Top economist’s warning to peers: ‘Elucidate or risk being ignored’

Date: 17/06/04

By Peter Chapman

THE European Commission's new chief economist has warned that judges in competition cases will disregard complicated mathematical models presented as evidence unless they are explained more clearly.

Lars-Hendrik Röllerwas recruited a year agoto beef-up the standardof economic analysis in Commissioner Mario Monti's competition department.

The move reflected an increase in the role of economic arguments in cases where regulators and courts must weigh-up the effects of mergers, cartels, thebehaviour of dominant firms and the distortions fromstate handouts.

However the German academic has warnedthat the complex calculus-ridden microeconomic and econometric models used by most economists could do little more than baffle judgesin national or EU courts responsible for hearing competition cases.

The worst-case scenariofor a judge is when twoopposing sides in a case usehardcore economics to present conflicting results - a classic example of economists living up to their reputation of never agreeing with each other.

“This is not terribly useful” to either side, he told European Voice. “I am not against using these sorts of rigorous mathematical models - but you [as an economist] have to rise above them. If you do not, the judge will not understandyour argument.

“If both sides were to rise above their models andwere effective in terms of communicating [their ideas], the judges will follow all that they say and take these views into account. The more you communicate, the moreyou matter and the more information is transmitted to a judge the better,” said Roller.

“Presenting your economics in an understandable way is not a sure way to win court battles,” he admitted. “But it helps.

The United States - which often says it is baffled by the economic reasoning behind EU competition rulings -has paved the way by producing best-practice guidelines for economists.

These are designed to ensure economists engaged by federal agencies stick to certain standardized procedures when they present information such as studies.

Röller said this approach would help improve coherence and lessen the risk of confusion among policymakers.

However, Röller said heand his team of ten PhD economists was doing itspart to spread the wordto non-specialists in theEU executive.

They are advising Monti, his Director-General Philip Lowe and desk officers in around “20 cases at a time“.

Lars-Hendrik Röller, Chief Competition Economist in the European Commission's Directorate-General for Competition, has warned that complex mathematical models presented as evidence in competition cases may do little more than confuse judges in national or European Union courts responsible for hearing such cases.