Sunday, February 26, 2012

Less Regulators in Spain (by Francesc Trillas)

The Spanish conservative government, recently elected after the November 20th General Election, just decided to eliminate the telecommunications (CMT) and energy (CNE), among others, sectoral regulatory agencies and absorb their functions in a new super competition policy regulator. The directors of the new super-agency will be appointed by the government, although they will have to pass a hearing in Parliament, who will be able to remove the candidates by overall majority (the same that requires the appointment of the government). So much for the idea of independent regulation.
The idea of better coordination of regulatory agencies among themselves and with the rest of government is not a bad one. However, it says little in favour of regulatory predictability and credibility to decide such a change in a rush after a government change. In any case, the notion of independent regulation keeps showing signs of weakness, after a similar move took place in Danish telecommunications some months ago after the socialdemocrats winning an election. The institution has proven much less durable than initially expected. However, network industries, like other industries, do need to be regulated, and the input of independent experts is necessary to achieve a better functioning of public, democratic intervention in these sectors. Probably, independent, insulated experts are more desirable when their task is of low dimensionality, because this facilitates expertise and accountability. Big regulators and independent regulators are a difficult marriage. Competition is possible and desirable in parts of these industries, and this competition will not be possible without intelligent regulation. While the Spanish government signs manifestos with other European governments (like the Brittish and the Italian, who show no temptation to abolish regulatory agencies) to introduce more liberalization in services, it also promotes the demolition of the institutional apparatus that is necessary to achieve effective liberalization.

Sunday, February 19, 2012

Against Scottish Independence (by Pedja dell'Arno)

As this interview of the great BBC journalist Jeremy Paxman with Scottish Prime Minister Alex Salmond shows, nationalist profets not always have answers to everything. It is interesting to see that Scottish independence would not mean changing the head of state (it would still be the Queen of England) and it would not mean stop watching the BBC, probably one of the greatest contributions of England to civilization. It would not even mean creating a new currency, although Mr. Salmond is not sure yet whether the currency would be the euro or the pound. It is not clear either whether in case of necessity the Scottish themselves would bail out Scottish banks, or it would have to be with the help of the English. Nothing is clear, because in an interdependent world, in the European Union, independence is ill defined. We live in a world of overlapping and complex sovereignties. I do not think that the ambition to have a seat in the European Council of Ministers justifies spending scarce political capital in a rich part of it such as the United Kingdom. This political capital could better be spent on more important and urgent fights such as ending world poverty or stopping climate change, or improving fiscal coordination to keep high tax rates to fund the welfare states. Political leaders should push for better interdependency, not for independence (unless this is justified by human rights violations, which is not the case at all).

Wednesday, February 15, 2012


The Pretence of Knowledge was the title of the 1974 Nobel Prize lecture by Friedrich Hayek. It was a declaration of intellectual war against socialism and the attempts to control society from the state. Almost forty years later, the pretence of knowledge can be used in an opposite ideological sense. Those that promote the idea that economic, social and financial problems should be fixed by an elite of insulated expert regulators (an idea inseparable from economic elites that emanated from the Washington Consensus), separated from public opinion and the political process, are also putting essential decisions in the hands of agents who often have the pretence of knowledge. Xavier Vives told me in an IESE presentation I gave today on “Behavioral Regulators” that the pretence of knowledge is especially common in the field of macroeconomics. Experts are essential in a complex society, but they should be used to help democracy and not to undermine it. It is precisely because nobody can know everything that democracies and expertise need to find a better coexistence. Experts’ mistakes have been a key component of the recent global financial crisis. Auditors, accountants, regulators, central bankers, professional investors, all of them have made huge mistakes. Experts are subject to biases as well as lay citizens are, and in some cases these biases are even stronger in the case of experts. Overconfidence, availability, hindsight, illusion of control, are biases that are well documented in the case of experts. Overconfidence is positively correlated with the perception of expertise, and the pretence that some things are knowable when they are not is one of the biggest problems that experts should learn to recognise.

Sunday, February 5, 2012

(In)Justice and Truth in Spain (by Francesc Trillas)

I outsource all I have to say about the crimes of Francoism and the courage of judge Garzón to the editorial of the New York Times today:

Terrible crimes were committed during and after Spain’s 1936-39 civil war that no court has yet examined or judged. No one knows how many people were taken away, tortured and murdered. Now, one of Spain’s top investigating magistrates, Baltasar Garzón, is on trial for daring to open an inquiry into those atrocities.
Spain is now a vibrant democracy, but Judge Garzón’s trial, which opened last week, is a disturbing echo of the Franco era’s totalitarian thinking. He faces criminal charges that could suspend him from the bench for 20 years for defying an amnesty enacted in 1977 to smooth the transition to democracy. He rightly counters that under international law, there can be no amnesty for crimes against humanity and that unsolved disappearances — thousands of mass graves are unopened — constitute a continuing crime.
In 2008, Judge Garzón briefly began an official inquiry, ordering the opening of 19 mass graves and symbolically indicting Gen. Francisco Franco and several former officials, none still alive, for the disappearance of more than 100,000 people. An appellate court shut the inquiry down. The next year, two far-right groups brought criminal charges against the judge for defying the amnesty law. The government’s prosecutor argued that no crime had been committed, but the Supreme Court accepted the case.
Separately, Judge Garzón faces criminal charges for rulings in two other politically charged cases. We cannot judge the merits of these. But criminal prosecution of magistrates for their rulings is rare in Spain, and could chill judicial independence.
Judge Garzón became famous for his prosecutions of Basque terrorists, Argentine torturers, Chile’s former dictator, Gen. Augusto Pinochet, and Spanish politicians. His powerful enemies now see a chance to end his career.
Judge Garzón is undeniably flamboyant and at times overreaches, but prosecuting him for digging into Franco-era crimes is an offense against justice and history. The Spanish Supreme Court never should have accepted this case. Now it must acquit him.