Sunday, July 26, 2015

"Network Industries and Social Welfare," by Massimo Florio

Prompted by a journal referee, I gave a quick read to the book by Massimo Florio on network industries in Europe. I should have read this book before, which does not mean that I agree with everything he says. This autor had already published a critical overall analysis of the privatization experience in the UK. Along the same lines of examining broad policy experiments, he analyzes what he calls the paradigm of network industries’ policies in Europe in the last 20 years. I like books like this, that take a look at the big picture. The author had discussed with the late social-democrat thinker and historian Tony Judt about the experience of privatizing railways and utilities, something that Judt had criticized in his last years. Having that connection is a badge of honour. I sympathize with the emphasis that Florio gives to the variety of corporate forms that still exists in utilities, including state-owned firms like those in Scandinavian energy. Florio argues that the dominant paradigm in Europe was born in Margaret Thatcher's Britain. However, the British paradigm did not include permanent regulation, as explained by Jon Stern in a paper discussing the origins of the UK reform. I am not even sure that the experiment started in the UK: USA (not only with Reagan), Chile, and other countries also experienced with various aspects of reform, not all of them good, or bad, or even finally reflected in the European experience. I also sympathize with the idea of public inetrvention in network industries encompassing a variety of objectives, which introduces caveats to the institution of independent regulation. Florio also correctly argues in my view that in the EU there is too much harmonization, but too little market integration. Still, I would not go back to state ownership monopolies, and I would have given more consideration of trade-offs, such as the one between investment commitment and short run objectives. I’ll give it a second slower read, and perhaps I'll try to write a proper book review for a journal, if I have time. The book deserves it, and it's supposed to be my topic.

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