Lecture 1

• the treaty of Rome was written in 1957, and laid out every part of economic integration until the 1992 Maastricht Treaty.
• the treaty of Rome was intended to create equal opportunities for firms to buy and sell their goods, and people could employ their labour and capital anywhere within the area
• the treaty of Rome involved 4 freedoms; free movement of goods, services, workers and capital. It did not involve citizenship
• the treaty of Rome involved free trade of goods by eliminating tariffs and frictional barriers such as different restrictions in different countries
• the treaty of Rome introduced a common trade policy with the rest of the world to avoid trade deflection and tariff cheating
• the treaty of Rome ensured undistorted competition by reducing national governments involvement in national industries, regulating anti-competitive behaviour, and harmonising laws union wide
• the treaty of Rome allowed unrestricted trade of services through a principle of freedom of movement (though implementation was slow)
• the treaty of Rome integrated labour and capital markets in principle, but loopholes slowed liberalisation until the 1980s
• the treaty of Rome involved exchange rate and macroeconomic coordination
• the treaty of Rome introduced common policy in agriculture, and even now the EUs budget is 40% on agriculture
• the treaty of Rome omitted tax and social policy, as harmonisation was difficult
• EU law can create rights that EU citizens can rely on in domestic courts. EU law has the final say, and the system is independant
• the big 5 EU institutions are the European Council; the Council of the EU, the European Commission, the European Parliament, and the EU court
• the European commission represent the interests of EU citizens, and are elected
• the EU budget by law must be balanced every year
• Subsidiary task allocation means decisions should be kept as close to the citizens as possible without jeopardising cooperation at the EU level
• Proportionality of task allocation means the EU should only undertake the minimum necessary actions
• centralised decisions create inefficiencies when people have different preferences that the central power cannot factor into decisions
• centralised decisions can benefit from economies of scale and increase production efficiencies
• externalities of local activities supports centralised decision making, as the central power is more incentivised to appreciate these
• diversity and local information bias means that one size fits all policies don't suit anyone, and its easier for local governments to set regional policies than have the central government set them.
• the welfare loss from centralisation and one size fits all decision making is an incentive to decentralise
• centralisation allows public services to be produced at a larger scale, which reduces its average cost. More impactful on goods and services that benefit from economies of scale
• voters have more influence in elections in decentralised decision making models, which encourages decentralisation
• decentralisation allows people to move out of places when decision makers do not pay attention to their needs. Centralised decision areas means people do not have the 'exit' option, and politicians get more control
• in EU decision making, efficiency refers to the ability to act and pass votes
• Passage probability = number of possible winning coalitions / number of possible coalitions
• use of qualified majority over unanimous decision making increases the probability that votes will be passed
• budget allocations are an observable manifestation of power, and refer to how powerful and influential different nations are within the EU government
• the mechanics of EU decision making is complicated, as giving equal power per person naturally makes sense, but will also give the bigger countries much more power
• power per nation will prevent the big countries having too much power, but will also give people in small countries much higher power per person
• the EU uses both power per person and power per nation in a 'double majority voting rule' as part of the Lisbon Treaty.
• the Lisbon treaty was introduced to balance the union of states' and union of peoples' perspective and make decision making as fair as possible