Institutional Competition

Institutional Competition

New Thinking in Political Economy series

Edited by Andreas Bergh and Rolf Höijer

Why is competition between institutions usually viewed in a negative light, when competition is considered positive in most other economic contexts? The contributors to this volume introduce new perspectives on this issue, analytically and empirically exploring reasons for this perception.

Chapter 4: Institutional Competition: International Environment, Levels and Consequences

Peter Bernholz

Subjects: economics and finance, austrian economics, institutional economics

Extract

Peter Bernholz 4.1 INTRODUCTION Institutional competition between nations, but also within nations, especially in federalized states, has received growing attention in academic debate in recent years. This development has probably been mainly caused by the observation of a growing mobility of capital but also of a growing mobility of labour, related to the opening of borders after the downfall of the communist bloc and the so-called globalization originating from the spreading of the ‘capitalist system’ to ever greater areas of the globe. The deepening of the European Economic Community to the European Union, the inclusion of many new members and the demand for stronger decentralization in several countries may also have contributed to this phenomenon. The scientific interest in institutional competition is well founded, for many of the inherent relationships and their consequences are still not well understood. First, institutional competition is a part of systems competition and interrelated with, but different from, other kinds of competition, such as military and foreign policy or market competition. Moreover, institutional competition exists on different levels, for instance on the international, the state or cantonal and the community levels. And its consequences may be quite different depending on which competencies are executed at which level. Moreover, even if the consequences were fully understood, the normative question would arise of how best to assign such competencies to the different levels to reach certain aims. And finally, even after answering this question, there would still remain the problem of how...

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