Saturday, 28 March 2015

A must-read report on people's attitudes to competition

Economists sometimes get taken to task for wishing competition onto people, and there are often proponents of the idea that there are less divisive and less conflicting, or more collegial and more cooperative, approaches to life.

So it's extraordinarily useful to have a comprehensive survey of what a large group of people actually think about competition. It covers the Eurozone, and it's the latest in the European Commission's series of what they call Flash Eurobarometers, or "ad hoc thematical telephone interviews conducted at the request of any service of the European Commission. Flash surveys enable the Commission to obtain results relatively quickly and to focus on specific target groups, as and when required".

This latest one is on "Citizens' Perception about Competition Policy", and it's terrific. If you've got the slightest interest in competition, it's a must-read. The summary is here (pdf) and the full report is here (also pdf).

First of all, let's deal to the canard that people would prefer the quiet cooperative life without the jostle or hassle. The two graphs below say it all.

It's also true that people can see the other side of the coin, and are fully aware of the downside of having inadequate competition, as this graph shows.

That's the guts of the results, but there's lots more that's also fascinating. For example, some competition authorities - including, I'd suggest, our own - take the view that it's too hard to measure the state of competition, and if you wanted to, you could certainly convince yourself that HHIs are imperfect and you can't measure price to marginal cost and so on and so forth. Funny, though, that the person in the street in Paris or Prague doesn't have much difficulty seeing a lack of competition when it sneaks up on them, as this next graph shows.

You couldn't ask for a better roadmap of competition problems (and indeed you could easily see how repeated surveys along these lines would help show any competition authority whether it is making progress). 

And it gets better: if you go to the full report, you can see the country/sector breakdowns where you can immediately identify the hot spots. If the European Commission was born anew today, knowing nothing whatever about the state of competition across the Eurozone, in five minutes it would establish (from pp17-21 of the full report) that it should be looking at the energy sector in Bulgaria, Cyprus and Latvia; at the transport sector in France, Finland and Ireland; at the pharmaceutical sector in France, Ireland and the Netherlands; at telecoms and the internet in Croatia, Belgium and Spain; at food distribution in Finland, Greece and Lithuania; and at financial services in France, Ireland and Denmark. That's an immensely powerful guide to competition policy and enforcement priorities, and a very suggestive input into the kinds of structural reforms many of these countries need to undertake.

I won't go on much further: it's a great report, and you should really read it for yourself. I'll finish with just one final, and I thought somewhat poignant, point, and that's how attitudes to competition have changed. Some of those countries in the EU28 are relatively recent converts to the market economy, and back in 2009, when the previous survey was run, there were, for obvious reasons, relatively high levels of "don't have a clue, mate" responses to how competition feels and what it does or does not achieve.

Fast forward to 2014, when this latest survey was taken, and the "don't knows" have shrunk. In Romania, for example, they used to make up 16% of the populace: now it's only 2%. And where did those votes go? Overwhelmingly towards a more positive view of competition: when exposed to the wicked market ways of the West, 90% of Romanians now agree that competition gives consumers more choice, a 17% rise in just five years. Those who disagree have dropped from 11% to 8%. And there are similar shifts in opinion in Hungary, Lithuania, Bulgaria and Estonia, and smaller shifts in the same positive direction in Poland and Latvia. 

It's not completely universal: the Czechs, for example, don't seem to have made much of a success of their move to a more market economy. But as a general rule when people who have never had decent choice or fair prices get them, they love it. Something to remember for the next time a politician is afraid of the backlash from some protected group whose privileges are being exposed to competition: the vast majority of citizens will be behind you.

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