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Seeing Through Transparency. Some comments on Glashelder Masja Stefanski, Tjalling de Vries, Jakob van Waarden Ministerie van Economische Zaken by Marco.

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Presentation on theme: "Seeing Through Transparency. Some comments on Glashelder Masja Stefanski, Tjalling de Vries, Jakob van Waarden Ministerie van Economische Zaken by Marco."— Presentation transcript:

1 Seeing Through Transparency

2 Some comments on Glashelder Masja Stefanski, Tjalling de Vries, Jakob van Waarden Ministerie van Economische Zaken by Marco Haan University of Groningen

3 1. Struggle Praise 3. More on transparency 4. More on the proposed decision tree 5. How to tackle intransparency? I will be very harsh and unfair...

4 Very well written Makes all the right noises All possible caveats are mentioned In that sense: hard to comment on The report does an excellent job in making policy makers think in the right way about many micro-economic issues. But still: Where do we stand at the end of the day?

5 What is transparency? Basically, a catch-all phrase. It can be anything you like it to be. The latest buzzword? Any reason as to why markets do not function the way we like them to, seems to boil down to “lack of transparency”. For policy makers, this is convenient. Now they are always able to say what is wrong in a market. Lack of transparency. “Voorbeelden van poducten en diensten waarbij transparantie een issue is, zijn energie, makelaars, notarissen en taxi’s.”

6 Examples of lack of transparency: 1. Lemons problem 2. Hold-up problems (contractual incompleteness) 3. Market power 4. Search costs 5. Switching costs 6. Credence goods 7. Product differentiation 8. Price discrimination 9. Adverse selection 10. Moral hazard

7 By calling all of these “problems of lack of transparency”, one gives the suggestion that it basically all boils down to the same problem. Of course, nothing could be further from the truth. These are all very different problems that require very different solutions. “Lack of transparency” can mean anything. Therefore, it means nothing.

8 General impression: “The market isn’t really able to work for itself. We, as government, should step in and help those poor consumers out”.

9 The decision tree. Suppose person Z has problem X. How should (s)he tackle that? Try the following steps: 1. Does problem X really exist? 2. If so, what causes problem X? 3. How can we solve problem X? 4. Are the benefits of the solution larger than the costs? 5. Or are there other solutions with higher net benefits? This is exactly the approach taken here, with Z = “consumers”, and X = “lack of transparency”.

10 Decision tree 1. Lack of transparency? 2. What causes the lack of transparency? 5. Focus on other market failures 4. CBA most suitable remedies 3. Possible remedies

11 Hence, the decision tree is reasonable, and it really makes sense. At the same time, it doesn’t really say anything.

12 Also note: Consumers often like (at least some) aspect of lack of transparency: it gives them more choice. Twenty years ago, the telecom market was really transparent... Admittedly, such caveats are also in the report.

13 What is (also) important in a decision tree? 1. Never be content by only calling something “lack of transparency”. Always be more precise and specify the exact economic problem. 2. The market is often able to solve many “intransparency problems” for itself If not, first pose the question as to why market participants do not have the incentive to provide the necessary information. Try to give them that incentive. 4. Only then, legislate or regulate.

14 The End (And again: I have been unduly harsh and unfair...)


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