Edited by Anastassios Gentzoglanis and Anders Henten
Chapter 8: From the Pursuit of Efficiency to the Pursuit of Competition in New Zealand’s Evolving Telecommunications Market
8. From the pursuit of efficiency to the pursuit of competition in New Zealand’s evolving telecommunications market1 Bronwyn Howell INTRODUCTION 8.1 From an economic perspective, efficiency is the defining performance benchmark for any industry or sector – not least telecommunications. Consequently, the primary normative objective of law-and policy-making is the promotion of economic efficiency (in both its static and dynamic forms) via the elimination of market inefficiencies (Schmalansee, 1981; Kahn, 1970, 1975). A minority of economists, and many consumer advocates, propose the use of law- and policy-making powers principally as a means of achieving distributional objectives, independent of their effects upon total efficiency (for example, Feldstein, 1972a, 1972b). However, in practice it is extremely difficult to achieve desired distributional outcomes through laws and policies (Schmalansee, 1981), and attempting to do so may well be counterproductive (Kahn, 1975; Peltzman, 1976). Furthermore, because distributional objectives are highly subjective, it is very difficult to adjudge the ‘successes’ of any distribution-motivated intervention. By contrast, efficiency is an objective measure that provides a useful benchmark for the economic assessment of law- and policy-making performance. Even if redistribution is a primary consideration, the Kaldor–Hicks criterion requires efficiency gains sufficient that the winners from a law or policy change could compensate the losers and still be better off relative to the status quo (Connolly and Munro, 1999). Competition is one important means of increasing both static and dynamic efficiency; another is regulatory intervention. Although intervention undoubtedly has many potential pitfalls, its use may be justified in industries...
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