Massimiliano Vatiero

Costly institutions as substitutes: novelty and limits of the Coasian approach

One of the main contributions of Ronald H. Coase was to demonstrate how mainstream economics was based on a contradictory amalgam of costly physical inputs and free institutional resources, and to gave origin the economics of institutions: each institution is a mode of allocation and organization of economic resources that is to be investigated. In particular, none of the institutions (including the market) is a free lunch. The Coasian approach regards institutions as costly substitutes and provides a fundamental starting point for comparative institutional analysis. However, Coase neglected two issues deriving from the observation that institutions are not cost-free. First, when institutions are costly, one should not only consider their possible substitutes but also how complementary institutions affect their costs, as well as the costs of the possible institutional substitutes. Secondly, the economic analysis should also take into account that the transition from one institutional setup to another cannot occur in costless meta-institutions. The initial conditions may substantially affect the final institutional arrangements. Both the novelty of Coase’s approach and its limits were grossly undervalued. The costly institutions assumption requires a view of economics as a historical discipline.

The Ordoliberal Notion of Market Power: An Institutionalist Reassessment

“Contemporary Europeans” began to develop the idea of a competition law around the end of the eighteenth century in Vienna, the truth-core of the European competition law tradition. In Vienna, a group of intellectuals (Carl Menger and Eugen Bohm-Bawerk, among others) began to explore the idea of using law to protect the process of competition.1 Austrian ideas had planted in Germany, where the first European competition law was enacted in 1923. This law, however, was too weak to withstand the pressures of economic lobbies and public opinion against it, and Nazism eliminated it. Nevertheless, during the Nazi regime, a group of lawyers and economists called ordoliberals continued to explore “underground” the issue of Continental and Austrian ideas on competition law at Freiburg.2 December 2010 European Competition Journal 689

ON THE (POLITICAL) ORIGIN OF ‘CORPORATE GOVERNANCE’ SPECIES: ORIGIN OF ‘CORPORATE GOVERNANCE’

Although economies, business practices and living standards have converged since WWII, corporate structures continue to differ among the advanced economies of the world. Looking at the diversity of corporate structures of large‐sized firms around the world (and over time) would fascinate Charles Darwin. This work develops a critical review of the literature on political determinants of corporate governance through the Darwinian theory (including some Lamarckian aspects). As Darwin, in his work On the Origin of Species, explicates the diversity of species of tortoises, finches and iguanas of the Galapagos Islands, so Darwinism may contribute in understanding the origin and the persistence of corporate diversity. In particular, this paper takes into account politics‐driven variations, their inheritances, and the subsequent selection of advantageous ‘corporate’ attributes.

Positional Goods and Robert Lee Hale's Legal Economics

The legal realist Robert Lee Hale offered a definition of freedom as a zero-sum game: each volitional freedom implies some degree of coercion over other people’s freedom and at the same time one’s liberty is subject to some degree of control and coercion by others. The objective of our work is to develop such an intuition along with the theory on positional goods. This allows us to illustrate the externalities deriving from the “consumption” of freedom and detail the role of the law-maker in accordance with the Halean contribution.

Learning from the Swiss Corporate Governance Exception

The Swiss economy represents an exception to the legal origin theory (e.g., Roe (2006)). Although Switzerland is a country belonging to the civil law family, many of its public companies have diffused corporate ownership, as do those in common law countries. This paper maintains that the Swiss exception relies on the complementarity between corporate ownership and policies addressing employment protection and innovation. The Swiss case presents two lessons: first, the current corporate governance is the result of a long and composite path in which politics plays a pivotal role; second, the institutional differences and similarities across countries, which one would try to explain along with the legal origin theory, can derive diversely from additional politics-based accounts, such as those referring to policies on employment protection and innovation.

ORDO AND EUROPEAN COMPETITION LAW

Abstract It is often “assumed,” even among well-informed lawyers and economists, that European competition law is an emulation of the US antitrust law because of American influence on European political and economic debates after the Second World War. However, such an assumption is disputable: in accordance with Professor Gerber, the competition law in Europe is an indigenous product based primarily on ideas developed in Germany by the so-called ordoliberal thought. In this respect, the article 102 TFEU may be considered a proof. The aims of this article are to furnish a critical examination of ordoliberal ideas of anticompetitive conducts and underline the relevance of ordoliberal thought for the development of the modern European competition law.

Valutazione delle autorità di regolazione: una nuova introduzione

An Independent Regulatory Authority is a publicly identified official bureau having the regulatory responsibility of a market and being independent from i) the agents operating in that market, ii) other interested parties such as industrial pressure groups and iii) political actors like ministers. In particular, an Independent Regulatory Authority can be represented as a decentralised mode of government designed to check and balance the powers of ministries and interest groups. We can find in this depiction a European theoretical root: the Ordo-Liberal thought. The purpose of this paper is to emphasize such root in the evaluation of the performance of Independent Regulatory Authorities.

Positional goods and social welfare: a note on George Pendleton Watkins’ neglected contribution

Abstract Watkinss analysis of adventitious utility contains many aspects that are connected to the contemporary debate on positional goods. First, Watkins adventitious utility emerges from a process of social exclusion and can create negative externalities, in the sense that positive consumption of one individual implies negative consumption by another individual. Not only it creates negative externalities on other individuals, but it can initiate a race-to-the-bottom, where individuals waste an increasing amount of money on goods which do not possess any real utility.

Ownership and Innovation: Evidence from Swiss Listed Firms

Both theoretical and empirical studies provide mixed predictions when looking at the impact of corporate ownership on innovation. Contributing to this discussion, this paper conducts a causality test of the relation between the ownership concentration of firms and their innovation, measured by patents and patent citations. Using a sample that contains annual data of about 150 companies over the 1990-2010 period, we address potential endogeneity concerns using the introduction of the Swiss takeover law as an instrumental variable. In line with the “hold-up” view, we find higher ownership concentration leading to more firm innovation.

Dominant Market Position and Ordoliberalism

The ordoliberal distinction between performance competition and impediment competition may improve the understanding of the European distinction between a “dominant position” and an “abuse” of that position. Using a simple game-theory framework, I illustrate the dominant firm as a firm with, among other things, a dominant strategy in performance competition. If, due to the impediment condition, the dominant firm abandons its dominant strategy in the performance competition, then this firm is conducting abusively. In other words, the dominant firm should behave as-if it did not have economic power. It is the formulation of the ordoliberal as-if standard. As I show, such an ordoliberal standard leads to a wider concept of dominance that not only includes the economic domain but also considers the impact of private economic power on the political sphere . Copyright Springer-Verlag Berlin Heidelberg 2015