The Vickers-Yarrow Collaboration
But theory was not everything. In the real IO world in Britain, the mid-1980s witnessed a radical new institutional development. This was denationalisation, or, as it became known, privatisation.
This complemented Vickers' interest in the rarefied world of abstract models of invention and innovation. What should an economist make of the case for privatisation in principle? Was it a good or a flawed application of agency theory in practice? Was the sale of State assets being handled well? What was the best form of regulation for privately run natural monopolies, and were the new instruments of regulation going to work satisfactorily? Vickers was intrigued by these questions forming in his mind and found that George Yarrow, an economics tutor at Hertford College, Oxford, shared his curiosity. The partnership with Yarrow was to be the second great collaboration in IO in which John Vickers participated.At the same time fellowship as these thoughts were starting to form, the Fellow Warden of Nuffield College had approached Vickers informally to tell him that there was a vacant fellowship there. The post was named after a former Fellow and eminent economist, Sir Roy Harrod. Vickers applied, and was elected to the Fellowship, in the Economics of Business and Public Policy, on 1 October 1984. He relinquished his Prize Fellowship at All Souls, half a mile to the east, but would retain his connections there. Alongside his work with Harris on patent races, therefore, Vickers started to collaborate with Yarrow on the intriguing new field, the economics of privatisation.
They started with a well-received booklet, Privatisation and the Natural Monopolies (Vickers and Yarrow 1985), which dissected the issues dispassionately. Then came a long book, Privatization: An Economic Analysis (Vickers and Yarrow 1988a), published by MIT Press, which received very wide attention.
Thorough and probing, yet accessible to all, it at once became the canonical work for economists on this subject. It described and appraised the mechanics of the various ways of selling shares in previously nationalised companies; it considered when some form of regulation was required when a business faced limited competitive pressures; and it contrasted various ways of achieving that, including the UK's favoured RPI-x approach to price setting and alternatives employed in the US, and focused on knotty other problems like the optimum length of a franchise period.Translations into Spanish and Chinese later brought that book to the attention of some two billion more potential readers. These two Vickers and Yarrow publications were meanwhile succeeded swiftly by another, a journal special issue, then book, co-edited with his politics colleague at Nuffield, Vincent Wright, on the politics of privatisation in Europe (Vickers and Wright 1989). Vickers and Yarrow continued to publish together on aspects of privatisation, and in non-UK based journals: two papers in the European Economic Review on regulation (Vickers and Yarrow 1988b) and on electricity pricing (Vickers and Yarrow 1991a), in Economic Policy again on electricity (Vickers and Yarrow 1991b), and a more wide-ranging discussion in the Journal ofEconomic Perspectives (Vickers and Yarrow 1991c). Vickers' publications also include some papers on privatisation written by himself alone.
Many other productive collaborations that various scholars undertook with Vickers were also occurring in this period. One was with Paul Stoneman, and another, Michael Waterson. Both were at Warwick. Stoneman and Vickers (1988) focused upon technology policy while Vickers and Waterson (1991), and a paper with Giacomo Bonanno (a postdoctoral Nuffield student who had moved to UC Davis) (Bonnano and Vickers 1988), were both on vertical relationships. Yet others were with current or former Oxford colleagues, most prominently Donald Hay (Hay and Vickers 1988) and John Kay (Kay and Vickers 1988). These were devoted to aspects of regulation.
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