. It is alone responsible for drawing up proposals for new European legislation, and it implements the decisions of the European Parliament and the Council of the EU. 2. What does the Commission do? A. Proposes new laws The Commission is the sole EU institution tabling laws for adoption by the Parliament and the Council that: 1) protect the interests of the EU and its citizens on issues that can't be dealt with effectively at national level; 2) get technical details right by consulting experts and the public. B. Manages EU policies & allocates EU funding 1) Sets EU spending priorities, together with the Council and Parliament. 2) Draws up annual budgets for approval by the Parliament and Council. 6) Supervises how the money is spent, under scrutiny by the Court of Auditors. C. Enforces EU law: Together with the Court of Justice, ensures that EU law is properly applied in all the member countries. D. Represents the EU internationally 1) Speaks on behalf of all EU countries in international bodies, in particular in areas of trade policy and humanitarian aid. 2) Negotiates international agreements for the EU. 3. Composition A. Political leadership is provided by a team of 28 Commissioners (one from each EU country) - led by the Commission President, who decides who is responsible for which policy area. B. The College of Commissioners, includes the President of the Commission, his seven Vice-Presidents, including the First Vice-President, and the High-Representative of the Union for Foreign Policy and Security Policy and 20 Commissioners in charge of portfolios. C. The day-to-day running of Commission business is performed by its staff (lawyers, economists, etc.), organised into departments known as Directorates-General (DGs), each responsible for a specific policy area. D. Appointing the President: The candidate is put forward by national leaders in the European Council, taking account of the results of the European Parliament elections. He or she needs the support of a majority of members of the European Parliament in order to be elected. E. Selecting the team: The Presidential candidate selects potential Vice-Presidents and Commissioners based on suggestions from the EU countries. The list of nominees has to be approved by national leaders in the European Council. Each nominee appears before the European Parliament to explain their vision and answer questions. Parliament then votes on whether to accept the nominees as a team. Finally, they are appointed by the European Council, by a qualified majority. The current Commission's term of office runs until 31 October 2019. 4. How does the Commission work? A. Strategic planning: The President defines the policy direction for the Commission, which enables the Commissioners together to decide strategic objectives, and produce the annual work programme. B. Collective decision making: Decisions are taken based on collective responsibility. All Commissioners are equal in the decision-making process and equally accountable for these decisions. They do not have any individual decision-making powers, except when authorized in certain situations. The Vice-Presidents act on behalf of the President and coordinate work in their area of responsibility, together with several Commissioners. Priority projects are defined to help ensure that the College works together in a close and flexible manner. Commissioners support Vice-Presidents in submitting proposals to the College. In general, decisions are made by consensus, but votes can also take place. In this case, decisions are taken by simple majority, where every Commissioner has one vote. The relevant Directorate-General (headed by a Director-General, answerable to the relevant Commissioner) then takes up the subject. This usually done in the form of draft legislative proposals. These are then resubmitted to the Commissioners for adoption at their weekly meeting, after which they become official, and are sent to the Council and the Parliament for the next stage in the EU legislative process.

European Court of Justice

Short summary: Now called the Court of Justice of the European Union. This is the judicial branch It interprets EU laws, adjudicates disputes EU law has been supreme over national law since 1964 The judges are nominated by governments and the Court also serves as a constitutional court. Domestic courts are supposed to follow EU law Principle of direct effect: individuals can invoke EU law 1. The Court of Justice of the European Union (CJEU) interprets EU law to make sure it is applied in the same way in all EU countries, and settles legal disputes between national governments and EU institutions. It can also, in certain circumstances, be used by individuals, companies or organisations to take action against an EU institution, if they feel it has somehow infringed their rights. 2. What does the CJEU do? The CJEU gives rulings on cases brought before it. The most common types of case are: A. interpreting the law (preliminary rulings) - national courts of EU countries are required to ensure EU law is properly applied, but courts in different countries might interpret it differently. If a national court is in doubt about the interpretation or validity of an EU law, it can ask the Court for clarification. The same mechanism can be used to determine whether a national law or practice is compatible with EU law. B. enforcing the law (infringement proceedings) - this type of case is taken against a national government for failing to comply with EU law. Can be started by the European Commission or another EU country. If the country is found to be at fault, it must put things right at once, or risk a second case being brought, which may result in a fine. C. annulling EU legal acts (actions for annulment) - if an EU act is believed to violate EU treaties or fundamental rights, the Court can be asked to annul it - by an EU government, the Council of the EU, the European Commission or (in some cases) the European Parliament. Private individuals can also ask the Court to annul an EU act that directly concerns them. D. ensuring the EU takes action (actions for failure to act) - the Parliament, Council and Commission must make certain decisions under certain circumstances. If they don't, EU governments, other EU institutions or (under certain conditions) individuals or companies can complain to the Court. E. sanctioning EU institutions (actions for damages) - any person or company who has had their interests harmed as a result of the action or inaction of the EU or its staff can take action against them through the Court. 3. Composition: The CJEU is divided into 2 courts: A. Court of Justice - deals with requests for preliminary rulings from national courts, certain actions for annulment and appeals. B. General Court - rules on actions for annulment brought by individuals, companies and, in some cases, EU governments. In practice, this means that this court deals mainly with competition law, State aid, trade, agriculture, trade marks. Each judge and advocate general is appointed for a renewable 6-year term, jointly by national governments. In each Court, the judges select a President who serves a renewable term of 3 years. 4. How does the CJEU work? In the Court of Justice, each case is assigned 1 judge (the "judge-rapporteur") and 1 advocate general. Cases are processed in 2 stages: A. Written stage 1) The parties give written statements to the Court - and observations can also be submitted by national authorities, EU institutions and sometimes private individuals. 2) All of this is summarised by the judge-rapporteur and then discussed at the Court's general meeting, which decides: 3) How many judges will deal with the case: 3, 5 or 15 judges (the whole Court), depending on the importance and complexity of the case. Most cases are dealt with by 5 judges, and it is very rare for the whole Court to hear the case. 4) Whether a hearing (oral stage) needs to be held and whether an official opinion from the advocate general is necessary. B. Oral stage - a public hearing 1) Lawyers from both sides can put their case to the judges and advocate general, who can question them. 2) If the Court has decided an Opinion of the advocate general is necessary, this is given some weeks after the hearing. 3) The judges then deliberate and give their verdict. General Court procedure is similar, except that most cases are heard by 3 judges and there are no advocates general.

EU Council

Short summary: Occupied by the heads of state of EU member nations. There are also separate councils: one for finance ministers, one for telecom ministers etc. There are 28 councils 1. The European Council defines the EU's overall political direction and priorities. It is not one of the EU's legislating institutions, so does not negotiate or adopt EU laws. Instead it sets the EU's policy agenda, traditionally by adopting 'conclusions' during European Council meetings which identify issues of concern and actions to take. 2. The members of the European Council are the heads of state or government of the 28 EU member states, the European Council President and the President of the European Commission. 3. The High Representative of the Union for Foreign Affairs and Security Policy also takes part in European Council meetings when foreign affairs issues are discussed. 4. The European Council mostly takes its decisions by consensus. However, in certain specific cases outlined in the EU treaties, it decides by unanimity or by qualified majority. If a vote is taken, neither the European Council President nor the Commission President take part.

Exercise

Students came up with examples/conclusions related to: 1. a comparison between telecoms in the UK and in France, where in the former companies were completely privatised, whereas in the latter the French state deliberately supported the "national champions" (a privatisation without liberalisation); 2. Re-regulation (the movement towards liberalisation came along with a set of new rules); 3. There are varieties of regulatory states - different forms in different countries; 4. Both formally implemented IRAs in energy sector (OFGEM and CRE); 5. Liberalisation after EU Directives are assimilated differently in each domestic regulatory framework (the UK actually liberalised its markets, France on the other hand allowed competition but privileged French companies); 6. There is no such a thing as homogeneity in terms of regulatory state;

What Problems Arose out of This Arrangement?

System was supposed to be legitimate, because electorate delegated authority to the legislature, who delegated that same authority to the enterprises. This was supposed to be legitimate, because legislature was elected. 1. Asymmetries of information: There was a principal-agent problem with voters being the principal and governments the agent of their will. Voters lacked information. There were even asymmetries between public companies managers and politicians. 2. Coordination problem: Parties offer a bundle of choices. Nuclear great example of information asymmetries. Suppliers provided limited information to ministers. Cost of storing nuclear waste for 100 years wasn't disclosed. If you were unhappy with service in the 1960s in Chile, couldn't do anything. Most countries had legal doctrines that protected the public administration from being sued. Public provider had a virtual monopoly on information: no one knew the costs of providing services. Today, Ofcom will tell you BT's costs. 3. In different countries there were protections favoring the Government which prevented it to be sued in case of faults or deficiencies. 4. Lack of information available, i.e., no transparency laws neither other mechanisms of control, moreover several pieces of information were confidential.

"Europeanization of the French electricity policy: four paradoxes" by Pierre Bauby and Frédéric Varone

The European liberalization of the electricity sector led to four paradoxes in France. First, the transposition of European directives into French law has induced a clarification of the public service mandate; previously, its vague definition largely contributed to its quasi-sacrosanct status. Second, while the initial European impulse was to break down national monopolies, we observe that French groups still control the French market, currently Electricite de France and, probably, Suez-Gaz de France in the near future. Third, the partial privatization of these two French operators is one of the key transformations of the electricity sector; this indirect impact of the European liberalization process is rather paradoxical as the EU has no legal power to regulate the ownership of market operators. Finally, while the current regulatory framework of the French electricity sector has formally changed, the same political and administrative French elites are still in control of the new regulatory agencies. In sum, we conclude that the liberalization of the French electricity sector may result in a fully accomplished French industrial policy.

Public ownership (formal)

The United States was the exception This public ownership took many forms: 1. Public enterprise part of the state e.g. posts and telecoms with the exception of BT examples include PTT, NTT 2. Public corporations e.g. energy, airlines, water ,gas. These bodies had their own private ownership, but were owned by the state. Germany had substantial ownership, Britain for water, France had a mix for water. 3. Industries were part of a government department (part of the civil service), and their workers were civil servants. Often the case for telecoms and posts. 4. Municipal, local or regional ownership. Often the case for water and gas.

Informal/behavioral independence

The actual degree of independence

A Key Pointer

The motivations underpinning privatisation can't necessarily be read directly off the institutions.

To recapitulate

We talked about the minimum requirements for an agency to be considered independent, from the second paper of M. Thatcher for this week: 1. Agency has its own powers, established under public law. 2. Is organizationally separated from ministries. 3. Its head is neither directly elected nor managed by elected officials.

"The regulatory state and its legitimacy problems" by Giandomenico Majone

While the interventionist state was characterised by a high level of centralisation in administration and policy making, the regulatory state relies on extensive delegation of powers to independent institutions: regulatory agencies or commissions, but also the judiciary which is becoming an increasingly active player in the regulatory game. Delegation of important policy-making powers to non-majoritarian institutions raises novel problems of democratic legitimacy. This article argues that such problems should be tackled not by limiting the independence of the regulators, but rather by strengthening the accountability structure. Similar problems arise at the European level. Here, too, the correct solution is a better accountability structure rather than increased politicisation. The depoliticisation of European policy making is a consequence of the fact that the large majority of Europe's voters support far-reaching economic integration but oppose true political integration.

Regulation

intervention in social, economic and political processes to promote or restrict behavior in the pursuit of public welfare

"Globalization, the 'Competition' State and the Rise of the 'Regulatory' State in European Telecommunications" by Peter Humphreys and Seamus Simpson

1. Paradigmatic change in telecommunications governance provides an important example of the emergence and development, at national and European levels, of the competition and the regulatory state. Both have been regarded as key features of the neo-liberal turn in political economy, of which telecommunications provides ample evidence. Nonetheless, this article has highlighted two important caveats. First, telecommunications provides evidence of tensions, as well as complementarities, between the two. Second, both the competition state and the regulatory state can pull in a different direction to that suggested by neo-liberalism. Here, the competition state, at the national level, illustrates the enduring presence of more traditionally interventionist - even mercantilistic - state activity, albeit in a new governance guise. Equally, the pursuit of economic liberalism through the regulatory state paradoxically requires an increase in regulatory coverage, complexity and weight. 2. This article also shows how Europeanization of the competition and regulatory state, in the attempt to render the EU more internationally competitive and to change parochial habits into cosmopolitan behaviour, adds a further twist to the analysis. The European Commission pursued a neo-liberal competition state approach in the telecommunications sector, leading to tensions with more parochially preoccupied Member States. One of the mainstays of the ECRF - to govern telecommunications markets as much as possible through EU competition law - is the embodiment of the EU competition state, vesting responsibility in the most 'supranational' dimension of the EU. The ECRF addresses a paradox of the competition state in telecommunications - governments' continued protection of domestic firms under the earlier 1998 regulatory framework. The European regulatory state also reflects this tension and complexity. It is necessarily constituted as a multi-dimensional governance structure: the Commission sits at the centre of a devolved and diversely constituted regulatory network, yet - even after the enactment of the ECRF - it is unclear whether equilibrium of influence between the European and national levels has been attained. This is no more clearly illustrated than in the controversial Commission proposal, currently under consideration by Member States and emanating from the 2006-07 review of the ECRF, to create the European Electronic Communications Markets Authority. This new regulatory body would be, in effect, a 'supranationalised' version of the ERG. Advisory (to the Commission) in nature, it would be constituted under EU law and accountable in political terms to the European Parliament rather than Member States. 3. Finally, the ECRF highlights the intimate connection between the European competition state and European regulatory state where the competition state paradox of freer markets requiring more, not fewer, regulations and regulatory activity is evident at both national and EU levels. As things stand, the development of the regulatory state at the European level through the ECRF highlights the persistent tensions between the Member States and the Commission where even compromise outcomes have created a regulatory system that still provides Member States with scope to domesticate the constituent measures of the ECRF.

Journal of European Public Policy 2002, Special Issue on 'Regulatory Reform in Europe'

1. The phenomena that this volume seeks to explain are threefold: the emergence of regulatory institutions (Gilardi); regulatory policy outcomes (S. Schmidt, V. Schmidt, Drahos and van Waarden, Heritier, Serot); and political outcomes of regulatory reforms (Thatcher). On the first topic, Gilardi asks which factors account for the rise of independent regulatory agencies to which governments have delegated power in different sectors, e.g. electricity, telecommunications, financial markets, food safety and pharmaceuticals. From the second perspective, S. Schmidt investigates the impact of mutual recognition on market integration, on the one hand, and European and domestic regulatory responses in the road haulage and insurance sectors, on the other. Van Waarden and Drahos study the impact of the European Court of Justice rulings and Commission decisions on the content of national competition policies, measuring policy convergence. V. Schmidt investigates national adjustment to European economic policy in sectors, such as energy, telecommunications; she points to different national responses, e.g. inertia, absorption or transformation. Serot focuses on the impact of privatization and the deregulation of telecom prices, finding a clear convergence. Heritier analyses the policy impact of the liberalization of network industries, focusing on the provision of public services in rail transport and telecommunications services, identifying the underlying factors of service performance. Within the third perspective, Mark Thatcher scrutinizes the central political consequences of regulatory reform, e.g. for the relationship between independent regulatory authorities and elected politicians, the relationship with regulatees, decision-making practices and their democratic legitimacy. Thus, the explananda of the contributions in this volume reach from the emergence of new regulatory structures, to the outcomes of these structures at the policy level, including the underlying processes, to the structural impacts of the new structures on national polities. 2. In explaining the new regulatory structures and their impacts at the policy and structural level, all articles either test explicitly stated, and theoretically derived, propositions or at least make plausibility probes of such propositions. Gilardi tests the credibility hypothesis derived from economic institutionalist theory (Majone 2001). That hypothesis claims that elected politicians delegate powers to independent agencies in order to increase the credibility of their policies. From this, Gilardi derives more specific, testable hypotheses, stating a causal relationship between international interdependence and delegation, recent privatization and delegation and, finally, veto players and delegation. There are two con icting views, one arguing that the more veto players there are, the less a political system is able to withdraw independence from an agency, hence the greater its effectiveness, the other claiming that governments in systems with few veto players are likely to find alternative solutions to policy instability, of which delegation is one possibility. In accounting for the emergence of independent regulatory authorities, Gilardi remains within delegation theory. Alternatively, one could argue that independent regulatory authorities have become fashionable and that states just emulate each other in making use of them. 3. S. Schmidt, explaining the different national responses to mutual recognition, builds her argument upon a political institutionalist explanation and points - like Gilardi - to the importance of the number of veto players in the German, as compared to the French, political system. This difference arguably accounts for both the speed and extent of national regulatory responses. Accordingly, she expects Germany to be less capable than France to react swiftly to the consequences of mutual recognition. With the selection of her cases she systematically varies the factors expected to cause different policy outcomes. 4. Van Waarden and Drahos, in seeking to account for the convergence of national competition policies, test a variety of theories of European integration, first making a plausibility argument and then exploring the theories systematically against qualitative and quantitative data: they examine institutionalism, neo-functionalism, liberal intergovernmentalism and the theory of epistemic communities and mutual learning. They discard all except institutionalism and the epistemic community approach. '[C]onvergence has been the result of the gradual . . . pressure and . . . mutual modelling arising from the development of a multi-level split legal system . . . through the lines of communication . . . created by the development of a multi-level epistemic community of legally trained officials' (p. 914). Of course, one may object that it is not so surprising that liberal intergovernmentalist theory would - by definition - be irrelevant, since, as they point out, there has been no policy of positive integration in competition policy. 5. V. Schmidt emphasizes that in order to explain the differences in the economic policy adjustments in France, Britain and Germany it is necessary to simultaneously take a number of factors into account - derived from a variety of different theoretical backgrounds: economic vulnerability, political institutional capacity, policy legacies, policy preferences and discourse. Rather than seeing them as mutually exclusive, she nds them linked in particular ways. As such, in the three countries under discussion they bring about different policy responses in different policy areas. Typical combinations of factors are more likely to produce absorption, inertia or transformation in particular policy areas in particular countries in more general terms. 6. Serot advances a macro-historical institutionalist hypothesis, as opposed to an 'international forces' hypothesis, in order to explain the particular price development in telecommunications: he shows that the international economic environment and technological innovation largely account for the convergence of prices in Great Britain and France and not the overall change in the regulatory structure. 7. Heritier considers three explanatory hypotheses in order to account for the differences in the provision of public services before and after the reforms in rail transport and telecommunications: a technology hypothesis, arguing that the provision of public services is facilitated by large-scale efficiency-enhancing technological innovation; a liberalization hypothesis, claiming that, up to a certain limit, privatization and deregulation favour better services by increasing efficiency; and an institutional, principal-agent theoretical explanation, which views the interaction between regulators and regulatees as a precondition for providing high-quality services. 8. What empirical ndings are presented in the different contributions in order to test or explore the hypotheses put forward? Gilardi measures his dependent variable, e.g. agency independence, which he claims increases as a function of international interdependence, recent privatization and the number of veto players, along different qualitative dimensions which are then summarized in an 'independence index'. The author finds that the economic interdependence hypothesis does not hold, while recent features of privatization/economic regulation and of national institutions (the number of veto players) can largely explain the cross-national variation. These findings support the 'credibility' hypothesis with which the author started out. 9. S. Schmidt, who, in considering the impact of mutual recognition on market integration and domestic policy responses, partially draws on existing qualitative empirical sectoral studies and partially on her own empirical investigations, shows that the extent of national and European regulation is disproportionate to the de facto extent of market integration in the two sectors studied, road haulage and national insurance markets. 10. Van Waarden and Drahos, studying convergence in national competition policies in the Netherlands, Austria and Germany, employ a multi-dimensional empirical measure of what constitutes competition policy, distinguishing between goals and basic principles, scope, application, treatment of cartels, regulation of dominant market position and merger control. On the basis of this fine-grained empirical operationalization, the authors show that convergence in national competition policies can best be explained by an epistemic community approach. 11. V. Schmidt defines the empirical dimensions of her dependent variable 'adjustment' to European policy requirements in terms of absorption, inertia and transformation and illustrates the adjustment processes with empirical information from a range of policy areas, e.g. monetary policy, financial services, telecommunications, electricity, transport, the environment and employment. Depending on a particular link between the factors pointed out, she finds the UK leading the transformation processes, France showing a mixed pattern of adjustment and inertia, and Germany lagging behind in most areas. 12. Serot, when studying the impact of the overall change of institutional structures on the retailing prices in telecommunications, measures price development in a differentiated way. But the absolute and relative figures compared across countries and periods have to be considered with caution since the national measurements vary considerably (the same holds for Heritier's analysis). Still, the trends indicated can be clearly outlined. Serot finds that - against a macro-historical institutionalist claim that owing to reduced differences in the national regulatory frameworks prices should converge - they had converged prior to that time. 13. Heritier, in analysing the impact of liberalization on the provision of services in rail passenger transport and telecommunications, looks at a range of empirical indicators that constitute public services, de ned as accessibility, affordability, continuity and reliability. What emerges from comparing the rail sector and telecommunications - corroborating the findings of Serot - is that the quality of service provision is mainly influenced by technological innovation. 14. Thatcher, studying the empirical changes in political relationships brought about by regulatory reform, works on the basis of newly collected data. He discusses various explanatory approaches, such as principal-agent, capture theory and work on procedural legitimacy, to develop empirical indicators for the above purpose. He finds that independent regulatory authorities have enjoyed conditions favourable to independence from elected politicians. They have also had a degree of separation from business regulatees. He shows how independent regulatory authorities have greatly altered decision-making processes in regulation. 15. In brief, it seems that whether or not political institutions matter depends very much on the particular explanandum (features of services provided as opposed to domestic adjustment to European policy requirements which as such is closely linked to political institutions) and on the particular perspective of the comparison (countries or sectors) which is chosen.

"Regulatory agencies, the state and markets: a Franco-British comparison" by Mark Thatcher

1. This article began with three contrasts between the regulatory state and VOC literatures in interpretations of changes in institutions governing markets in France, concerning the extent of cross-national convergence, the degree of break with the past, and the ability of France to adapt its institutions to new conditions and pressures. What do the empirical findings about IRAs in network industries tell us about these three issues and hence which interpretation is supported or weakened? 2. In terms of the spread of the formal institutions of the regulatory state, the article provides strong support for the regulatory state hypothesis. IRAs have been created in France in similar domains to Britain. In both countries, they have been given duties and powers to enforce competition. Delegation to IRAs represents a sharp break with traditional French economic institutions. Their establishment is especially noteworthy as French network industries offer a 'hard case' for the regulatory state hypothesis since they were marked by strong centralization, lack of competition and successful grands projets. The case of IRAs in France and Britain suggests that countries with very different national-level institutions and 'varieties of capitalism' can adopt the formal institutions of a regulatory state. 3. However, when the strategies, behaviour and relationships of policy-makers (both IRAs and governments) are examined, a different picture emerges, one that often supports VOC claims. Policy-makers in Britain and France set up IRAs for diverse reasons: responding to the EU was important in France, whereas Britain created IRAs to deal with the privatization of incumbents with market power. The staffing of IRAs has varied, as well-established technocratic elites in France have maintained their power, accounting for a large proportion of senior IRA members, whereas British regulators have been drawn from the private sector and/or a new group of managers who move between public and private sectors. British IRAs pursued internationally competitive markets whereas French ones formed part of a national strategy to create internationally competitive suppliers through overseas expansion and ensure a profitable domestic base for those champions. 4. Why, despite a similar spread of IRAs, have such contrasts existed between the two countries? One factor is that differences in the powers retained by governments over suppliers can be used to create significant diversity; thus, for example, the French government's ownership of incumbents and powers over regulated tariffs have become a powerful element in policy-making. Another factor is that formal powers can be used in contrasting ways; thus although elected politicians appoint IRA members in both countries, their choices have differed significantly; similarly, they used their licensing powers in contrasting ways in 3G mobiles. Third, IRAs form part of a wider policy-making context that affects their role and strategy; dissimilarities include the nature of state-society relations (notably the linkage between public and private sectors through the grands corps), ownership of suppliers and the aims of governments. 5. Examination of strategies, behaviour and relations suggests that the institutions of 'the' regulatory state can be adopted for different reasons and operate in very diverse ways, giving rise to a variety of forms of markets. Regulatory regimes that include liberalization and IRAs develop in different ways. Similar institutions can conceal various state strategies and the result is the emergence of several regulatory states not one. Equally, a country such as France may adopt the formal trappings of a liberal market economy, but the operation of the state and markets remains very different from a 'proper' liberal market economy such as Britain. In particular, the modes of co-ordination between policy-makers and firms and among policy-makers themselves differ from Britain, as members of the grands corps have fashioned a strategy to promote French international champions, whereas in Britain policy-makers have sought internationally competitive markets, but have not co-ordinated to protect British firms. With respect to change, there are also strong elements of continuity with French industrial policy from the previous decades, notably of the aims of policy, the position of the grands corps, and the ability and desire of public policy-makers to mould markets and competition. 6. The third issue separating the regulatory state hypothesis and VOC studies concerned France's ability to adapt to external and internal pressures for change. The material suggests that contrary to VOC critiques of 'mixed market economies', France has been remarkably successful in its pursuit of international champions, thanks in part to new regulatory institutions. IRAs have been able to protect profitable domestic markets through gradual liberalization, which has given French suppliers time to adapt and sometimes to raise prices. The government has used licensing and restructuring of state-owned firms to limit foreign entry to the French market and create strong French firms. Meanwhile, French suppliers have been able to expand abroad both through exports that benefit from low-cost domestic production and through buying up overseas firms. Hence they have enjoyed both a strong domestic base and international expansion, aims that hark back to the 1960s-1980s. French policy-makers have adopted IRAs as part of the overall strategy of adapting to changing international and domestic conditions, whilst operating a statist industrial policy, pursuing well-established ambitions and protecting existing elites and suppliers. State forms and instruments may have altered, but an activist French industrial policy is alive and well.

"A Contagious Concept: Explaining the Spread of Privatization in the Telecommunications Sector" by Simon Fink

1. According to Fink, almost every government on the planet has in one way or another transferred authority over major network industries from the public sector to the private sector since 1981 2. And this is to say nothing of the pressures countries felt to emulate their peers, who were increasingly privatizing their network industries and thus lending greater legitimacy to this once-unusual policy choice, a point emphasized by Fink in his work.

"The audit society: rituals of verification" byMichael Power, Conclusion

1. Evaluation, assessment, checking, and account giving are part of everyday human interaction. They are sometimes explicit, always varied and usually take place as part of the tacit understandings which constitute social life. Although an examination of these micro-exchanges has not been undertaken in this book, the possibility of such an analysis provides an important reminder: if account giving and auditing in a general sense are a deep part of the social fabric, it makes no sense to be against them on a priori grounds alone. However, when attention is focused on the manner in which forms of checking are specifically institutionalized and formalized, on their methods and consequences, then these practices become a legitimate object of critical inquiry. 2. This book offers a diagnosis where hitherto there has only been presumption. If the analysis errs too much on the side of criticism and polemic, this has been necessary to provide a counterweight to official stories. While there is much more empirical work to be done, it is clear that in the UK and elsewhere during the 1980s and early 1990s auditing acquired an institutional momentum which insulated it from systemic inquiry. The mood which has led to the reshaping of the public sector in recent years could not be described as very sensitive to empirical inquiry. But this is equally true of the financial sector where the machinery of supervision and audit are constantly being refashioned in response to each crisis. 3. The motif of the 'audit society' which provides the title of this book suggests where the audit explosion may be heading and points to a set of tendencies and potentials. These tendencies are far from being monolithic. Different traditions of evaluation and control, appeals to collegiality and trust and doubts about the efficacy and cost of auditing provide a discourse of resistance. There is also scepticism about programmatic ideals of 'performance' and 'quality' and the technologies through which they are made operational. But despite these critical developments a certain intellectual and political vigilance is still required because, as Chapter 3 argues, the audit explosion has emerged from deep structural changes in organizational governance. While accounting practitioners and others may be opportunistic there is no grand supply side conspiracy which drives the rise of audit. There is rather a series of interrelated programmatic shifts in styles of government which commonly presuppose the necessity and benefits of auditing in its various forms. 4. The question which must be brought back to the surface in every particular case is whether the tail may be wagging the dog and, in the process, whether audit provides deluded visions of control and transparency which satisfy the self-image of managers, regulators and politicians but which are neither as effective nor as neutral as commonly imagined. Against official images of a technical fix I have counterpoised the possibility that audit emerges more as a new form of image management. Rather than as a basis for substantive change, it is a practice which requires social trust in the judgements of its practitioners and which is only superficially empowering to the notional publics which give it its purpose. And when audit fails, or is presumed to fail, strategies exist to insulate it from radical enquiry about its role and operational capability. Worse still, audits may turn organizations on their heads and generate excessive preoccupations with, often costly, auditable process. At the extreme, performance and quality are in danger of being defined largely in terms of conformity to such process. 5. There is much to be said for this pragmatic modesty and, quietly, this is the view of most practitioners. But the selling of audit has not taken place so modestly: audit is a practice which in every sphere where it operates must necessarily talk up expectations at the very same time as it may suffer from so doing. I have argued that the 'expectations gap' is not so much a problem for auditing as its constitutive principle. More generally, the audit explosion has actually closed off avenues of official scepticism and modesty; auditing has become central to regulatory programmes. It is too greatly needed for many of the changes which have taken place for an open and fundamental diagnosis of benefits and dangers. Diagnosis is necessary and yet constantly deferred by a range of other localized and procedural issues which occupy regulatory energies. 6. The politics of regulatory failure described in Chapter 2 must become reflexive if it is not to reproduce itself in ever increasing structures of regulatory complexity with ever greater demands for monitoring. In effect regulatory politics would need to 'go empirical' and this would require some institutionalization of social scientific knowledge of the manner in which instruments of supposedly neutral verification can transform the contexts to which they are applied. And as this knowledge of consequences grows, so too would the possibilities for debate and discussion about whether they should be intended or not. In this way, audit would become part of a broader organizational learning process rather than an empty ritual of verification for merely disciplinary purposes. 7. It is important to recognize that such an institutionalized capability for evaluating audit which avoids reproducing the very problems it is intended to solve could only be created by a confident society. This would be a society capable of knowing when to trust, when to trust trust and when to demand an audited account. This would also be a society which wants to know the dangers it faces before creating risk management practices which simply fragment responsibility for these dangers. It would be a society which was capable of a certain honesty about the prospects for social order and about the instruments available for bringing it about. A preparedness for discomfort would be necessary and this would clearly require a distinctive political culture. Audit currently operates in a regulatory space where regulators and politicians do not wish to be encumbered by systemic doubts about audit; they need to be reassured that it works or can be made to work better. Empirical knowledge creates discomfort and is needed to institutionalize disturbance. 8. On the back of these speculative proposals, it must be borne in mind that the audits described in this book are part of an organizational order which is itself constantly changing. The emergence of corporate networks, in which clearly definable groups give way to a multitude of related parties, is already creating problems for traditional financial auditing. Companies and states are legal fictions in a 'grand web' of employees, suppliers, regulators, customers, and many others. Such developments suggest a long term drift away from central control capabilities towards an encrypted network economy which is literally 'out of control'. 9. Finally, the way societies call individuals and organizations to account says much about fundamental social and economic values. Power is this ability to demand accounts, to exercise control over performance, while at the same time remaining unaccountable. Such accounting arrangements are necessarily contingent and varied, ranging across formal and informal, financial and non-financial, detailed and aggregated measures of performance. Auditing operationalizes a balance of liberty and discipline which is not shaped simply by objective economic necessity or common sense. Rather, even in its most mundane techniques, it reflects a complex and not always consistent constellation of social attitudes to risk, trust, and accountability. The motif of the audit society reflects a tendency for audit to become a leading bearer of legitimacy and this must be so because other sources of legitimacy, such as community and state, are declining in influence. So the audit society is a symptom of the times, coincidentally a fin de siècle, in which a gulf has opened up between poorly rewarded 'doing' and highly rewarded 'observing'. In this book I have tried to create some understanding and a little discomfort about this growing industry of comfort production.

"The Theory of Economic Regulation" by George Stigler

1. The idealistic view of public regulation is deeply embedded in professional economic thought. 2. So many economists, for example, have denounced the ICC for its pro-railroad policies that this has become a cliche of the literature. 3. The fundamental vice of such criticism is that it misdirects attention: it suggests that the way to get an ICC which is not subservient to the carriers is to preach to the commissioners or to the people who appoint the commissioners. 4. The only way to get a different commission would be to change the political support for the commission, and reward commissioners on a basis unrelated to their services to the carriers. 5. Until the basic logic of reform is developed, reformers will be ill-equipped to use the state for their reforms, and victims of the pervasive use of the state's support of special groups will be helpless to protect themselves.

"Regulating infrastructure: monopoly, contracts, and discretion" by Jose Gomez-Ibanez, Chapter 2

1. The more market-oriented solutions to the commitment problem are, the better, as they better approximate what parties would have agreed to in the absence of government intervention. Furthermore, market-oriented approaches guard against government opportunism. 2. Market solutions are less subject to debates about fairness, and thus are less controversial.

Legal monopoly

A monopoly given by the state

"The New Governance of Markets and Non-Majoritarian Regulators" by David Coen and Mark Tharcher

NMRs have proliferated at the national and international levels. Whilst many have arisen from delegation to public bodies, others are private bodies that have acquired regulatory power. Analysis of formal delegation is essential to understand the structure of the new governance of markets. However, the volume shows how and why the power and activities of NMRs have grown well beyond the terms of the initial formal delegation. Surprisingly, governments have failed to fully use their formal controls over NMRs. Instead, NMRs have built close relationships with regulatees and each other through processes of learning, mutual dependence, and networks. Over time, they have developed their own norms, rationales, and resources. The consequence is a new group of powerful actors with concomitant accountability problems. NMRs constitute intermediaries between governments, suppliers, and consumers and provide a new source of rules to govern markets.

Other features of network industries

Require eminent domain and government provision 1. These services must be provided according to the legal doctrine of (state) provision 2. Have fixed costs that constitute the grid and give rise to the natural monopoly Information asymmetries of networks require regulation

"Globalization, International Organizations, and Telecommunications" by Kirsten Rodine-Hardy

1. This article has shown that membership in IOs, especially the WTO, is pivotal in determining the timing of adopting a new telecom regime. Less clear is the role of international organizations in shaping the design and diffusion of the regulatory agencies, or the implementation of actual regulations. In addition, battles between vested economic interests and a broader public interest continue to be waged within member states, across regions, and globally. The political challenges of promoting access to the global world through technology, information, and markets will continue to evolve as countries learn more about how to support and regulate markets. 2. Various components of the international transgovernmental networks are at work in the shift to adopt a new separate telecoms regulator. By incorporating the key factors of international organizations and transgovernmental networks within an overall model of diffusion and domestic policy change, it becomes possible to gain a richer and more empirically grounded view of policy change with implications for theory, institutional design, and policy formation. 3. While the widespread creation of separate regulators has been impressive, the enforcement and effectiveness of these separate regulatory institutions has been mixed. Most countries have enacted legislation on telecoms and policies of privatization, but the actual competition in many market segments remains limited. For example, some market segments tend to be highly competitive (e.g., wireless and mobile telephony) whereas others remain dominated by the monopolist incumbent (local loop, fixed line telephony, broadband). Furthermore, only some countries have established a new form of interconnection and universal access, which is the instrument for promoting public interest. Some countries have regulatory agencies within government ministries and are perceived to be strong and pro-competitive, whereas others are independent agencies yet perceived to be weak and anti-competitive 4. Finally, the findings of this study reveal the global contours of market regulation. Part of regulating telecommunications markets includes the power to provide citizens in rural and urban areas access to a much broader world, which is important not only economically but politically, culturally, and socially.How information can spread throughout the world, and to whom, can affect the lives of billions. While the regulation and governance of telecommunications seems arcane, it has very real effects on the lives of people—as witnessed in recent political upheaval in Ukraine, Syria, and Venezuela. Using mobile phones and the Internet, citizens have access to a broader world, enabling new forms of collection action and mass mobilization (Segerberg & Bennett, 2011). Yet, government involvement in monitoring these phones poses new challenges to national security, political rights, and civil liberties. The quest to reregulate global markets in telecommunications will be enacted in a global forum, with major states as big players, but also with citizen influence. More recent battles over data privacy (Newman, 2008), cybersecurity (Vaishnav, Choucri, & Clark, 2013), and net neutrality (Hart, 2011; Marsden, 2010) indicate that the role of government in telecommunications has only begun to be examined and understood.

"Policy transfer in European Union governance: regulating the utilities" by Simon Bulmer

1. In the past decade or two, EU scholarship has shifted its conceptual and empirical attention from unidirected empirical puzzles - just how member states influence EU decision making (uploading puzzles) or just how member states are hit by the EU (downloading puzzles) - to frameworks that conceive of the EU policy process as a mix of not only downloading and uploading but also, increasingly, of horizontal policymaking. With the declining role of the traditional Community method and the emergence of New Modes of Governance, the object of research within the field of EU policy-making has urged scholars to adapt their theoretical and conceptual tools to match this highly complex setting. 2. In response to this development, Bulmer and his colleagues in Policy Transfer in European Union Governance: Regulating the Utilities suggest policy transfer as an analytical framework for investigating how policy-making occurs in the EU. The authors build further on recent observations from various parts of EU scholarship that perceive the EU as a policy ' transfer platform '. Although a policy transfer perspective of EU policy literature is implicitly present within the EU literature, as the authors write, the full benefits of adopting policy transfer as the explicit lens will enable the actions of various actors within the EU to be revealed as deliberate forms of policy transfer 3. The authors contend that the outcomes of policy transfer in the EU will be a function of the specifity of the institutional contexts at the EU level under which transfer takes place, the domestic institutional characteristics of member states or policy sectors, and globalization effects. In terms of the first factor, the EU comprises various mechanisms of 'institutional mediation'. Depending on the institutions governing the phase of EU policy process under study, transfer may occur under a setting of negotiation, hierarchy or horizontal facilitation. These mechanisms more or less correspond to ' uploading ' (that is, Commission and Council negotiations), ' downloading ' (that is, the implementation of regulations, directives and ECJ rulings), and ' horizontal transfer ' (that is, open method of coordination). However, sooner or later, most policies (air transport regulation is the obvious exception in this study) will hit upon nation-states and the transfer outcome at 'street-level' will be a function of domestic mechanisms varying from 'institutional inertia' (that is, member states adapt EU policies to fit in with existing practices and routines), 'institutional opportunity structures and veto points' (that is, the strategic responses of domestic actors to EU policies), and 'institutionally driven competition' (that is, member states trying to achieve a better competitive position than other member states). 4. Chapters 3 to 5 of the book then apply this framework to the cases of the liberalization and regulation of airport transport (a single-tier regime), and telecommunications and the electricity market (both multi-tier regimes) in six countries. Chapter 3 tests the authors' main hypothesis - that transfer outcomes are a function of institutional contexts within the EU. They further refine this hypothesis and find that in the case of air transport regulation the transfer outcome is shaped by Dutch-British preferences for adopting a US-inspired deregulation of air transport. Officials from these countries managed to transfer their preferred policies from the European Civil Aviation Conference to other supranational institutions. In the other two cases, Bulmer and colleagues found that the UK model of liberalization proved influential as a principle but that it was not emulated by other member states; instead, the implementation of the UK model in national contexts followed a path-dependency, in line with previously established models within the different national contexts of member states. 5. In Chapter 4, the authors examine the EU regulatory regimes in the selected utility areas. Here regulatory regimes are perceived as the outcome of the negotiation processes examined in the previous chapter, but they also form part of the explanation of the actual governance of the sectors. Here, the authors found that in the air transport case the EU institutions had sufficient supranational sanctions and incentives as well as authority and mandate to have the air transport regulatory regime emulated at the member state level. In the telecommunications and electricity cases, the EU regime consisted of a framework of rule and sufficient leeway for member states to adopt their national regimes. However, the Commission was not really in need of authoritative measures since member states in this case must keep pace with changing technological conditions within the fields. 6. Chapter 5 then turns its eye on the domestic level and thereby to telecommunications and electricity regulation. It examines whether multi-tier governance promotes the spread of a European regulatory model or leads to a patchwork of national models. In other words, this chapter addresses the classic issue of whether Europeanization leads to a convergence or divergence of governance models within the EU. The authors ' findings are very much in line with observations elsewhere: the EU has altered electricity and telecommunications sectors beyond recognition but there is no proof of the emergence of a single regulatory model of governance across the EU. 7. The final chapter concludes that the EU is unmistakably a major platform of transfer that has caused major and fundamental change across the utility sectors of the member states. Another striking finding is that the authors claim to have found little evidence for horizontal policy transfer between member states and that the nature of transfer within the EU is very much determined by uploading/negotiation and downloading/hierarchical modes of governance. Globalization, they assert, has had an uneven impact across the three sectors and has formed at best a weak intervening variable for the role EU institutions have played in the transfer process. From this, negotiated and hierarchical policy transfer emerge as the most important and strongest determinants of the outcomes of EU policy transfer, albeit that their effects are not always supportive of transfer. With regard to negotiated policy transfer, the authors conclude that this mechanism is 'circumscribed by high institutional hurdles to agreement': member states with high stakes can easily block agreements. With regards to hierarchical policy transfer, the authors found, unsurprisingly, that hierarchical governance works best in single-tier (air transport) than in multi-tier (electricity and telecommunications) regimes.

"Buying Out the State: A Comparative Perspective on the Privatization of Infrastructures" by Volker Schneider, Simon Fink and Marc Tenbücken

1. Like Chick, Schneider and his coauthors examined the telecommunications, aviation and electricity sectors. 2. Unlike Chick, however, they looked at these industries in 26 advanced industrialized nations between 1970 and 2000. In so doing, they found that the ideology of the governing party explains a great deal of the privatization in the 1980s, but not in the 1990s. To put it differently, right-wing governments, keen on reducing the size of the state, pushed through privatization in the 1980s. This dynamic changed in the 1990s, when left wing governments, the traditional defenders of the state, started to take part in the privatization bonanza. 3. While Schneider and his coauthors recognized the strong effect economic openness and interdependence had in bringing about privatization, they failed to appreciate how these economic pressures might have coincided with political pressures from other countries grappling with the same seismic change.

"The EU Commission and National Governments as Partners" by Mark Thatcher

General integrationist models underline conflicts between the Commission and national governments. They cite telecommunications as an exemplar of the Commission imposing its choices on unwilling member states. However, a close examination of the development of substantive EC regulation in telecommunications shows that the Commission and national governments acted in partnership. Major conflicts concerned constitutional issues rather than substantive ones. How and why the partnership came to exist is analysed using a principal-agent framework. The article argues that formal and informal institutional controls made the Commission very sensitive to the preferences of national governments in substantive EC telecommunications regulation, resulting in partnership in developing substantive EC regulation. Four processes whereby such controls operated were: the participation of national governments at all stages of decision-making; incrementalism; compromises and linkages; national discretion in implementation. In contrast, effective controls and processes did not apply to constitutional issues, leading to conflict rather than co-operation between the Commission and governments.

"Independent economic regulation: A reassessment of its role in sustainable development" by Ian Bartle and Peter Vass

The established 'standard' model of economic regulation is characterised by independent economic regulators undertaking specialised tasks. There is a clear perception that the roles and responsibilities of regulators are and should be reduced to the execution of the core function, i.e. economic regulation. We argue that this needs to be reassessed in the context of sustainable development in which the integration of economic, social and environmental policy objectives are fundamental. The established model is particularly confronted by problems of regulatory policy indivisibility (social, economic and environmental matters are intertwined at technical levels) and information asymmetry (regulators often have more knowledge of environmental and social effects of economic regulation than government). We propose a 'revised standard' model in which economic regulators are more clearly integrated into the regulatory state's system of governance. Economic regulators retain their independent core specialism but at the same time are encouraged to use their knowledge and expertise to address the social and environmental implications of their core decisions. This is achieved not by extending their decision making powers but by encouraging and facilitating a direct engagement by regulators with the appropriate public authorities on social and environmental decision making. The onus is not only on regulators to engage but also on government which should welcome and encourage such engagement. Although there is some evidence in Britain that the model reflects actual practice, it needs to be more deeply and widely embedded and institutionalised. This can be achieved by high level governmental commitment including specification in sustainable development strategies and principles of good regulation.

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher, Chapter 13

Internationalisation represents an important force for institutional change. Powerful transnational technological and economic developments are transforming many sectors, putting pressures on existing institutions and closed national markets. Rival nations frequently alter their domestic institutions, offering sources of regulatory competition and examples of alternative institutional arrangements. (p.269) Supranational regulation is growing, not only by the EU but also other organisations such as the WTO. The second image reversal and comparative institutional models underline the need to integrate international factors into studies of domestic politics. The present study follows them, but argues that rather than treating international factors as external pressures that are mediated by diverse domestic settings, analyses should study how and why different forms of internationalisation can change those institutional settings. It suggests that internationalisation should be seen as part of the policy process: at the international level, where overseas decisions and supranational regulation are important forms of internationalisation; at the national level, where these forms become part of domestic policymaking concerning reform of economic institutions. (p.270)

"Keeping a watchful eye: Doctrines of accountability and transparency in the regulatory state (Working Paper)" by Martin Lodge

1. As noted at the outset, it is very difficult to deny that transparency and accountability are essential 'good'. This paper has attempted to suggest that accountability and transparency are not goals in themselves, their sole purpose is to keep a system of control within a certain range of desired states. To keep a system of control 'under control' requires a more refined view than the basic debates about parliamentary oversight over supposedly independent regulatory agencies would suggest. Thus, this paper has advocated the adoption of a regulatory regime approach that points to accountability and transparency along at least five dimensions. When approached with a basic toolbox of four instruments and the different understanding of potential worldviews as to what constitutes 'appropriate' regulation, a more complex picture as to accountability and transparency emerges that goes beyond the concerns of parliamentary oversight over regulatory activities. Moreover, any analysis and discussion of accountability and transparency needs to consider not only the standardsetting dimensions, but pay equal consideration to issues occurring on the effecting and the detecting modes of any regulatory regime. 2. The empirical section too has suggested that there national policy responses to questions of accountability and transparency have varied, raising the question why particular mechanisms have not been transplanted. In particular, the comparison did not suggest that there were clear differences between sectors where there were low information costs for consumers (thus arguably justifying instruments promoted by the consumer sovereignty doctrine). However, at the same time, there was a clear tendency over time towards emphasising instruments that promoted information and voice that accompanied the increased reliance on choice and competition. The formal existence of choice without any accompanying instruments that facilitate actual choice does not facilitate consumer choice. 3. In conclusion, if war is too important to be left to the generals, then regulation is too important to be left to the regulators and (poorly resourced) parliamentary oversight committees. Talking about accountability and transparency has for too long been concerned with long-established questions about parliamentary oversight and the consequences of oversight and ministerial direction on the goal of regulatory independence. The obligation to be accountable and transparent is fundamental to any power relationship within any regulatory regime and therefore is important to public debate. However, to come to an informed discussion, it is important to widen this debate, both analytically and empirically, rather than remain continuously rehearsing narrow views that only in most limited ways add to the ways in which public services can be made transparent and accountable to the final consumer of the product, the citizen.

"Policy credibility and delegation to independent regulatory agencies: a comparative empirical analysis" by Fabrizio Gilardi

1. In this paper I have performed an empirical analysis of one increasingly relevant form of institutional change, namely the creation of independent regulatory agencies in Western Europe. More specifically, one particular explanation of this phenomenon has been investigated, i.e. the credibility hypothesis. This explanation stresses the need for governments to be able to credibly commit to given choices, and postulates that creating independent agencies is a means to increase the credibility of regulatory policies. While the empirical relevance of the phenomenon can hardly be questioned, that of the hypothesis should. This is precisely what has been done here. 2. First, I have shown that the credibility hypothesis has great merit. Sectoral features (the economic nature of regulation) and national institutional features (veto players), as well as their interaction, can explain a good deal of the cross-national and cross-sectoral variation in agency independence. Economic interdependence, on the other hand, is not a relevant explanatory factor. I have shown here that while some transnational factors do matter, others do not. The institutional framework of regulatory policy is in part shaped by sectoral, not national, characteristics. In particular, economic regulation is much more likely to be carried out through independent agencies than social regulation. On the other hand, one powerful transnational force, i.e. economic globalization, has been shown to be irrelevant. 3. I have found strong support for the argument that national institutional features mediate transnational forces. Specifically, I have shown that functional pressures linked with credibility problems are moderated by veto players. At a theoretical level, what is particularly interesting here is that the veto player theory offers the possibility to integrate national institutions into a rational choice framework in a comparative way. To this extent, it seems that a little of the comparative advantage of historical institutionalism in taking country-specific factors into account has been eroded. 4. In conclusion, the credibility hypothesis is corroborated by the analysis presented here. When designing regulatory institutions, governments seem to care about the credibility of their policy commitments. Whether we can be happy with this explanation, however, can only be assessed by future research.

"Delegation in the regulatory state: independent regulatory agencies in Western Europe" by Fabrizio Gilardi

1. The book focuses on what the author calls the institutional foundations of this new phenomenon of regulation, which he considers as being the newly emerging independent regulatory agencies (IRAs). The main feature of such IRAs is that they are (somewhat) "insulated from political control". The author has created a unique dataset that accounts for the emergence of such IRAs since 1980 in 17 European countries (EU15 plus Norway and Switzerland) and in seven regulatory domains, namely telecommunications, electricity, financial markets, competition policy, food safety, pharmaceuticals and the environment. This dataset shows that IRAs have increased exponentially, especially since the late 1990s. The second unique contribution is the author's construction of an indicator of independence of regulators. 2. The book seeks to answer two questions, namely (1) "why have governments chosen to delegate regulation to authorities that they can only in part control"? And (2) "why did IRAs spread so spectacularly during the 1990s"? In response to the first question the author finds that "policy makers delegate so as to increase the credibility of their policy commitments and also to tie the hands of future policy makers who may have different preferences", whereas the answer to the second question is basically the international diffusion of the IRA model, mediated by some national specificities. I will come back to these two questions and to the answers in the final critique of the book. 3. The book is structured into five main chapters, plus an introduction, a conclusion and appendices. Chapter 2 makes the case for the phenomenon of regulation in general and for regulatory agencies in particular. It shows how regulation has become a central activity, especially of European governments. This literature review was certainly comprehensive at the time of writing (2003-2004?) but is a little outdated by now. Chapter 3 is theoretical and focuses on the question of delegation, i.e., on the question why, in theory, a government would delegate regulatory authority to independent bodies. The author convincingly shows that often invoked principal-agent theory is not really helpful here. Rather, he links delegation to problems of credibility of political commitments and political uncertainty. This is indeed the central idea of the book: creating IRAs is seen as a deliberate political choice so as to increase the credibility of political commitments (e.g., "credible commitments") and to tie the hands of future policy makers (and by doing so again increase the credibility of one's actions). The latter very much depends upon the ability of veto players to let this happen. This is also the country specificity the author refers to and constitutes a hypothesis to be empirically tested. At least the second idea (delegation in order to tie the hands of future policy-makers, and this being influenced by veto-players) seems to be heavily influenced by the literature on central banks (which turns out not to be a generalizable model after all). Chapter 4 tests these ideas empirically. The author is able to conclude (pp. 70-72) - on the basis of measuring the independence of IRAs in 17 countries and seven regulatory domains - that regulators are more independent in economic regulation (especially in the utilities, where credibility is more important) than in social regulation, that delegation to IRAs is more widespread in countries where governments alternate frequently, and that regulatory independence is higher in countries with fewer veto players. Chapter 5 seeks to answer the second question by way of referring to the diffusion literature. The author makes the argument - mainly at a theoretical level - that "the spread of IRAs has been due to a mix of sector- and country-specific factors and to an interdependent diffusion process driven by emulation" (p. 104). Chapter 6 tries to ground this argument in statistical analysis. This is actually the only place in the book where the author, timidly, introduces the role of the European Commission, namely as a factor for spreading the IRA model. Indeed, the spreading of the IRA model in the 1990s cannot be explained by the above variables alone 4. Indeed, the weakness of this book is on a theoretical level, i.e., in the understanding of what regulators really are and why they come about. While the idea that regulators emerge because policy-makers want to gain credibility can make sense from a nationally and narrowly focused political science perspective, one may question whether this is the real reason why IRAs have come about in Europe (which is the focus of this study) and why they have diffused so rapidly. As a matter of fact, the author himself has to introduce the role of the European Commission, at least when it comes to the diffusion of the IRA model among European countries. But the role of the European Commission could equally be invoked when it comes to explaining the independence of the IRAs, as such independence is also a means to impose European regulations at the member state level. Nevertheless, it is thanks to works like this one that we can make progress in the understanding of the phenomenon of independent regulatory authorities in Europe and elsewhere.

"Internationalisation and economic institutions: comparing European experiences" by Mark Thatcher

1. The major contribution of this book, however, is not just the well written narrative of these major events, but also its attempt to explain, from within a single unified theoretical framework, why the timing and trajectories of the reforms differed across these four countries. Drawing on theories from the 'second image reversed' literature (SIR) and comparative institutionalism, the book examines the causal relationships between three forms of internationalisation and the reforms of domestic sectoral economic institutions. The three forms of internationalisation are transnational technological and economic developments; regulatory reforms in the USA; and supranational decision-making within the European Union. For each policy sector (securities trading, telecommunications, electricity supply, airlines, and postal services) in each of the four countries, the author process traces how and when each or some of the forms of internationalisation affected (or not) the domestic institutional settings in these policy sectors. In a nutshell, the research's main finding is that regulatory reforms in the USA and supranational decision-making in the EU had a greater and more decisive impact on domestic economic reforms than technological and economic changes; that domestic veto players enmeshed in a politics of regulatory competition with their counterparts in other countries were a crucial 'transfer' point in this process; and, finally, that each sector and country adopted the reforms along national path-dependent routes. 2. What is interesting in this book is the holistic approach that Thatcher has applied throughout each chapter. To take the securities markets case as an illustration (chapters 2-5), it is instructive to see how changes in the US securities markets, i.e. the development of large international market firms from the 1970s onwards, generated pressures for reform in Europe. There, these pressures were first felt and picked up in the UK where the 1986 Financial Services Act caused a Big Bang and gave way to the evolution of London as the world's leading financial centre in the 1990s and first decade of 2000. The London example, then, caused policy-makers in Germany, Italy and France to choose between following the example of London or to be irrevocably pushed towards the margins of international financial markets. The case of securities trading reform is highly illustrative of the way internationalisation and regulatory competition knit together national centres of power and decision-making and caused reforms in sectors where the dominant mode of policy-making was incrementalism.