Murky Waters: The Law and Economics of Salvaging Historic Shipwrecks

The salvage of historic shipwrecks involves a debate between salvors, who wish to maximize profit, and archeologists, who wish to preserve historical value. Traditionally, salvage of shipwrecks has been governed by admiralty law, but the Abandoned Shipwreck Act of 1987 transferred title of historically important wrecks in U.S. waters to the state in whose waters the wreck is found, thereby abrogating admiralty law. This paper examines incentives to locate and salvage historic wrecks under traditional admiralty law and proposes an efficient reward scheme. It then re-considers current U.S. and international law in light of the results.

Economics of Policy Errors and Learning in the European Union. Bruges European Economic Policy (BEEP) Briefing 31/2013

Policy errors occur regularly in EU Member States. Learning from these errors can be beneficial. This paper explains how the European Union can facilitate this learning. At present, much attention is given to “best practices”. But learning from mistakes is also valuable. The paper develops the concept of “avoidable error” and examines evidence from infringement proceedings and special reports of the European Court of Auditors which indicate that Member States do indeed commit avoidable errors. The paper considers how Member States may take measures not to repeat avoidable or predictable errors and makes appropriate proposals.

The Economics of Subsidies for R&D: The Intrinsic Difficulty of Determining Optimum Subsidies and Implications for Reform of EU State Aid Rules on R&D. Bruges European Economic Research (BEER) Papers 26/February 2013

The European Commission is reforming state aid rules. An important element of the reform is to prevent the granting of excessive subsidies. This paper shows that the determination of the optimum subsidy for research is difficult. What appears to be the socially optimum level of research effort depends on the benchmark of comparison and whether this benchmark is the situation before subsidies or the situation after subsidies. In the presence of asymmetric information, policy makers should induce firms to reveal their true costs and should grant subsidies to the relatively more efficient firms by allocating subsidies not on a first-come-first- serve basis but through a competitive process. However, competitive selection of subsidy recipients is not a panacea as it may not be possible to be effectively used in all cases and for all research programmes. This is because in principle public subsidies should support those programmes with the largest value for society, rather than with the lowest costs. Although this paper focuses on R&D, its findings are relevant to any subsidy whose aim is to remedy market failure caused by positive externalities.

The Economics of State Aid for the Rescue and Restructuring of Firms in Difficulty: Theoretical Considerations, Empirical Analysis and Proposals for Reform. Bruges European Economic Research (BEER) Papers 27/September 2013

State aid for rescue and restructuring (R&R) of companies in difficulty causes a significant distortion of competition. It prevents the market from eliminating inefficient companies. Because of this, the European Commission has to be specially strict when it assesses rescue or restructuring aid. This paper examines recent cases of corporate restructuring partly funded with public money. It explains the main aspects of the current guidelines which are applicable to R&R State Aid and establishes a theoretical framework for the economic assessment of R&R aid. It then analyses decisions adopted by the European Commission concerning R&R state aid during the period 2000-2013. It finds that there is little economic rationale in the granting of R&R aid. The paper concludes by applying the lessons drawn from the empirical analysis to the anticipated revision of the R&R guidelines in the context of the State Aid Modernisation process.

Preventing another Euro Area Crisis: EU Economic Governance ‘Six Pack’ – a case of too little, too late? Paper from the Colloquium: The Politics and Economics of the Euro Crisis, Institute for European Studies, University of Malta, 2 December 2011

Summary: The ‘Six Pack’ forms part of the economic governance reforms which are being implemented in order to prevent a repeat of the current sovereign debt crisis in the Euro Area. This legislative package involves strengthening the Stability and Growth Pact, with stronger financial sanctions and more focus on debt; a new directive on national budgetary frameworks and a new framework to monitor and correct macroeconomic imbalances. Furthermore, the implementation of the ‘Six Pack’ also involves procedural reforms, in particular reverse majority voting, as well as more oversight by the European Parliament. Inter-institutional negotiations on the ‘Six Pack’ took over a year. In the meantime, the sovereign debt crisis had deepened and broadened, implying that the ‘Six Pack’ may have come ‘too late’. The ‘Six Pack’ has also proved to be ‘too little’ to address the crisis and by the time it entered into force, further measures and proposals to strengthen economic governance had to be made. Nevertheless, the ‘Six Pack’ comprises some positive developments. In particular, recognising that fiscal policy is a matter of national sovereignty, it sets a new approach which relies on institutional reforms at national level. As such, it constitutes a first, small step to improve economic governance in the Euro Area.

The Euro: A Crisis of the Currency or a Failure of Politics? Paper from the Colloquium: The Politics and Economics of the Euro Crisis, Institute for European Studies, University of Malta, 2 December 2011

Summary: Overall the monetary pillar of the EMU project has worked well so that it is incorrect to speak of a 'euro' crisis though it is at the epicentre of the present crisis. The origins of the problems it is facing have more to do with the economic component, particularly because of the breach of budgetary rules which points to a failure of politics. Hence the solution must be political, namely a strong commitment by governments to achieve balanced budgets and implement structural reforms so as to lay the basis for improved competitiveness, job creation and sustainable growth.

Consensus, contradiction, and conciliation of interests: the geo-economics of the Energy Union. EPC Policy Brief, 8 July 2015

European Union energy policy calls for nothing less than a profound transformation of the EU's energy system: by 2050 decarbonised electricity generation with 80-95% fewer greenhouse gas emissions, increased use of renewables, more energy efficiency, a functioning energy market and increased security of supply are to be achieved. Different EU policies (e.g., EU climate and energy package for 2020) are intended to create the political and regulatory framework for this transformation. The sectorial dynamics resulting from these EU policies already affect the systems of electricity generation, transportation and storage in Europe, and the more effective the implementation of new measures the more the structure of Europe's power system will change in the years to come. Recent initiatives such as the 2030 climate/energy package and the Energy Union are supposed to keep this dynamic up. Setting new EU targets, however, is not necessarily the same as meeting them. The impact of EU energy policy is likely to have considerable geo-economic implications for individual member states: with increasing market integration come new competitors; coal and gas power plants face new renewable challengers domestically and abroad; and diversification towards new suppliers will result in new trade routes, entry points and infrastructure. Where these implications are at odds with powerful national interests, any member state may point to Article 194, 2 of the Lisbon Treaty and argue that the EU's energy policy agenda interferes with its given right to determine the conditions for exploiting its energy resources, the choice between different energy sources and the general structure of its energy supply. The implementation of new policy initiatives therefore involves intense negotiations to conciliate contradicting interests, something that traditionally has been far from easy to achieve. In areas where this process runs into difficulties, the transfer of sovereignty to the European level is usually to be found amongst the suggested solutions. Pooling sovereignty on a new level, however, does not automatically result in a consensus, i.e., conciliate contradicting interests. Rather than focussing on the right level of decision making, European policy makers need to face the (inconvenient truth of) geo-economical frictions within the Union that make it difficult to come to an arrangement. The reminder of this text explains these latter, more structural and sector-related challenges for European energy policy in more detail, and develops some concrete steps towards a political and regulatory framework necessary to overcome them.