Economics of Privatization and Liberalization: An Internationally Comparative Approach

Prof Takanori Ida

Sunday, 2 June, 2002; 7:30-9:30pm

Chetwynd Room, King's College

The restructuring of public services is a major political issue with which all advanced countries have been struggling. In particular, the regulatory reforms of public utilities such as telecommunications / railway / electric power / gas / mail are important because their privatizations or liberalizations will have large direct effects on our actual lives. Let us take a few examples. The first example is the telecommunications industry: AT&T was broken down into one long-distance call company and several local call stock-holding companies in the USA whereas NTT and BT were established as a result of privatization in Japan and the UK; at the same time, a lot of new companies have entered into the markets, and intense competition has occurred. It is noteworthy at this point that a private company was broken down based on the modified final judgment between the Department of Justice and AT&T in the USA while a public corporation was not disintegrated but privatized in Japan and the UK. The second is the railway industry: although there was not a conspicuous reform in the USA where airlines are much more popular, the national railway company was privatized in Japan and the UK; in addition, six vertically-integrated Japan Railways were established in each region of Japan while a radically vertical disintegration between track and operating companies was carried out in the UK.
I would like to explain how we should analyze the regulatory reforms proposed above from the viewpoint of economics in simple terms. The topics I will take up are as follows: AE For what is public regulation necessary? To put it in other terms, why is it becoming unnecessary? AE What are natural monopoly and network externalities, which are considered as grounds for public interventions? AE What methods do we have at our disposal to regulate or deregulate the public utilities? How are structural and behavioral remedies different? AE What are incentive regulation, unbundling, price cap regulation, and access charge, which have been recently discussed even in newspapers? AE Why are regulatory reforms so diverse across countries? Considering Toiro-kai is an interdisciplinary organization, I will keep in mind that I should avoid jargon that is too excessive and deal with many instances from our actual lives. Furthermore, it would be appreciated if members of the audience could comment on these problems based upon their experiences of living in the UK.