The conference started on Thursday, September 25 early in the afternoon. Following the Opening Addresses, the first session started with a paper by William Niskanen entitled “Advice by a Friendly American on the Proposed Constitution for the European Union”. The paper summarized the major strengths and weaknesses of the US Constitution and the proposed EU constitution. The author wondered why some of the major strengths of the proposed EU constitution are provisions concerning issues for which the US Constitution is weakest, and some of the major weaknesses of the proposed EU constitution are provisions concerning issues for which the US Constitution is strongest. So suggested that both countries have to learn one from each other. He highlighted that the most important difference between the US and the proposed EU constitution concerns the concept of rights. The US Bill of Rights is a list of individual rights against the state. In contrast, the Charter of Fundamental Rights, which constitutes Part II of the proposed EU constitution, includes a list of rights to services provided by the state. The combination of free movement within the EU and this list of claims on the state represents the most important potential tension in the European Union. The second speaker was Professor Scott Feld, who presented a paper written jointly with Bernard Grofman and Leonard Ray entitled "Implications of Expansion of the European Union for Decisions Within the EU Council". He proposed a framework to analyze the effects of enlargement of the EU on decisions in the Council of the European Union and focused on understanding the collective choices that would be made if countries were to vote sincerely. He clinched the importance of these collective choices in negotiations. In particular, the focus was on the set of stable or undominated outcomes for a particular decision rule. He ably demonstrated how size and location of the set of stable outcomes can be changed by including a set of new members whose interests have means and/or variances different from those of the original members. These effects were illustrated by using data on three particular issues, involving gender equality, energy use, and the environment. He suggested that there may be many issues where the new countries have different means and wider variances than the original countries; in which case, the most important effect of adding the new countries is to expand the range of stable outcomes and thereby make it more difficult for the EU to act. Finally, he showed that replacing the present qualified majority rule with a newly proposed rule that requires a majority of the countries including at least 60% of the population would tend to counteract some effects of adding the new countries. The second session started with a paper by Professor Hartmut Kliemt entitled "The Morals of Power Politics or Better in the West". He started by stating that the taming of power, the establishment of individual rights and the rule of law in domestic affairs are the greatest achievements of the West, and argued why it is “better in the West”. He underlined the risk that tame may in the end be lame power. The question posed was essentially that of how the West can survive in the Hobbesian jungle of international affairs. These include the ability of the West to keep its superior power in view of a public opinion that looks with suspicion at the use of all discretionary power even in external relations with despotic regimes, the misconception of power, which is regarded as an evil to be controlled rather than as a good to be acquired and the search for a “civil religion” in which the western citizens might coherently embed their ideals of internal restraint of discretionary power along with a support of potentially unrestrained power politics in external action. It then followed a paper by Carla Angela and Giuseppe Eusepi entitled “Neither Behind, nor Beyond a Thick Veil of Ignorance: The ‘Difference Principle’ in the Impending European Constitution”. Starting from the constitutional document drafted by the European Convention, the paper sought to compare and contrast the two approaches of welfare economics and constitutional political economy to redistribution. Major emphasis was on the fact that the first approach is descriptive of both the fifteen-nation European Union and the twenty-five-nation European Union, while the constitutional political economy approach implies the so-called constitutionalization of the welfare state. Moving from this premise, they argued that the present crisis of the welfare state accounts for the joint impact of population aging and the comparative reduction of the employed population which has placed an increasing pressure on national governments' public budgets. The authors tried to show that the problem could justifiably be identified in the creation of rights and benefits divorced from costs. They underlined that EU's member countries have weathered financing problems during the last twenty years and that with the enlargement to ten more countries they will irreparably confront yet further financially unsustainable situations. The authors' recommendations were based on the argument that centralization of redistribution is required in order to finesse the financing problems that the EU is expected to field. As it stands, the constitutional document approved by the convention is permissive, or even omissive on this front and has neither arguments, nor bounds for preventing centralization. They suggested therefore that multiple difference principles should be introduced behind a thin veil of ignorance. The use of multiple difference principles would allow the extension of the generality principle to redistributive choices such as those concerning disability benefits and support to low-income earners. On Friday, September 26, the first session started with a paper by Professor Antonio Pedone entitled "Tax Harmonization Policy in a Changing European Union" He offered reflections on the complexities of harmonization and suggested that a system, to be defined truly harmonized, should consider also tax bases. In particular, tracing the history of VAT through the succession of institutional changes, Pedone highlighted that harmonization has reached a greater international uniformity at the expense of less generality in taxation. He then tackled the problem of capital taxes harmonisation underlying its different origin from the legal, economic and political point of view. He finally discussed the ambiguous role played by the fisc in the Constitutional Treaty. The second paper was by Roger D. Congleton entitled "Mutual Advantages of Coercion and Exit within Private Clubs and Treaty Organizations: Towards a Logic of Voluntary Association" closed the session. He offered a diagnosis of treaty organizations. In his analysis treaty organizations are viewed as clubs whose leadership may be granted coercive power of various kinds. In ordinary clubs, coercive power is simply the right to exclude those who fail to pay their dues from club services. In other more coercive clubs, leaders might be given the power to penalize individual members for shirking as a means of solving free rider and coordination problems of various kinds. After noting that there are risks associated with grants of coercive power to a club's leadership that would be taken account of by prospective members, he illustrated that as exit costs fall, members are willing to grant (or tolerate) more coercive power to a club's leadership and highlighted how treaty organizations are not different from clubs due their voluntary nature. The European Union is therefore a club whose memberships are governments rather than individuals, and so the interests advanced tend to be those represented in government. He concluded that such clubs tend to have higher risks associated with them than ordinary private clubs, which limit the willingness of members to grant such organizations significant coercive power and increase the importance of the exit option. The second morning session started with a paper by Vincenzo Russo entitled "The back and forth transfer of expenditure powers in Italy after the constitutional reform of 2001". Most of the presentation was concerned with the problem of assignment and structure of competences, specifically the expenditure power. He contrasted the main approaches used by economists on this issue, with the approach used by constitutionalists who traditionally are more familiar with such a problem. Moving from the constitutional treaty, the speaker meditated on the optimal assignment of competences. Fabrizio Balassone presented a joint paper written with Daniele Franco and Alessandra Staderini entitled "Tax Policy in Emu: A Preliminary Assessment". He attempted to shed light on the late 1990s, a time when, after a phase of fiscal consolidation, several European countries introduced tax cuts in order to reduce distortions and support growth. He illustrated the main challenges that tax policy faces within the framework of EMU and focused on a range of issues such as the EU fiscal rules, fiscal stabilization at the national level, economic integration and tax bases and the role of tax policy vis à vis the long term sustainability of public finances. He then examined the revenue trends in the EU and highlighted how the latter have had on the overall tax burden and on the tax wedge on labor. This was shown to depend on both the feeble reforms and on the constraints imposed by the EMU fiscal framework. He concluded that the scope of national tax policies has been significantly curtailed. The afternoon program started with Bruno S. Frey, who presented a paper entitled "Terrorism and Defence Power. An Economic Analysis". According to Frey, Political Economy might be helpful to better understand terrorism and to identify possible counter-terrorism policies. He based his argumentation on the proposition that conventional wars are ineffective in fighting terrorism. He suggested an approach based on reduction of benefits to terrorists by lowering the attractiveness of terrorists’ targets, and by lowering media attention so as to raise the opportunity cost to terrorists. He concluded that constitutional changes should be introduced to implement his proposals. It then followed a paper by Carlo Giannone entitled "Two Conflicting Approaches to the Fiscal State. A Predatory Government for Europe?". After reviewing the contractarian literature and seeking a grounding in the writings of Buchanan and Musgrave, Professor Giannone tried to show how in real institutions is much easier to delineate a predatory finance rather than a consensual one. It is in this perspective, although partial, that the public finances of the European Union could be read. The second session opened with a paper by Mueller entitled "Constitution Making the European Way". He discussed the special challenges posed by constitutional political economy in constitution making. He tackled the important topic of the principal-agent relationship between citizens and the state and offered useful insights for understanding the concept of sovereignty in a constitutional democracy. Although no constitution has ever been written by the citizens themselves, he clinched, in some cases arguably the convention that writes a constitution is representative of the citizens at large, and the content of the constitution can be expected to correspond to that of a constitution written under the ideal conditions posited by the political economy approach. With these insights, he illustrated the European and American approaches to constitution writing. The second paper was by Geoffrey Brennan, who presented a joint work with Jonathan Pincus. He focused on fiscal equalization within the emerging EU. To this end, he revisited Buchanan's formulation of fiscal equalization based on apparently unexceptionable “horizontal equity” norms and examined this issue in terms of “social welfare function”. Moving from this premise, he explored three possible formulations of social welfare function: the simple utilitarian one (à la Harsanyi); the Rawlsian maximin one; and the Nash ‘utility products” one. The focus was on those individual inequalities that arise from different consumptions of publicly provided goods, and in particular those reflecting different numbers of taxpayers/consumers. By using Cobb-Douglas utility functions, he highlighted that only in the Rawls case is there an argument for fiscal equalization, while the utilitarian social welfare function suggests that fiscal resources should be entirely concentrated in the region where there is the largest population (if there are publicness properties in national and subnational public expenditures) or the smallest population (if there are net congestion effects). In the Nash case a principle of equalizing tax resources per capita can be found, independently of the degree of publicness. He concluded that no scheme of fiscal equalization in Buchanan’s terms could survive the test of rational constitutional calculus – except under extremely contrived conditions. On Saturday, September 27, there were only morning sessions. The first session was chaired by Friedrich Schneider and opened with a paper by Charles Beat Blankart (Humboldt University, Berlin) written jointly with Christian Kirchner "The Deadlock of the EU Budget: An Economic Analysis of Ways In and Ways Out" He argued that the EU budget is spent on redistribution. Large sums of money are transferred from the member state governments to Brussels and back to these governments. With this mechanism, some member states end up by being net receivers and some net payers. That's why many economists agree that the resources of the budget should be reallocated from redistribution towards the provision of more Union-wide public goods. After noting that such appeals have been made for years but little changes have occurred, Blankart suggested that such a scenario arose out of the fluid situation in the early years of the Community coalitions of member states that threatened to withdraw if their claims on budgetary resources were not fulfilled. Over time this attitude has dramatically originated a status quo in redistribution. Besides, the combined action of the Council's qualified majority rule on the expenditure side and the unanimity rule on the revenue side have produced a deadlock in the status quo with large redistribution and few Union-wide public goods. He concluded by suggesting that a complementary budget procedure based on voting by veto should be enacted. A paper by Maria Teresa Bia followed. She argued that in the modern age policing, has developed as inextricably associated with state authority. Given that policing is traditionally perceived as the more-or-less exclusive preserve of the nation-state, the founding Treaties of the European Communities did not provide for any rule aimed at promoting supranational co-operation in this area. As soon as the European Economic Community (EEC) evolved into the more cohesive European Union (EU), however, a gradual European-level involvement in policing occurred and instruments for supranational law enforcement co-operation have been introduced. In the security field the EU envisages a good level of co-operation while in questions such as harmonization of national criminal law provisions and their enforcement the exclusive authority of nation states is firmly maintained. This means that concerning the transnationalisation of police 'competences', co-operative and conflicting processes take place simultaneously both at national and supranational level. In her view, this is so because the emerging EU suprastate policing threatens to establish a new centre of authority over which the state no longer retains ultimate regulatory control. Through the analysis of the many agencies and overlapping dimensions of governance along which the newly born EU police capacity is being built, she discussed the dynamics of the ongoing transnationalisation of police action in Europe. The last session was chaired by Geoffrey Brennan and started with a paper by Franz Dietrich entitled "How to prevent terrorism: a general model". He formalized the popular intuition that a tough antiterrorism policy, although increasing the probability of capturing existing terrorists, may at the same time create new terrorists. To be able to compare the merits of different policies, he proposed to minimise the proportion of free (or not captured) terrorists in the group, for instance the probability that a randomly selected person is a free terrorist. Burgio closed the last session with a paper on "Collaboration of Universities and Peace-Keeping Forces for the Stabilization in the Balkans: the Outcome of an Experience" He argued that the countries of former Yugoslavia are in search of stability in the framework of the geopolitical scenario created by the Dayton agreement. The Universities of Rome “La Sapienza”, Belgrade and Sarajevo, with the logistic support of the Italian peace keeping forces (SFOR) in Sarajevo, as of 2000 have launched a programme that can be considered today the most successful experience of cooperation among universities and SFOR for the stabilisation in the Balkans. Giuseppe Eusepi closed the conference by thanking the speakers, the discussants and all those who took part in the lively discussion, which was helpful to the speakers and stimulating to the audience. He warmly congratulated those who acted as session chairmen on their efforts in ensuring that sessions did not exceed the allotted time-span. He acknowledged the help offered by the CIDEI staff and a very special note of appreciation went to the team hired by the ECSPC for their excellent job. Finally, he expressed his gratitude to the University of Rome "La Sapienza, the Bank of Italy and the Province of Rome for their generous financial support.
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