Students on Show Abstracts
In his essay, “Could Government Intervention Solve the Power Crisis?” Jason Nichols explains the crisis is not due to
insufficient generation capacity but a temporary fuel shortage, i.e. not enough water and gas to run our hydro and gas
power stations. The problem is exacerbated by our geography: New Zealand is a long narrow country in a single time zone,
meaning peak consumption occurs at the same time everywhere and transporting electricity involves very long distances.
Jason argues these problems would be with us whether the electricity market had been deregulated or not. He concludes
that while New Zealand is vulnerable to fuel shocks to the electricity industry, when rain and snowfall are lower than
expected, the market encourages the most efficient outcome given the fuel available.
Simon Bratt looks at New Zealand’s unique accident compensation scheme from three perspectives. (1) The Law and
Economics approach evaluates existing legislation and proposed reforms in terms of whether appropriate incentives are
created to minimise accidents and encourage people to take cost justified precautions. (2) The Communitarian perspective
views most accidents as the inevitable by-product of an industrialised interdependent society, and, as such, should be
borne collectively. A Communitarian approach would therefore judge a compensation system on its capacity to spread risk
and provide meaningful and expeditious compensation to victims. (3) The Corrective Justice approach stresses the
responsibility of the morally culpable wrongdoer to restore the victim to his pre-accident status. Our accident
compensation scheme does not provide a mechanism to address the notion of corrective justice.
Richard Robinson explains that vertical restraints, such as resale price maintenance and exclusive territories, are
restrictive trade practices under the Commerce Act 1986, however both can be authorised under section 58 of the Act if
the practice benefits the public. Judge Posner has argued that vertical restraints are generally welfare enhancing
because output increases, however others have questioned whether output will increase in all circumstances. Some have
argued that vertical restraints which aim to encourage service competition among retailers can mean that consumers end
up paying a higher price for services they don’t require. The Commerce Commission expects applications for authorisation
to quantify the expected efficiency gains. The New Zealand stance, which allows for authorisation where efficiencies are
proven, is suited to this unclear and highly contentious area in both Law and Economics.
The New Zealand Telecommunications Commissioner must make a recommendation to the Government by December 2003 whether or
not Telecom should be required to unbundle its local loop. While it is generally accepted that consumers benefit from
competition, the choice of the regulatory mechanism to promote competition is important to the Law and Economics
approach, where efficiency and welfare maximisation are paramount considerations. David Carter argues that unbundling
the local loop will be damaging to consumer welfare. Local loop unbundling distorts the incentives on the incumbent firm
to invest and innovate, as any investment will essentially benefit the entrant. Unbundling also distorts the incentives
for new entrants to invest, as they are presented with attractive low-priced access to the local loop. Both distortions
affect dynamic efficiency for the long-term benefit of consumers.