Microeconomics: IB Economics

The Digital Markets Act (DMA) is designed to open up messaging and app buying and diminish the market power of tech giants, like Google and Apple, by forcing them to make their platforms to other developers.

It is designed to increase competition in the sector, and potentially benefit consumers by increasing choice and decreasing their price. The bad news? It's an EU law and won't apply to post-Brexit Britain.

Here a point of contrast: the UK has adopted an energy bills cap, but the EU have set out other plans - a windfall tax on energy companies, plans for power savings and a cap on the price of Russian gas. 

It will be interesting to look back and see which set of policy measures prove to have the most impact. 

The EU has introduced legislation to increase boardroom diversity, by insisting that companies will have boards with women making up 40% of all board members.

The question is "Is this good economics?" You'd need to weigh up the opportunity costs, and law of unintended consequences too. You might argue that a lack of progress has driven the need for legislation, but is legislation the right mechanism for driving change? 

And further, is the issue of gender imbalance the most significant issue that requires tackling? I suspect that in order to meet the requirement, firms will employ people from a particular social class, and this will do little for increasing diversity in its broadest sense. 

Ending the EU's reliance on Russia fossil fuels is likely to prompt a significant increase in investment in renewable energy - not a bad thing!

The EU has tightened its regulation of the internet, with the introduction of the Digital Services Act, giving the European authorities greater power to fine the Big Tech companies a greater portion of their global revenues. 

The sale of UK chip maker Arm to US giant Nvidia is off. It seems that competition concerns in the UK, the US and the EU, not least because Arm's chips are near ubiquitous in smart devices and there are fears that any merger could jeopardise competition in this and other, emerging sectors requiring semi-conductors.

Although energy prices are set to rise this Guardian article provides an interesting counterpoint - if it wasn't for a number of other measures adopted in the recent past, we'd be paying even more.

What's most fascinating for me is the extent to which it's been a mixture of incentives - times when energy has been expensive have encouraged increased energy efficiency - and regulation - particularly by the EU. The pity is that, in the UK, our departure from the is likely to slow progress in this direction.

It seems as though the EU is about to draft legislation designed at improving workers' rights in the gig economy, and despite Brexit, the UK is likely to follow suit. 

Obviously, that won't appeal to the Brexiteers who would like to ensure that those workers - often the most vulnerable - are paid a pittance and reduced to a state of penury in the name of boosting post-Brexit Britain's international competitiveness. 

It seems that COP26 is focussing minds on decarbonisation, with the EU looking to introduce a range of policies designed to encourage this, reform the market for carbon and reduce carbon emissions. 

In particular, the notion that airlines should get free carbon permits is being challenged, and although the UK government has promised to reveal how it intends to hit its climate targets, we're still waiting. 

Yesterday's big story was the fact that the EU competition authority's have charged Apple over the anti-competitive way it runs its App Store. It is argued that the company's policy distort the market for streaming, raising costs for music streaming app developers and, as a consequence, limiting choice and stifling innovation, both of which are against consumer interests. 

Epic Games have claimed that the same also applies to games developers, but Apple argue that the opposite is true: music streamers and games developers want access to App Store at zero cost, when the reality is that they should be paying for it. 

Watch this space!

It seems that Amazon is going to be challenged by the EU, with EU competition authorities suggesting that the company is acting anti-competitively.

The allegations relate to the company's position as an online store, and someone who sells their own products on that platform. Furthermore, Amazon's access to data gives it a privileged position: it is aware of third-party data and is able to tailor its own offerings to suit. 

Add in the international trade dimension, whereby the US will see any attempt to regulate the company is motivated by 'regionalism', and the matter is likely to get complicated.

Part Brexit, part common access resources, this Guardian article looks at the end of EU vessels having automatic access to UK fishing waters. 

It highlights the possibilities as well as the likely drawbacks that are going to result from the move. And there's a kicker, despite this being portrayed as a major issue of 'taking back control', the UK fishing industry is worth less than £1bn and only directly employs 11,000 people. I suspect that JLR alone employ far more in the West Midlands.  

This just strikes me as an instance where the EU has got things horrible wrong, with their being talk of an EU-wide minimum wage, equivalent to 60% of the median salary in an EU member state. 

The Nordic economies argue that such a move would undermine the existing collective bargaining within their economies, as well as lowering the wages of some of the lowest paid, which would seem to be counter-intuitive. 

It's one of those instances where you just wonder what is the incentive to intervene in such a cack-handed fashion? 

The main statistic here is staggering - the EU wastes more food than it imports, and this alone could have a dramatic effect on food prices. Food waste - at every stage of the supply chain - is inefficient and represents a sizeable market failure.

It seems that the EU have agreed new climate change targets - with the phasing out of fossil fuel cars by 2035 a key pillar of their strategy. 

This Guardian article flags up the fact that a shortage of EU migrant workers has seen a rise in non-EU migrant workers, some of whom have paid large amounts to come to the UK, and whose working conditions are cause for concern. 

Has it come to this? Another argument against Brexit is that seasonal labour markets worked very effectively with EU workers willing to come and harvest crops for short periods of time, and now...this.

I can't ignore the biggest business story of the week - but don't want to go into much detail at this stage. As a result, I'll just pop this here - it presents an interesting assessment of what Elon Musk's takeover of Twitter might mean for the streaming platform, and includes all sorts of factors such as the EU's new Digital Services Act

A common access resources story - with the EU being sued by ClientEarth over its supposedly 'unsustainable' fishing quotas. Under the Common Fisheries Policy, the EU had claimed that it would end the over-exploitation of the resource by 2020, but the environmental group claim that their data shows that 40% of all fish stocks have been fished unsustainably, and against scientific advice. 

According to the article it is cod that is most precariously placed - with the North Sea having lost 80% of its cod stocks since the 1970s.

The UK isn't the only country experiencing an energy crisis: this BBC article details how.

France and Denmark have spent money on subsidies, Germany is grappling with the fact that its energy is already among the most expensive in Europe, and Spain is struggling to get its energy from Algeria after the closure of the Maghreb-Europe pipeline. In short, energy prices across Europe are going up and there's no straightforward solution.

Geopolitics, the Ukraine and gas are linked in this Guardian explainer that considers the implications of Russia restricting  gas exports to the Europe, in the event of hostilities in the Ukraine.

In the immediate term, the fact that the UK doesn't import much gas from Russia might temporarily insulate UK markets from the effects of such a move. However, if prices rise in European markets this will have spillover effects for the UK and higher prices are, unsurprisingly, going to result. 

It appears that the EU isn't doing its bit to meet climate change, with the news that the EU is going to prolong gas subsidies until 2027, making gas cheaper. The qualifier - it will need to be mixed with an unspecified amount of hydrogen. 

This could go on a variety of boards but I'll put it here. The Guardian highlights the fact that the number of farms in Europe has seen a significant decline and the growth of so-called factory farms. 

The underlying economics of this is straightforward: larger farms accrue greater economies of scale. However, the concern is that they are also more likely to damage the environment and lower food standards. As a result, the EU is altering its subsidy programme to try and halt this trend. 

The flip side though, is that large farms are also likely to lower food prices, and better reflect consumer demand. If small scale farmers producing organic produce is what consumers want, then you'd expect them to pay for it. 

Rumours that the EU were on the point of subjecting Amazon to an anti-competition probe have just been trumped - no pun intended - by the announcement that Apple are facing two investigations. 

The first relates to the relationship between the AppStore and Apple devices, the second to Apple Pay. Apple have, of course, come out fighting, attacking the European Commission's "baseless complaints" - although I am amused when Apple complains of other firm's being 'free riders', given the public sector sources of much of the research that led to the creation of Apple's proprietary intellectual property. 

Expect the US President to also come out fighting - making a trade war between the US and the EU more likely in the wake of this perceived attack on American interests.

It seem that most aspects of conventional economic thinking has been put on hold, with the EU worried about the predatory acquisition of European firms during the coronavirus pandemic. I suspect that the  argument is that current share prices might not reflect the true value of these companies, and that uncertainty and extra spending to deal with the pandemic might make them more vulnerable, particulalry to other firms with 'unfair' advantages, such as Chinese firms, perhaps.

It's an interesting response - and one that beg some interesting questions about the extent to which we should be prepared to let markets allocate resources in every instance. 

The Flybe bailout - involving a review of Air Passenger Duty - has, unsurprisingly, provoked controversy from a number of people. Rival airlines are furious arguing it breaks EU rules on state aid, and is supporting a company that has been inefficiently run. Rail companies argue that it also represents unfair competition for them. Environmentalists argue that it contradicts the government's climate change objectives.

In fact, the only people who seem happy with the move are Flybe shareholders, employees and customers. 

Is this going to be another example of government failure in the longer-term?