Exploring the coherence between institutions and technologies in lib-eralized infrastructures
Chair: Rolf Künneke (Delft University of Technology) and Matthias Finger (École polytechnique fédérale de Lausanne)
This workshop is organized as a round table discussion with the following participants:
Paul Nightingale (University of Sussex)
Mark Jamison (University of Florida)
Bill Melody (Technical University of Denmark and London School of Economics)
Claude Menard (Université de Paris 1 Sorbonne-Panthéon)
Matthias Finger (École polytechnique fédérale de Lausanne)
John Groenewegen (Delft University of Technology)
Abstract: Infrastructures are complex systems in which technology, economics and institutions are closely related. It is of importance that changes in the different elements cohere, that is, that changes in the technology correspond with supporting changes in the institutions and vice versa. It is essential that changes in the economy like the scale of production corresponds with supporting changes in the technology. Likewise, when government decides about changes in the institutions—introduction of competition, laws, regulations, and new modes of governance—it is vital that the coherence with the technological elements of the system is taken into account. The restructuring of various infrastructures such as telecommunication, energy, water and railway transport is often solely perceived as a matter of institutional change, ignoring the relationships with the other elements of the infrastructures as a complex system. Parts of the activities in the respective value chains are exposed to competition and are treated as commodities exchanged on anonymous markets. Networks are typically regulated since they often inhibit characteristics of natural monopolies. New regulatory frameworks are established including independent system operators and regulators and stronger private sector involvement. Up to now, the possible relations of these profound institutional changes with the technological features of infrastructures were not addressed as a potential disturbing matter. Supporters of the deregulation process, at least the mainstream economists supporting it, believed—and still believe—that introducing market-based trading in infrastructure industries would per se create or reinforce the incentives for technological innovation, and hence readjustment in accordance to the novel institutional frameworks. Thus the coherence between technology and institutions would be re-established as a consequence of the newly evolving market-driven allocation processes. The issue of incoherence between institutional change and the technological status quo was overlooked or, at least, underestimated.
In the past years, however, significant unexpected side effects appeared such as large scale electricity black outs and deadly train accidents. These effects pinpoints to insufficient institutional safeguards to guarantee the proper technical functioning of these complex systems. Beside there is an increasing concern about the long term security of supply and the technical reliability of infrastructure systems. Firms operating on competitive markets are experiencing other incentives as compared to regulated monopolies. Among others, they are facing regulatory and commercial risks that influence their economic behaviour, for instance with respect to innovations, investments and maintenance. This has repercussions for the technical functioning of infrastructures. Apparently there are certain critical technical functions that need to be pertained in order to safeguard the proper technical functioning of infrastructure systems. These critical technical functions are typically related to network related activities like capacity management, system management, interconnection and interoperability. In this track the various presenters elaborate how effective and efficient these critical technical functions are safeguarded in various infrastructures under liberalized market conditions. What are the lessons to be learned for government and industry? How to improve the performance of infrastructures by realizing coherence between institutions and technology? How to establish sustainable infrastructure systems in which there is coherence between technology and institutions, while allowing for more competition and private sector involvement?
