Bailing out the banks: Reconciling stability and competition

There is a new CEPR report on this topic –  this VOX column provides a summary.

Groceries Code Being Introduced

Following up on yesterday’s post about farmers and the IFA, today’s Irish Times reports that the government “is to introduce a statutory code of conduct for grocery retailers and suppliers, in spite of opposition from the bigger operators.” It is also being introduced despite opposition from the ESRI and the Competition Authority. Still, “newly elected president of the IFA, John Bryan, welcomed the announcement.”

The IFA and Retail Food Prices

For most people, one of the few positive elements of the current slump is that the sharp decline in the cost of living has somewhat cushioned the blow of declining nominal incomes. But deflation has not been a good thing for everyone. In particular, farmers have been hard hit by declining food prices.

One can only have sympathy for farmers who are struggling with current market conditions. However, the current campaign by the Irish Farmers Association (IFA) aimed at blaming retailers for falling prices is based on poor economics and its calls for policy intervention should be resisted by government.

Investing in Electricity Infrastructure and Renewables in Ireland

With three colleagues Seán Diffney, Seán Lyons and Laura Malaguzzi Valeri, we have recently published a series of papers on the economics of the electricity industry in Ireland. The conclusions are summarised in a Research Bulletin published today. There is also an article in today’s Irish Times.

The original papers are:

DIFFNEY, S., J. FITZ GERALD, S. LYONS and L. MALAGUZZI VALERI, 2009. “Investment in Electricity Infrastructure in a Small Isolated Market: the Case of Ireland,” Oxford Review of Economic Policy, Vol. 25, No. 3, pp. 469-487. Available here. We will release a working paper with additional results on this topic in the next few days.

MALAGUZZI VALERI, L., 2009. “Welfare and Competition Effects of Electricity Interconnection Between Great Britain and Ireland”, Energy Policy, Vol. 37, pp. 4679-4688. available here. An earlier version is available as a working paper.

The benefits of increased investment and efficiency in public infrastructure and utilities

A guest post by Paul Hunt

The case for a pro-cyclical fiscal contraction accompanied by a significant “internal devaluation” has been convincingly demonstrated by many commentators and, in particular, on this site by Philip Lane (most recently here).

But Philip has been equally strong on the requirement to tackle rent capture and inefficiencies that increase costs and prices and, to some extent, justify calls for the retention of current nominal pay levels, as in:

As a complement to pay reductions, it is also vital to more vigorously tackle monopoly power in many sectors of the economy, since a reduction in markups and monopoly rents (often shared between owners, managers and workers in these firms) is an important source of real depreciation and improved competitiveness.” (Irish Economy Note9, p3)

However, apart from a recognition of the importance of this task, it appears that little attention is being paid to what could be done in the short to medium term. There can be no doubt that the bubble economy facilitated increased rent capture and inefficiencies in the sheltered sectors of the economy, but quantifying the scale and extent – not to mind devising effective remedies – is a daunting task. And the political and economic power of the beneficiaries is not insignificant. So it is, perhaps, not surprising that there is little evidence of these problems being tackled effectively.