An Ordo-Institutional investigation around the notion of power

My Research project starts from a main point: as showed by Professor Gerber [4], Eucken and Ordo-liberals argue that competition may tend to collapse because firms prefer certain private agreements (i.e., collusion) and they are frequently able to acquire certain high levels of market share (i.e. monopolization), potentially eliminating competition. The core of the Ordo-liberal setting is that the legal system should prevent the creation and misuse of private economic power, while the State should preserve an healty level of competition in markets by its public power.
Ordo-liberals as well as Institutional Economists staked out further new research territories by embedding their analysis of the economic phenomena in a political-legal context [2, 9]. The Ordo-liberal concept of economic constitution – as a formal set of rules that characterizes the nature and functioning of an economic system [4] – is replaced within Old and Neo Institutionalism by economic institutions. Then, the Ordo-liberal problem may be revisited within the five-agents transaction as defined by the Old-Institutional Economist John Rogers Commons [8, 12, 14]. More precisely, a Commonsian transaction is composed by one private agent, her competitor, her current contractual counter-party, her alternative contractual counter-party, and a public officer. We have already brought back the three Coasean institutions – upon which Neo-Institutionalism rests – to this Commonsian unit of analysis [13]: (i) the market is set up among the agent and her competitor and/or her alternative contractual counter-party (such as deeply studied by strategic competition theory), (ii) the firm may “theoretically” be established between the agent and her current contractual counter-party (as in the Willamsonian Fundamental Transformation) and (iii) the State emerges from a peculiar relationship among private and public agents (as in Rousseau’s social contract). As a result, these three institutions along with the five-agents transaction may illustrate the ordo-liberal main concern on the trade-off between public and private power [1].
Moreover, Neo-Institutional Economics places the emergence of power in a positive transaction costs context [6], where the allocation of power may also allow the achievement of a second-best equilibrium [5, 6, 7]. This is related to the fact that power is a positional good [10, 11] and hence externalities are consequently often involved. In this context, certain choices of the powerful agent may be not self-regarded as the Smithian egoist man but relative-regarded as the Veblenian envious one. It is exactly in this latter context that the ab-usus (namely distorted use) of power arises. In this respect, the Ordo-liberals (in particular, Leonhard Miksch) offer a similar definition of misuse of power: it occurs when a powerful agent (i.e. firm) does not act as if she was powerless.
By this token we wish to:
1) re-formulate the Ordo-liberal perspective by a more modern Institutional approach based on the trade-off – in the Pareto sense – among power(s) in the market, power(s) in the firm and power(s) in the State;
2) explain the “acting as if rule” in terms of positional goods.

In this line of thought, I deem that the Chicago-Kent College could provide new and beneficial ways to refine and expand my research approach, allowing me to enjoy of a stimulating place and a highly qualified faculty. More specifically I believe that my research would take a great advantage by interacting with Professor XXX, whose research about Ordo-liberals is at present one of the most important in the current academic world.


[1] G. Amato (1997), Antitrust and the Bounds of Power. Oxford: Hart Publishing.
[2] R.H. Coase (1960), “The Problem of Social Cost”. Journal of Law and Economics, 3:1-44.
[3] D.J. Gerber (1998), Law and Competition in Twentieth Century Europe. Protecting Prometheus. Oxford:Oxford University Press.
[4] D.J. Gerber (1994), “Consitutionalizing the Economy: German Neo-Liberalis, Competition Law and the ‘New’ Europe”. The American Journal of Comparative Law, 42(1):25-84.
[5] S. Grossman S. and O.D. Hart (1986), “The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration”. Journal of Political Economy, 94:691–719.
[6] O.D. Hart (1995), Firms, Contracts and Financial Structure. Oxford: Oxford University Press.
[7] O.D. Hart and J. Moore (1990), “Property Rights and the Nature of the Firm”. Journal of Political Economy, 98:1119–58.
[8] A. Nicita and M. Vatiero (2007), “The Contract and the Market: Towards a Broader Notion of Transaction?”. Studi e Note di Economia, (2007), 1:7-22 (lead article).
[9] D.C. North (1990), “Institutions, Institutional Change and Economic Performance”. Cambridge:Cambridge University Press.
[10] U. Pagano (1999), “Is Power an Economic Good? Notes on Social Scarcity and the Economics of Positional Goods”. In Bowles S., Franzini M. and Pagano U. (eds.) (1999), The Politics and the Economics of Power, pp. 116-145. London: Routledge.
[11] U. Pagano (2002), “Legal Positions and Institutional Complementarities”. In Legal Orderings and Economic Institutions, F. Cafaggi, A. Nicita and U. Pagano (eds). London: Routledge.
[12] W.J. Samuels (1990), “Old Versus New Institutionalism”. Review of Political Economy, 2:83-86.
[13] M. Vatiero (2008), “Towards a Law and Economics of Power”. PhD Dissertation. University of Siena.
[14] O.E. Williamson (1985), The Economic Institutions of Capitalism. Firms, Markets and Relational Contracting. New York: New York University Press.