László Csaba, Crisis in economics? Studies in European political economy. Budapest: Akadémiai Kiadó , 2009, 224pp., e35.10 h/b.

Book review

Making political capital:the behaviour of UK financial markets during Election 97

This article examines the behaviour of the UK capital markets during the overnight trading period that coincided with the announcement of the results of the UK general election in May 1997. Evidence that the financial markets responded to the evolving pattern of results is found. In addition, the consensus move experienced as the markets opened the next trading day was influenced by the extent of the moves that had already occurred overnight.

The political economy of industry dynamics in China:a microeconomic investigation

Using a unique firm level data, this paper analyses the role of political connections in the post-entry performance of private start-up companies in China. It documents robust evidence that political affiliation enhances firms’ survival and growth prospects. But interestingly politically neutral start-ups enjoy faster productivity improvements conditional on survival.. We conclude that the close association between the state and a segment of the business community is leading to sub-optimal resource allocation in the economy by interfering with the process of market selection.

The political shaping of energy technology:combined heat and power in Britain

There has been negligible adoption of combined heat and power (CHP) for district heating (DH) in Britain, despite continued advocacy. This thesis constructs an account of the treatment of the option, and devises a framework for explanation. Analysis of technological development and adoption, it is argued, should be similar to that of other social processes, and be subject to the same requirements and criticisms. They will, however, show features peculiar to the institutions developing and selecting technologies, their relation to different social groups, and the forms of knowledge in and about technology. Conventional approaches - organisation and interorganisation theories, and analyses of policy-making - give useful insights but have common limitations. Elements of an analytical framework situating detailed issues and outcomes in a structured historical context are derived from convergent radical critiques. Thus activity on CHP/DH is essentially shaped by the development and relations of energy sector institutions: central and local government, nationalised industries and particularly the electricity industry. Analysis of them is related to the specific character of the British state. A few CHP and DH installations were tried before 1940. During postwar reconstruction, extensive plans for several cities were abandoned or curtailed. In the 1960s and 70s, many small non-CHP DH schemes were installed on housing estates. From the mid-70s, the national potential of CHP/DH has been reappraised, with widespread support and favourable evaluations, but little practical progress. Significant CHP/DH adoption is shown to have been systematically excluded ultimately by the structure of energy provision; centralised production interests dominate and co-ordination is weak. Marginal economics and political commitment have allowed limited development in exceptional circumstances. Periods of upheaval provided greater opportunity and incentive for CHP/DH but restructuring eventually obstructed it. Explanation of these outcomes is shown to require analysis at several levels, from broad context to detailed action.

The British higher education funding debate: the perils of 'talking economics'

This article examines current debates surrounding British higher education funding from a political economy perspective, drawing on ‘positive’ and ‘institutionalist’ political economy. Adopting the lens of political economy enables a critical assessment of the use of terms drawn from economics by many higher education decision-makers. Current discussions embody particular assumptions about the nature of producers and consumers in higher education, the relationship between supply and demand, and the role of information in the higher education ‘market’. They also frequently fail to acknowledge the active rather than passive role of higher education institutions in shaping policy discussions surrounding higher education funding.

Degree of vertical integration and its buffering effects on political uncertainty

The focus of this study is on the governance decisions in a concurrent channels context, in the case of uncertainty. The study examines how a firm chooses to deploy its sales force in times of uncertainty, and the subsequent performance outcome of those deployment choices. The theoretical framework is based on multiple theories of governance, including transaction cost analysis (TCA), agency theory, and institutional economics. Three uncertainty variables are investigated in this study. The first two are demand and competitive uncertainty which are considered to be industry-level market uncertainty forms. The third uncertainty, political uncertainty, is chosen as it is an important dimension of institutional environments, capturing non-economic circumstances such as regulations and political systemic issues. The study employs longitudinal secondary data from a Thai hotel chain, comprising monthly observations from January 2007 – December 2012. This hotel chain has its operations in 4 countries, Thailand, the Philippines, United Arab Emirates – Dubai, and Egypt, all of which experienced substantial demand, competitive, and political uncertainty during the study period. This makes them ideal contexts for this study. Two econometric models, both deploying Newey-West estimations, are employed to test 13 hypotheses. The first model considers the relationship between uncertainty and governance. The second model is a version of Newey-West, using an Instrumental Variables (IV) estimator and a Two-Stage Least Squares model (2SLS), to test the direct effect of uncertainty on performance and the moderating effect of governance on the relationship between uncertainty and performance. The observed relationship between uncertainty and governance observed follows a core prediction of TCA; that vertical integration is the preferred choice of governance when uncertainty rises. As for the subsequent performance outcomes, the results corroborate that uncertainty has a negative effect on performance. Importantly, the findings show that becoming more vertically integrated cannot help moderate the effect of demand and competitive uncertainty, but can significantly moderate the effect of political uncertainty. These findings have significant theoretical and practical implications, and extend our knowledge of the impact on uncertainty significantly, as well as bringing an institutional perspective to TCA. Further, they offer managers novel insight into the nature of different types of uncertainty, their impact on performance, and how channel decisions can mitigate these impacts.