Tuesday, February 27, 2007

Fuzzy Logic

From a story in the HK Standard:

Legislator Ronny Tong Ka-wah said despite suspected cartel behavior locally among supermarkets, property markets, fresh pork suppliers, ports and exhibition services, the lack of any independent and neutral body charged with adequate investigative powers to detect and substantiate claims would make enforcement of fair competition difficult, if not impossible...

Although there exist few barriers to entry into Hong Kong markets, Tong believed existing business conduct that impeded competition was particularly worrisome for foreign investors who were new to the market."

Read more here.

Wouldn't one expect Mr Tong to at least understand the contradictory nature of his own argument highlighted above?

Anti-competitive behaviour means returns for incumbents higher than the interest rate;

If barriers entry are few, competitors who want a cut of the higher return would jump into the fray;

Returns would return to normal as competition intensifies.

Why worry, Mr Tong?

1 comment:

Peter said...

Gary,

The present debate about competition law has descended into a brawling match with more heat than light. While the Government's Discussion Paper on competition policy was circulating we at least had some structured discussions.

Perhaps this fact and the fact that people are now attempting to identify competition problems in the economy (but have no background or expertise in doing so - and have been let down by COMPAG which failed in its job) are the cause for the Fuzzy Logic and muddle-headedness we see today in political circles.

We should also note that Mr Tong and his Civic Party colleague Mr Alan Leong, who is presently running for Hong Kong's Chief Executive position, are both lawyers.

Do you think it's ironic that both men fail to see/highlight the restrictive practices - and artificially raised barriers to entry - in their own profession, while they seek to become experts on every other industry and declare them in need of monitoring?

Peter