Thursday, August 26, 2010

Do we need a Minister for Co-operation Policy?

Without going into the detail now I've been doing some reading on the development of religious thought recently, and in common with some of the evolutionary economics as found in The Origins of Wealth, there is a consistent trend in that the systems that are successful are those that facilitate co-operation in society.

Last night I had the great pleasure to attend an event to honour those from the telco industry who had been vigorously working together to develop the technical and operational framework for the NBN. I felt a little fraudulent attending as I really was only active for a couple of meetings at the very start at which I tried to enthuse people and not accept any we have to wait for NBN Co" thinking.

But it does set me to think again about the magic of co-operation. Starting in the 1970s a lot of attention got paid to competition policy, based upon the economic benefits expected to flow from competition. The under-pinning theory mostly relies on the idea of a dead-weight loss that occurs under monopoly rather than competition - and any restraint of trade creates monopoly like market power.

A different way to describe it though is the view of Hayek that the price system works to communicate individual preferences more effectively than a command and control system. Ultimately the victory of democratic capitalism over fascism and communism in the Long War (1914-1990) attests to that. But theorists don't spend a lot of time talking about the pre-conditions for the price system to work its magic - and the single most important thing to make competition work is co-operation. (From which Brandenburger and Nalebuff fashioned Co-opetition)

It underpins my belief in the need for the state to actively break up any large entity that tries to "internalise" transactions through its own command and control structure. Ultimately Government needs to artificially create the need for economic co-operation.

Anyhow, I can at least take pride in the fact that the telco industry in Australia may not be perfect, but it continues to provide models of co-operation. I also thought of this when noting a story about delays in Mobile Number Portability testing in Thailand. The solution delivered in Australia in 2001 still stands testimony to the ability of the industry here.

It is a pity that the co-operation isn't yet complete. Better co-operation between industry participants and between industry and consumers may have resulted in better outcomes on mobile premium services, including the ability for Optus to avoid the ignominy of having to provide an enforceable undertaking to the ACMA.

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