Thursday, August 7, 2008
Protecting the Freedom of Competition vs. More Economic Approach? The Evolution of the Normative Foundations of European Competition Policy
Posted by D. Daniel Sokol
Oliver Budzinski of the University of Marburg Department of Economics discusses Protecting the Freedom of Competition vs. More Economic Approach? The Evolution of the Normative Foundations of European Competition Policy (Wettbewerbsfreiheit Und More Economic Approach: Wohin Steuert Die Europaeische Wettbewerbspolitik?).
ABSTRACT: The more economic approach of European competition policy entails the implementation of a new (normative) conceptual approach of antitrust policy: decisions become more strongly focused on short-run and quantifiable price and quantity effects. This paper contributes to the widespread discussion whether this efficiency-orientation stands in contrast to the idea of protecting the freedom of competition as the prerequisite of (in the long-run) sustainable competitive markets (freedom approach). Despite finding considerable scope for compatibility of the two approaches, the paper identifies as the main difference the underlying assumptions about the predictability, computability and measurability of competitive processes: while the more economic approach (implicitly) assumes that - with the help of modern economic techniques and instruments like econometrics and simulations - future market equilibria can be calculated and predicted ex ante to a considerable extent, the freedom approach expects competitive processes to be less accessible for predictive quantitative analysis, or, in other words, a lower degree of reliability of quantitative predictions. Therefore, the freedom approach assumes extensive case-by-case analysis to produce a higher frequency of the occurrence of error types I and II compared to more general rules, whereas the more economic approach assumes the opposite.