Academic Music, Victoria’s Secret, and Deregulation

Remarks by Dr. William G. Shepherd

Emeritus Professor of Economics, the University of Massachusetts at Amherst

February 5, 2006

Talking Points

I. Economic Goals for Markets

II. Criteria for Effective Competition

III.Common Dangers of Deregulation

IV.Some Actual Results of Deregulation

I. Economic Goals for Markets Technological Progress

Efficiency of Various Kinds Internal Efficiency Allocative Efficiency

Fairness in Distribution

The Competitive Process Itself

Others: Freedom of choice for individuals Security from extreme risks and losses, of jobs and

livelihoods

II. Criteria for Effective Competition Pure Competition A Single Monopoly Firm, Plus Contestability Just Two Rivals “Workable Competition” At Least Five Comparable Competitors

Plus Free Entry

At Least 15-20 Comparable Rivals Plus Free Entry

III. Common Dangers of Deregulation Too Quick, Too Far, and Badly Designed

California, et al.

Abuses by the Former Monopoly Firm Predatory Pricing

Lax Permission for Anti-Competitive Mergers Weak Antitrust

And Weak Regulation

Result: An Entrenched Dominant Firm

IV. Some Actual Results of Deregulation

“Good” Deregulation Financial Markets, Trucking, etc.

Mixed Deregulation Airlines, Local Telecoms, etc.

Dubious Deregulation Electricity, Western Railways