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    The ‘light touch’ has made some utility deals extremely lucrative

    tags: regulation regulatorycapture privatisation utility Arqiva privateequity UK competition capitalism corruption

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    Yet the change of ownership from public to private did nothing to solve the challenge of regulating natural monopolies such as electricity and rail, or of constraining market power in industries with economies of scale. The failures of regulation and competition policy over the intervening decades are now all too apparent…

    Financial investors have wrung every drop they can out of the water industryrather than reinvesting profits. In spite of a recent Competition and Markets Authority inquiry into the electricity market, even Conservative politicians are proposing price controls. Telecoms companies and their regulator Ofcom are at loggerheads. And where there has been competition, as in the airline industry, the collapse of Monarch raises doubts about consumer protection. No wonder that a study by the Legatum Institute reported wide support for the idea that capitalism is in crisis…

    Capitalism is not the problem. It is regulatory policy that is in crisis. Renationalisation would not serve the public any better without careful design of incentives and accountability. The experience of the past four decades underlines fundamental challenges.

    It is hard to make natural monopoly industries competitive. Even when there are auctions for licences or franchises, bidding companies know far more than the regulator about costs, technological possibilities and demand. As Nobel laureate economist Jean Tirole argues in his new book Economics for the Common Good, asymmetry of information between regulator and provider can never be wholly overcome. This understanding led to the UK’s use of fixed price bids for franchises, giving operating companies stronger incentives to be efficient. If a privatised operator misjudged costs or demand, and made less profit than anticipated, tough…

    The trouble is that regulators and politicians like the idea of business stumping up if things go wrong, but not of them reaping the reward if things go well. The temptation to claw back some of the return by changing the rules is strong — in many sectors there has been almost constant change. No wonder all the businesses concerned employ teams to handle relations with the regulator — which brings the danger of regulatory capture. Some sector regulators are clearly far too lenient with “their” companies.

    The current political allure of price caps — whether on electricity in the UK or mobile call charges in the EU — reflects a suspicion that capitalists are doing too well from natural monopoly industries. In some cases the suspicion may be well-founded. But this plays directly into another challenge: if low prices for consumers are enforced at the expense of profits, it will reduce new investment or prevent improvements in service quality. Or companies might simply recoup losses elsewhere….

    Beyond the formerly nationalised sectors, competition and regulatory policies are also in a mess. People do not trust competition to protect consumers, regardless of the benefits it so evidently brings in so many cases. And of course, some regulation is necessary, again because of a fundamental asymmetry of information — nobody would want a free-for-all over technical or safety standards. The market cannot reveal dangerous cost-cutting by unscrupulous companies until it is too late…

    Businesses always complain about red tape, of course: not because they object to the aims but because every new headline adds to the burden. In a highly regulated economy, consumers expect nothing bad to happen and are outraged when it does, so a new law is enacted and complacent expectations restored — until the next time.

    Is there another way through these dilemmas? Or are we stuck with the worst of all worlds, a lack of effective competition, and regulation that is simultaneously burdensome and counterproductive? Bonfires of red tape never light up, and the public mood seems to rule it out. Regulatory independence is more important than ever, though, in febrile times; it is also harder to achieve. It is clearly time to review the structure of regulation of the once-nationalised network industries.

    One approach is to combine all the sector regulators into a single body, with a clear mandate to be tougher. Smart businesses will recognise a tough, rule-based regulator is better than constant political intervention. Regulators also need to be less naive about financial engineering by investors. Economists must work out where on the trade-off between low prices now and investment later each industry ought to be — but above all, to keep making the case for competition where it is possible as well as firm regulation where it is not.

    tags: monopoly competition regulation privatisation DianeCoyle asymmetry information regulatorycapture

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     The question is whether Labour can actually deliver. On that one must be sceptical.

    Socialism is not a new idea, but one that has been tried and tried again. It has come in three main varieties: autocratic, populist and social democratic. Autocratic socialism was that of the Soviet Union and Mao Zedong. It was a catastrophe. The social democracy of the Nordics or the Netherlands has, in contrast, been a triumph. These are among the most successful societies on the planet: wealthy, dynamic and stable.

    Finally, the populist socialism so characteristic of Latin America has never worked economically. But it has at least not had the cataclysmic human results of Soviet or Maoist communism (though the outcome of Hugo Chávez’s Venezuelan experiment, much lauded by Mr Corbyn, is clearly ghastly).

    Why has European social democracy been such a success? The answer is that it understands the fundamental constraints that have to shape any successful programme, particularly for a party that believes in active government. First, it must avoid the lure of magical thinking on budget constraints, at all levels of government. Resources are always limited. Second, it must recognise the crucial role of incentives in shaping human behaviour. Third, it must fully internalise the importance of a stable institutional framework in guiding these incentives. Last, it must understand that the private sector, foreign as well as domestic, must play a leading role in the economy…

    The economy can function with very high levels of tax: ratios of close to, or over, 50 per cent of gross domestic product are common in the advanced social democracies. Governments can also play a big role in supporting the economy. But private initiative is essential. And that does not come because the government commands it. It comes because the government motivates it.

    Why, then, has populist socialism failed? It is because it does not respect these constraints. It is undisciplined on public finances, unconcerned about incentives, contemptuous of property rights, hostile to the private sector and antagonistic to the constraining institutions. The last point is crucial. As Princeton’s Jan-Werner Müller has written, the one thing leftwing and rightwing populists share is the belief they alone represent the people against the elites. Anything that limits their ability to act as they see fit is seen as illegitimate…

    tags: LabourParty socialism MartinWolf JeremyCorbyn democracy capitalism

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    Walker, a neuroscience professor at the University of California, Berkeley, has written an angry polemic about what he sees as the blindness of individuals and society as a whole to an unfolding public health disaster, caused by “the decimation of sleep throughout industrialised nations”.

    He maintains that a silent sleep-loss epidemic, resulting from changing social and employment patterns together with new sleep-disrupting consumer products such as smartphones, “is having a catastrophic impact on our health, our life expectancy, our safety, our productivity and the education of our children”.

    Walker’s advice to everyone — and an iron rule in his own life — is to sleep eight or nine hours a night. Routinely getting less than seven hours undermines health on many fronts. He describes multiple studies in humans and lab animals, showing how insufficient sleep harms the brain, demolishes the immune system, disrupts the body’s blood sugar balance and damages coronary arteries.

    Long-term consequences include elevated risks of suffering from Alzheimer’s, cancer, diabetes, heart disease and stroke. The immediate impacts of a sleepless night range from crashing while driving to forgetting key facts in an exam…

    Walker is rightly keen to dispel an attitude still prevalent in some circles: that getting by on little sleep is an admirable sign of mental strength, while sleeping a lot denotes weakness and lack of moral fibre. Only a tiny minority of people with very rare genetic mutations can thrive on less than six hours a night, he argues…

    Walker describes superbly what is going on in the brain during sleep and dreaming — above all sorting out the experiences of waking life, culling unwanted material and strengthening more important memories.

    The two basic types of sleep are REM, characterised by rapid eye movements and dreaming, and deeper NREM non-dreaming sleep, which alternate through the night. NREM, which tends to dominate at first, weeds out and removes unnecessary neural connections, while REM comes into its own later, strengthening remaining connections. A good night’s sleep has five NREM-REM cycles.

    tags: sleep sleepdeprivation neuroscience brain health dementia efficiency productivity cancer diabetes Alzheimer’s cardiovascular heart focus mind dream dreaming

Posted from Diigo. The rest of my favorite links are here.

Posted from Diigo. The rest of my favorite links are here.

Posted from Diigo. The rest of my favorite links are here.

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    tags: CambridgeAnalytica persuasion politics GillianTett DonaldTrump USpolitics poll survey democracy election voting bigdata analytics

  • A cabinet paper discussed by Mrs May’s team last year warned that if Britain pulled out of the customs union it could lead to a fall of 4.5 per cent in annual income by 2030, based on a Norway-style relationship with the EU.

    The paper, first reported by the Guardian, assumed that Britain would stay inside the single market but outside the customs union and drew on research by the Treasury and several think-tanks.

    It also concluded that Britain would need to grow trade with its ten largest partners outside the EU by 37 per cent by 2030 to offset a loss of exports to the EU. Asked whether this was likely, one Treasury insider said: “No.”

    Mrs May hopes to negotiate with the EU a transition deal during which Mr Fox could negotiate bilateral trade deals with the provision that Britain could not implement them until it was fully outside the customs union.

    The Bombardier row has highlighted the likely complexity of securing a trade deal with the US. Mr Hammond believes Britain should take a hard-headed view before severing ties with the customs union.

    The Daily Telegraph’s headline on the Bombardier row — “May threatens US with trade war” — was an indication that even in the pro-Brexit media there is a realisation that a UK-US trade deal might be more complicated than at first thought.

    A government spokesman said: “After leaving the EU the UK will be free to pursue new trade agreements with different countries. Any negotiations will be consistent with the terms of the implementation period agreed with the EU.”

    They added: “Our exit from the European Union offers an unprecedented opportunity to reshape our independent trading ambitions; to build on the already strong trading relationship with the US, including through a possible future Free Trade Agreement; and make the case for open markets around the world.”

    One Treasury source told the Financial Times in June: “There is potentially a timing issue: giving up existing trade for potential future trade is pain now for possible — but uncertain — future gain. So we need to proceed very carefully.”

    There are also fears in the Treasury that even if Britain secured a trade deal with Washington, it would create economic pain in the UK because of much higher American productivity rates, especially in agriculture.

    tags: Brexit trade UK HMTreasury

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Posted from Diigo. The rest of my favorite links are here.