Jean-Luc Gaffard

Re-industrialising the Eurozone

Real divergences in economic performances that emerge between countries belonging to the eurozone make it necessary to define an economic policy oriented toward a re-industrialization of some regions in Europe. In a world characterised by irreversibility of investment and imperfection of market information, supply reforms should consist in establishing a framework aimed at supporting both competition and cooperation between the various players of innovation, and thus allowing firms' strategies to be successful. This requires reconsidering both national and European policies that are growth-enhancing, that is, competition policy, labour policy, regional policy, but also industrial policy that takes the form of large public programmes. However, any change in the industrial landscape in Europe will only be possible if a new macroeconomic policy prevents inappropriate destruction of productive capacities.

Re-industrialising the Eurozone 1

France and Germany. This divergence is taking place in a context characterised by a sluggish final demand, involving a more intense struggle for market shares among firms, particularly in the manufacturing sector. It reveals the existence of strategic and policy differences that may provide information about the good and bad practices.

Cost issues

Germany is characterised by a dense and stable group of medium-sized firms (16,000 firms with between 500 and 5,000 employees). Production segments are outsourced to low-cost countries with highly qualified employees, so that real wage costs (taking into account the labour costs of countries in Eastern Europe) are about 20% lower than those of other countries in the euro area. Furthermore, as many industrial jobs are created as outsourced jobs.

In France, large firms that specialise in a specific area -aeronautics, energy, environment, luxury goods, etc. -perform exceptionally well on global markets. When they relocate some part of their business, it is to less-developed countries most often characterised by low wages and low skills. On the other hand, there are too few medium-sized firms (4,000 firms between 500 and 5,000 employees), and successful SMEs are rapidly sold and acquired by large firms when they should instead be allowed to grow without losing their identity. The consequence is that firms belonging to large segments of industry are more sensitive to price competition.

Over the past decade unit labour costs rose much faster than average in credit boom countries like Greece and Spain. In France and Italy, unit labour costs rose when wages grew faster than productivity. In Germany, outsourcing to foreign countries, weak domestic demand, and wage restraint meant that costs remained more or less flat. The resulting loss of competitiveness of peripheral countries is among the causes of the crisis.

The internal devaluation triggered by the crisis has stopped the divergence process, and in some cases reversed it. For example, in Spain, unemployment and fiscal consolidation led to a drop in real wages. This drop and the substantial increase in productivity have made Spain more competitive in comparison to its European partners, particularly France. The country's trade deficit has been substantially reduced due to the decreased imports as a result of the drop in economic activity but also due to rising exports.

Strategic oppositions

Differences between France and Germany in terms of firms' turnover and performance on the export market can be explained by the differences between firms' strategies and the divergent industrial policies characterising both countries.

During the 1990s, in manufacturing sector, the total firm turnover (entry plus exit rates) was about 3% in Germany, while it was around 11% in France. Moreover, firm exit (6.5%) outpaced firm entry (4.5%) in France, while Germany experienced a more balanced pattern [START_REF] Bartelsman | Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries[END_REF]). Entry and exit rates are positively correlated in Germany, while they are negatively correlated in France.

This can be interpreted as meaning that the creative destruction process is predominant in Germany, while sector profit shock is predominant in France. However, another interpretation is possible: that in Germany market structures are more or less stabilised and investment behaviours are more or less coordinated, while more turbulences persist in France, revealing a weaker degree of co-ordination within industries which affect firms' performance. In the German case, as a result of better coordination between the various players of innovation processes (firms, banks, and workers), the restructuring process boosts productivity and employment. An analysis that puts investment behaviour and coordination at the centre of the industrial dynamic process will be further developed, this being consistent with the patterns observed in France and in Germany.

The export participation rate (44% against 72%) and mean export intensity (40% against 21%) are further differences between Germany and France. It indicates that in France there are lower barriers to entry, but stronger barriers to growth in export markets.

When it comes to the orientation of industrial policies in each country, strong differences can be observed. State aid as a percentage of GDP is much higher in Germany than in France (horizontal objectives: 54.4% against 33.5%; total: 90.5% against 56.4%); it is more oriented towards the environment (31.7% against 0.6%), and regional aid (11.8% against 6.3%), and less towards employment (0.6% against 6.7%), R&D (6.7% against 8.0%), and SMEs (2.0% against 7.9%). In fact, both environmental and regional aids are aimed at creating market information and market conditions that help firms to invest by reducing uncertainty. Whereas France spends four times as much as Germany on policies supporting SMEs and ten times as much on supporting employment, net job creation has remained significantly lower in France. However, it should also be noted that Germany's performance in terms of job creation has not yet reached that of the US and the UK.

It is worth mentioning the real impact of labour market reform in Germany. A recent study [START_REF] Soskice | Reforms, Macroeconomic Policy and Economic Performance in Germany[END_REF] argues that the long period of high unemployment in Germany could be largely an aggregate demand phenomenon. It also shows that the German model of employee representation and protection, the apprenticeship system and the collective bargaining continue to operate most strongly in the export sectors. These reforms have not been oriented in the direction of a more flexible labour market as is usually understood in the contemporary debate. The most notable change has been the extent to which chairs of works councils (elected by employees) have been brought into the de facto co-management of large companies. It has largely been obtained by direct negotiation between business associations and labour unions.

In contrast to Germany, France has not elaborated a fully coherent industrial policy framework. Only a recent policy aimed at sustaining the development of local clusters may appear as a step in the right direction insofar as it promotes cooperation between small and large firms, and between firms and research groups. What differentiates the two countries are both the channels and the level of public intervention. The divergence between France and Germany developed against the background of a wider process of divergence between the centre and the periphery of the eurozone.

Barriers to entry and barriers to growth

Recent literature focuses on the incentives to innovate, which would be determined by the nature and the strength of the barriers to entry. Contrary to common wisdom, available data do not reveal any problems with entrepreneurship in countries like France. The turnover rate in France is relatively high, mainly in manufacturing [START_REF] Bartelsman | Comparative Analysis of Firm Demographic and Survival: evidence from micro-level sources in OECD countries[END_REF].

Rather, it is likely that the main problem faced by French firms lies not in the existence of barriers to entry, but in the existence of barriers to growth.

The observed patterns of firm demographics and survival may help in clarifying the debate. Firm size distribution has both a sector and a country component, with the latter playing a more prominent role in explaining cross-country differences in overall size. There are no large differences in firm turnover across countries, once differences in sector composition of the economy are taking into account, and there are no large differences in firm rate of survival 7 years after birth. But post-entry growth of survivors is much stronger in some countries, like the US, than in others [START_REF] Bartelsman | Comparative Analysis of Firm Demographic and Survival: evidence from micro-level sources in OECD countries[END_REF]).

In the case of France, for example, the percentage deviation from average sized firms with more than 20 employees as a function of sector specialisation is -0.22%. France's specialisation should lead to larger firms (+0.06% in sectors with large volumes of production), however its firms remain small (-0.21%).

These findings suggest that barriers to growth are much more significant than barriers to entry in explaining differences in performance across countries. These barriers could be attributed to the existence of sunk costs, and to the difficulty of coping with them. Therefore, there are reasons to believe that enhancing the ability of new and old firms to invest and grow would be much more decisive than incentives for the creation of new firms and for these to enter the market.

According to recent studies, the size distribution for a given group of firms exhibits a significant skew to the right, suggesting the presence of a large mass of small firms. Thus, the combination of sunk costs in setting-up a new business and of high uncertainty leads firms to start small and to expand once they are established on the market. In other words, some firms are small because they are financially constrained, while in a later phase, financial constraints cease to be binding and these firms will grow to their optimal size [START_REF] Cabral | On the Evolution of Firm Size Distribution: facts and theory[END_REF]. Differences between countries in terms of firms' size distribution would then be revealed in conditions of financial growth. Thus, as is the case for French manufacturing firms, financial constraints significantly increase the probability of exiting the market; access to external financial resources has a positive effect on firms' growth in terms of sales, capital stock, and employment; and financial constraints are positively correlated with productivity growth in the short run [START_REF] Musso | The Impact of Financial Constraints on Firms Survival and Growth[END_REF].

Nevertheless, the productivity path is U shaped for French manufacturing firms entering export markets -in fact, total factor productivity decreases prior to entry. This suggests that time to build constraints that generate sunk costs is responsible for this decrease in the productivity of new exporters. The difficulty of coping with these constraints could explain the low export intensity in the case of French exporters [START_REF] Bellone | The U Shaped Productivity Dynamics of French Exporters[END_REF]).

The role of financial constraints is puzzling. On the one hand, they must not be too tight and should allow firms to grow. On the other hand, they discipline competition between firms by preventing them from excessive investment with respect to the size of the market. In any case, the main challenge being faced by firms is the reduction of the barriers to growth, such as the barriers to converge towards a sort of natural market structure, which allows firms to capture productivity gains.

Innovation and competition

Re-industrialising the eurozone and re-establishing the trade equilibrium require the real sources of firms' competitiveness to be identified. While most of the discussion around industrial policy consists in determining the outcomes, which correspond to different information structures, and results in directing policy-makers to liberalise all markets, this paper intends to explore how firms may gain access to the relevant market information and will reveal what really are the market forces.

Information and co-ordination

Barriers to growth cannot be assimilated to barriers to entry. Firms are not only concerned with incentives issues in industries that are meant to be fully co-ordinated on a good or a bad equilibrium.

They have to face co-ordination failures, as market imbalances and financial constraints hamper their ability to grow.

For a process of growth to take place, investments must be planned and carried to completion. After a phase of construction, this will result in a new productive capacity, to be matched by a corresponding demand for final output. As Richardson put it (1960), the profitability of firms' investment, and hence its growth rate, will depend on how it will obtain sufficient information on which to base its investment decision. A specific problem of co-ordination is then involved, due to the existence of two delays: the delay of gestation of investment and the delay of transmission of market information. On the one hand, investment represents a firm commitment, and this commitment will give rise to an additional output only after a certain interval of time has elapsed. On the other hand, entrepreneurs will learn about the commitments of others and also about the needs of customers only after a certain period of time. Concretely, the marketing of a new product will take time and, of course, money. As demand for it grows, productive capacity will have to be enlarged. In general, manufactured products will gain in market share only gradually, as their merits become apparent and as the capacity to produce them is developed. During this period, rival offerings (and old products) will still be on the market and their lifespan may be prolonged somewhat by price reductions which help to offset their disadvantages. Meanwhile, a new product will be in development, ready to challenge the one that is gaining ground. Although a new product may be superior to an old one in all respects, the process of replacement is rarely immediate. Heterogeneity of products appears as a critical aspect of industrial dynamics.

Then, being confronted with the irreversibility of investment decisions and the lack of market information, firms will engage in new activities only if they are confident about the degree of coordination between competitors.

Imperfect information and imperfect mobility of resources are at the heart of competition, which is the better device for dealing with these natural imperfections. But, co-ordination through market transactions is only possible by virtue of the existence of circumstances which establish the boundaries, particularly for investment decisions. As [START_REF] Richardson | Information and Investment[END_REF] describes, these enabling circumstances exist naturally (such as differential capabilities or assymetries of information) or may be contrived through collective action (such as market sharing arrangements). The basic idea is that "entrepreneurs would have access to the market information they require only if there exist a variety of restraints, of different strength and durability, to which their freedom of action would frequently be subject" (G.B. Richardson 1960 p. 56). In order to take informed investment decisions, firms require some stability in their environment, and this is provided by these restraints or agreements, of different nature, which permit the industry to converge towards a state of dynamic equilibrium.

All these restraints can be qualified as market failures and may appear to be incompatible with market discipline, whichprevents entrepreneurs from reducing both production and investment and from maintaining a rate of profit in excess of the normal level. This is true only from a static viewpoint.

From a dynamic viewpoint, it is worth distinguishing between those restraints that help firms to invest and innovate and those that are really harmful and penalise customers, such as attempts to destroy competitors by deliberately operating at a loss or to exclude new entrants by monopolising the supply of an essential factor.

Therefore, the simultaneous co-existence of a number of competing firms, each innovating and producing with increasing returns, depends not on the intensity of competition as measured by the number of firms or by the level of the mark-up, but on the existence of so-called market connections, that is, to some extent, on imperfections that are in the nature of the competition process.

Contrived restraints mainly correspond to agreements that exist in a great variety of forms.

Agreements made between firms and their customers. Those that firms make with each other -among them, R&D agreements play an essential role. Of course, they allow firms to share heavy costs of development but, more fundamentally, they allow firms to share market information, which is made available only step-by-step, with the effect of avoiding an excess of competitive investment.

Firms' competitiveness and market equilibrium

Firms' growth depend on the behaviour of their competitors as well as their suppliers and customers.

Thus, firms' growth (and innovation) strategies are successful when investments are well co-ordinated, that is, when a sort of natural market structure is stabilised.

Successful innovation requires a breaking up of the market structure in an early phase, followed in the later phase by a stabilisation of this structure (Amendola, Gaffard 2006[START_REF] Amendola | Innovation, Productivity Gains and the Evolution of Market Structure[END_REF]. The problem then is not so much to define a given market structure that is assumed optimal and considered as a benchmark, but to put in place a stabilisation process that can lead to different market structures, depending on the evolution of the process itself. Stabilisation means that several firms coexist on the market, market imbalances are progressively dampened, and both competitive and complementary investments are made compatible with each other. This latter situation can be defined as a dynamic equilibrium (Richardson 1998). This is a situation in which competition causes the rate of investment in product development to rise or fall towards the level at which this investment yields only a normal return. It is also a situation in which the prices charged by the firms reflect decreasing average costs so that the benefits from innovation can also be distributed to customers. Finally, this is a situation in which the stability of market shares obtains an average: entries and exits do not change the market structure and appear as a purely random phenomenon. In short, this situation corresponds to dynamic efficiency, and a well-managed process of creative destruction.

Dynamic equilibrium is consistent with the co-existence of a number of competing firms, all of them supplying products for the same general market in conditions of increasing returns. This market supports several firms that remain differentiated not so much because they supply differentiated goods, but because they are each one at a different stage of the life cycle of the innovation process. Several firms live on the market, not only because they cater to different needs, but also because it takes time for new products to gain ground and for old ones to be driven from the field. The so-called natural structure, which is the more efficient one, will depend on the properties of technologies and preferences. What is important is that a dynamic equilibrium may be consistent with the rise and decline of firms within the industry. Furthermore, the rates of entry and exit are positively correlated, which means that there is no significant excess of demand or supply on the market. These considerations not only qualify a dynamic equilibrium, but also what should be the competitive conditions consistent with the effective gains from innovation and hence with increasing returns. As we have seen, these conditions often come down to market connections (monopolist practices) and new forms of regulation commanding the new inter-industry relationships, that is, imperfect competition. This, however, must be carefully distinguished from market failures. Market failures are generally defined with respect to the conditions of perfect competition. This implies that they must be corrected by means of specific incentive rules, without any consideration for the fact that the economic process is a time-dependent process. On the contrary, this paper maintains that imperfect competition is a characteristic of any market process and cannot be removed nor systematically corrected. It is a normal state quite often associated with the persistence of rivalry.

Two points must be stressed here. First, the maintenance of a plurality of firms that compete with each other is, in this framework, the best situation both for firms and customers. But, it might be argued that the dynamic equilibrium has nothing to do with perfect or full competition (Richardson 1998). In fact, it corresponds to a natural market structure in the sense that it allows firms to capture all potential gains of productivity. Moreover, innovative firms' competitiveness can go hand-in-hand with stability of market shares. Second, the characteristics of the dynamic equilibrium are unknown before the evolution has taken place. They will be the result of the rivalry between firms under specific restraints.

Consequently, policy cannot be devoted to reducing the gap between the existing market structure and this entirely unknown structure. It must be aimed at establishing those conditions that favour the convergence towards the so-called dynamic equilibrium, which are not, in any way, the conditions for full competition.

Industrial policy revisited

It is common to oppose sector-based and horizontal policies. Sector-based policies are above all protective policies: these aim at protecting firms in specific sectors exposed to foreign competition from market forces, and therefore to grant them more time to look for and acquire competitive advantages. These are 'traditional' industrial policies that are not very successful in the medium to long run since they do not address the root of the problem. This family might include all kinds of protectionist policies which are increasingly advocated nowadays: entry barriers, trade barriers, currency devaluations, government subsidies, and even import-substitution policies implemented in many countries in the past. Horizontal policies correspond to a broader interpretation of industrial policy. They are aimed at supporting firms engaged in free markets and at favouring market selection.

They include antitrust, regulation, and export policies, but also supply-side policies that are concerned with the working of labour and financial markets.

Usual deficiencies

The main issue with industrial policy is regarding the information that is available to policy-makers.

According to the standard economic theory, increasing returns to scale, asymmetries of information, and externalities lead to these so-called market failures that pave the way for public intervention.

However, how government ought to intervene depends on the characteristics of the industry. These characteristics -technology, preferences, and information asymmetries -are not really known by policy-makers. As a result, many subsidies can be inefficient and may introduce distortions in competition, harming customers' welfare. This is the main argument against sector-based policies. The problem is that horizontal policies face the same limitations. They are not targeted towards specific sectors, and are aimed at changing the environment for a large group of firms in many sectors.

Nevertheless, their efficiency also depends on the ability of policy-makers to know the nature of market failures to be dealt with. In order to fix R&D subsidies, policy-makers have to know the real content of knowledge spillovers, and the potential imperfections in the capital markets' funding of R&D. In order to sustain the accumulation of human capital, they have to know what sorts of market failures are affecting the training of human capital. In order to reduce the gap between the existing market structure and the optimal one, they have to identify the characteristics of the former. Indeed, they do not have access to this kind of information. Finally, from this perspective, the only eligible policy would be the policy that would focus on the working of the different markets, enhancing their liberalisation. In other words, there is no place for an active industrial policy. Competition and regulation policies, supply-side reforms, which are defined with respect to full competition as a benchmark, are instead applied to industrial policy in the narrow sense.

A new view

This paper's perspective is a little bit different, and would like to suggest that industrial policy makes sense not only because there are market failures or market imperfections, but also because believing in full competition as a benchmark is a dangerous obsession, which may turn into waste. As will be explored, industrial policy can (and should) facilitate the working of market forces, but market forces have nothing to do with full competition assimilated to an optimal state of affairs.

Policies oriented to ameliorate industry performances should be aimed at improving market information to firms, creating a more stable environment, and should then help industries to converge towards a dynamic equilibrium. Of course, governments have no more information than the firms do about markets and technologies. But they have the devices that should allow firms to acquire more information about market conditions, helping them to innovate and grow. In other words, even if the government and firms share the same issues with information, the government has different constraints and objectives.

From this perspective, industrial policy, rather than being targeted at sectors or technology, must be an array of horizontal interventions that concern the relations between firms, between firms and their employees, between firms and financial intermediaries, or between firms and public research institutions. This final option is preferable to any other since such intervention does not shield any particular firm or sector, but rather increases the quality of incentives, which are strongly dependent on conditions of co-ordination. Subsidies must not be devoted at supporting national champions or high tech sectors per se, but at encouraging cooperation between firms, including, of course, the firms that compete with each other. Industrial policies should be horizontal. But instead of replicating or re-establishing the conditions of full (perfect) competition as required by those calling for supply-side reforms, they should be aimed at validating restraints that allow firms acquiring market information.

Therefore, policies oriented at innovation, the building of human capital, and exporting, can be designed in terms of helping firms to make choices that might not be immediately profit-maximizing for the single entity, but have positive spillovers for the economic system as a whole since they create information.

Good market policies

Competition plays a central role in the co-ordination process, as it determines the way in which the market information relevant for co-ordination is being made available step-by-step, so that the required adjustments in productive capacity can actually take place. Thus it helps to make this process viable and to obtain the productivity gains deriving from it. In this light, competition is not only aimed at equalising supply and demand in a given market and technological environment, but also has to "adapt both structure and technology to the fresh opportunities created by expanding markets" (Richardson 1975, p. 353). Therefore, competition policy cannot be conducted in isolation without considering the distortions that are in the nature of the growth process and the necessity of having some market connections. Instead of targeting any optimal market structure, it must be aimed at enforcing viability (and growth) conditions. However, policy-makers may be faced with a real dilemma. On the one hand, contrived arrangements help firms to invest and innovate. On the other hand, it is sometimes in the nature of these arrangements that they can be used to shelter inefficiency or extract undue profits. [START_REF] Metcalfe | Evolutionary Economics and Creative Destruction[END_REF] distinguishes good and bad market imperfections: "The imperfections identified in the market failure approach, therefore, can be viewed in a different perspective, as integral and necessary aspects of the production and the dissemination of knowledge in a market economy. In this perspective it is surely perverse to call them imperfections. This is, of course, not a new point; for those who have studied Schumpeter they are the natural features of an economic process driven by creative destruction" (Metcalfe 1998, p. 114). To rule that all imperfections are against the public interest per se, denies the existence of the dilemma faced by policy-makers. It is necessary and possible to offer them some practical guidance by seeking to specify the circumstances in which these practices may or may not justified. The dilemma faced, for example, by anti-trust authorities is that market imperfections are, on the one hand, necessary in order to convince firms to launch innovative investment and, as such, they are not something to be systematically condemned; on the other hand, these imperfections reveal real market failures as they hamper the viability of the innovation process. Fundamentally, competition and regulation policies have to take into account the possible divorce between static and dynamic efficiency, and support restrictive practices that enhance the medium-term efficiency at the expense of the short-term one. As industrial policies, they must be discretionary policies rather than be reduced to the enforcement of given rules.

Labour market policies

The prevailing view in the literature and in most political circles is that the possibility of hiring and firing freely, and of offering wages at a freely-chosen level, is an incentive to invest and hence favours innovation and growth. As such, labour market policies could figure in an industrial policy.

A theoretical basis to this view focuses on the effect of labour market rigidities, identified by high firing costs, and on long-run productivity and growth (through the effect on the 'structure of innovation'). The argument is that, given that higher levels of productivity are obtained by the firms operating in high tech sectors, and that these firms (and sectors) are characterised by strong turnover and a pronounced creation and destruction of employment, dismissal costs (employment protection) reduce the incentive for investment, technical change and productivity increases, and help to retain human resources in low productivity sectors. This tends to reduce the average rate of productivity in the economy as a whole.

However, the fundamental aspect of a thorough process of innovation is the creation of skills. And, because it increases job tenure and, through this channel, favours on-the-job training, employment protection affects not only employment but also human capital accumulation, and hence productivity and welfare. Then, labour market policies, far from being oriented to the dismantlement of the welfare state, should promote labour market organisation and forms of bargaining between employers and employees that help with adjustment to technological and market changes. It would be more appropriate to reinforce bargaining procedures between employers and employees, and to revise the working of internal labour markets rather than suppress them.

Therefore, the effect of employment security regulation and of the partial reforms recently carried out, which extend to the use of temporary contracts for newly-hired workers leaving employment protection unchanged for permanent workers, and hence make the labour market more flexible, have only favoured a segmentation of this market and the appearance of a new category of workers, namely the 'short-term' workers. This segmentation might even be an obstacle to workers' mobility and growth by preventing voluntary quits from 'solid' jobs. Labour market policies should be designed in order to avoid such segmentation.

Regional policy

Industrial policies have a territorial dimension insofar as there are local learning processes. But, there is no evidence that local or regional governments are better informed than the national government, have a higher degree of competence, or are less easily captured by lobbyists. Moreover, due to information imperfections and political interests, there is no evidence that competition between countries induces firms to be located wherever they add more value since a government will offer more than another only if the external benefits are larger in the first region than in the second. Competition between regional governments could even be globally inefficient if its main consequence is to ameliorate the performance of a small number of regions at the detriment of all others. Such inequalities would negatively affect global efficiency. The conjecture can be made that the smaller the regions, the more wasteful competition between them will be. This might be so because small regions are more inclined to compete with each other by promoting generic advantages such as tax reductions or set-up subsidies, which reduce the sunk costs that firms have to bear and make setting-up more instable. Larger regions, on the other hand, would be more inclined to promote cooperation between firms within and outside its territory, and to pay subsidies aimed at sustaining large public programmes such as environmental programmes. This might be the reason why there is a tendency towards cooperation between larger regions. The issues to deal with are to build on critical mass, to allow diversification or differentiation, and most of all, to facilitate adjustments to changes affecting technologies and preferences.

Clusters as well as technologies are the result of the innovation process rather than a precondition of it.

So policy-makers are faced a dilemma, which concerns both the appropriate level of decision-making and the relevant geographical area of public intervention. There are local externalities, mainly in the form of learning processes, which require defining a relevant geographical perimeter of public intervention. This inevitably interferes with local political interests. So the real issue to be dealt with is about the nature of relations that prevail between regions, and the size of each of them.

5.The European challenge

The main objective of any policy in Europe should be re-establishing the conditions of a convergence in real terms, which means re-establishing a balanced trade between the large European countries, and, thus, re-industrialising some parts of the eurozone. This requires reconsidering both national and European policies that are growth-enhancing, that is, competition policy, labour policy, regional policy, but also industrial policy stricto sensu.

First of all, it would be worthwhile to abandon the idea that supply-side reforms making the labour market more flexible in each country would reinforce the competitiveness of each one without damaging global demand and growth at the European level. Instead, supply-side reforms should consist in establishing a policy framework aimed at supporting both competition and cooperation between the various players of innovation processes. This is largely the case in Germany, but not in France and not at the European level. Therefore, other countries in Europe should take advantage of the German experience and revisit their national policies. At the same time, a new European initiative should take the form of large public programmes defined at appropriate geographic levels, that is, levels that permit avoiding the destructive competition between regions or countries, typically technological programmes in the field of the environment, energy and applied research. The main reason for developing such programmes is that they are transversal both in terms of activities, firms and countries, and they aim at improving market information for firms, creating a more stable environment, making it credible and relevant for these firms to invest. Moreover, each country should be able to benefit from such programmes in terms of development of some segment of industry.

However, any change in the industrial landscape in Europe will only be possible if a new macroeconomic policy is under way. In fact, generalised austerity is going to destroy large segments of industry in Europe. Therefore, even if fiscal consolidation is a necessary part of a rebalancing strategy, it is vital that countries with large surpluses take action to stimulate their domestic demand.


M Amendola

S Bruno

J L Gaffard

Hicks and Richardson on industrial change: analysis and policy

This paper is aimed at showing the complementarity between Richardson's and Hicks' contributions as regards the sketching out of a proper analytical framework for dynamic analysis. These contributions deal with two essential analytical ingredients that the out-of-equilibrium analysis of processes of economic change calls for: investment, in the sense of construction of productive capacity, and the relations which must be established for construction looked at as a process over time. In particular, light is thrown on the specific co-ordination problem that characterizes a process of economic change; a problem that arises at the junction of two strictly related lags: the phase of construction of productive capacity -which entails sunk costs -and the delay of transmission of information -which implies uncertainty. The analytical framework thus sketched out helps to understand why the economic agents' interaction does not bring about chaotic results, as long as the decision-makers are characterized by roughly stable patterns of behaviour and/or as long as a fair amount of co-ordination takes place, through various forms of cognitive exchange. It helps to show that the adoption of routines, the compliance to rules and customs, communicative action, the sharing of expectations about the behaviour of the system, the search for explicit agreements, are all mechanisms (or strategies) producing some degree of co-ordination, which confer the required order and stability to the environment.

Change as an out of equilibrium process

Dynamic analysis depends on dealing with issues that are in the nature of dynamic problems rather than on referring to supposedly dynamic methods. Qualitative economic change -a change that implies a structural modification which can only be brought about through a process in real, irreversible time -is the crucial issue involved whenever a thorough dynamic problem is contemplated. Innovation, which implies creation of new resources and construction of different choice sets, is the foremost example of qualitative change; but also a speeding up of the growth rate or a simple change of the technique in use partake of the same nature. In all these cases, the previously existing productive structure is disturbed, its way of functioning is affected, its harmony over time, assured in the previous equilibrium state, is perturbed. As a result, problems of intertemporal complementarity arise which call for co-ordination over time of economic activity, to render the process of change undertaken viable. This process comes down to the construction (in the limit the creation anew) of a new productive structure which most of the times also implies the creation of new specific resources; in particular the appearance of new skills of the human resource, where the term 'skill' must be taken in a wider sense as referring not only to the intrinsic characteristics (qualifications, competences,...) of this resource, but also to its relations with the productive environment with which it interacts (organizational capabilities, institutional features...).

New aggregates of elements that exhibit different complementarity relations among them have thus to be shaped up for a different productive structure with its distinctive way of functioning to emerge. This can only come about through a process which is in the nature of an out-of-equilibrium process; its viability is the crucial problem involved, and this depends mainly on being able to re-establish the harmony over time of productive activity broken up by the undertaken structural modification. In this perspective, complementarity and co-ordination over time appear as the relevant issues for viability. This paper is aimed at showing the complementarity between Richardson's and Hicks' contributions as regards the sketching out of a proper analytical framework for dynamic analysis such as we just defined it.

Investment co-ordination and the delay of transmission of information

Standard equilibrium analyses, and models, are not suited to deal with the two essential aspects of the out-of-equilibrium analysis which qualitative change calls for: investment, in the sense of construction of productive capacity, and the relations which must be established for construction looked at as a process over time to be carried out 1 .

Both investment and relations between agents appear as strictly related problems in the analysis developed by Richardson in his book Information and Investment (1960). This can be read in his very words. "It is of the essence of the private enterprise that although its individual members are independent (in the sense that they are free from central direction) yet their activities are nevertheless interrelated" (ibid. p.30). "Any single investment will in general be profitable only provided, first, that the volume of competitive investment does not exceed a critical limit set by the demand available, and, secondly, that the volume of complementary investment reaches some minimum level."(Ibid. p.31) 2 .

On the other hand the decisions about the investment to be carried out are taken by entrepreneurs on the basis of expectations whose reliability depends on them being grounded on adequate information or evidence. According to Richardson "the availability to entrepreneurs of this information (...) is a function of the nature of the particular form of organization or system within which they are presumed to operate" (ibid. pp. 29-30). The assumed market structure has therefore an important bearing on the way expectations are formed, and decisions taken as a consequence; and, as we shall see better in the last section of this paper "some market imperfections may be essential to the process of successful economic adjustment" (ibid. p.38).

If we put on the lenses represented by the above proposed interpretation of qualitative change we can see in which way Richardson's analysis helps to deepen our understanding of how, and due to which factors, a co-ordination problem arises and becomes the main issue to be dealt with in the out-ofequilibrium process on the viability of which the endeavoured change depends.

For a process of change to take place investments must be decided and actually undertaken which, after a phase of construction, will result in a new productive capacity to be matched by a corresponding demand for final output. As stressed by Richardson, the profitability of any investment project depends on the setting up of a satisfactory amount of both complementary and competitive investments along the way. If entrepreneurs had immediately complete information on all existing investment projects this profitability would be assured because the entrepreneurs themselves would behave in such a way that no imbalance between supply and demand would appear on the market for final output. However, this is not likely to happen in a "private enterprise system; the larger the 1. Standard theory looks at production from the vantage point of trade and exchange, and production itself comes actually down to an analytically instantaneous assembling of given generic inputs. On the other hand coordination of economic activity -an activity interpreted as allocation, not as construction or creation of resources -is guaranteed by assumption by the price mechanism, and the theory is silent on how this actually takes place. 2. According to the author investment may be termed complementary (competitive) where the profitability of one is increased (reduced) by the carrying out of the other. Intermediate products or effective substitutes are examples of the one or the other, respectively. number of firms in each industry, and the less the co-operation between them, the more difficult it is to see how the required information could be obtained". Thus "it seems more reasonable to assume that entrepreneurs will generally learn of the investment commitments of others only after a certain period of time which, for convenience, will be called the 'transmission interval'. The duration of this interval, it seems safe to presume, would not be greater than the gestation period, after which the extra flow of goods would have themselves felt on the market, but could be shorter than this, where entrepreneurs were able to obtain evidence about the amount of construction under way" (ibid. p.51). The very existence of this delay in the transmission of information implies that adequate market information is no longer obtainable and hence involves a co-ordination problem.

How -in particular, as the result of the establishing of which kinds and forms of relations -the required information can be made available is the specific object of the analysis developed by Richardson. However, he focuses on "how entrepreneurs can be supplied with the information which will enable them to take the investment decisions required by a rational allocation of resources" (ibid. p. 45). What we are after, instead, is a theory able to explain change interpreted as the process by which new and different productive options are brought about: where the focus is on creation, not on allocation of resources.

The problem of co-ordination, the existence of a delay of transmission of information and its relation with investment activity, the coherence of expectations formation -together with other interesting insights on the policy issues involved by the co-ordination problem, which, we shall see, Richardson's analysis also provides -are essential analytical ingredients of this theory. However, for the theory itself to be properly developed we still lack a crucial element: a representation of production as a timestructured process dealing explicitly with the intertemporal complementarity, which provides the adequate sequential framework for an-out of-equilibrium analysis 3 .

Intertemporal complementarity of production and the construction lag

Articulation over time of the production process is the distinctive feature of the Neo-Austrian model [START_REF] Hicks | A Neo-Austrian Growth Theory[END_REF][START_REF] Hicks | Capital and Time[END_REF]. In this model production appears as a scheme for transforming a sequence of primary labour inputs into a sequence of homogeneous final output. The production process is fully vertically integrated. This makes it possible both to exhibit explicitly the phase of construction of productive capacity by bringing it inside the production process and to stress that it must necessarily 3. The gestation period stressed by Richardson refers to the time lag required for obtaining the output from a given productive capacity; it has got nothing to do with the process through which this capacity is brought about, which represents the true time element of production. come before the phase of utilisation of the same capacity 4 . Focus on the time structure of the production process, and on its intertemporal complementarity, allows to actually deal with the transitional dynamics of an economy, in the sense of bringing to light "what happens on the way" (Hicks 1973, p.10). In particular, the transition between two different techniques (a Traverse) is analyzed by following the process through which this transition takes place in its sequential development [START_REF] Hicks | Capital and Time[END_REF]. This allows important analytical insights: in particular it makes it possible a demonstration of Ricardo's 'machinery effect', according to which the introduction of machinery has an adverse effect on employment in the short run. The reason that the focus on the time structure of the production process renders evident is the temporal dissociation of inputs from output and of costs from proceeds during the Traverse (a consequence of the change in the age structure of productive capacity resulting from the modification of the balance between processes in the phase of construction and processes in the phase of utilization implied by a change in the technique in use) with the result of a temporary fall in final output, and hence in the resources available to sustain employment.

The message of the analysis of the Traverse is that any attempt to change a given productive structure implies bringing back into light the time articulation of the production process -its having to go first through a phase of construction of a different productive capacity in order to be able to use it later for current production -obscured by the synchronization of production in a given equilibrium state.

However it is a message the analytical potentiality of which cannot be fully exploited within the context sketched out by Hicks 5 . As a matter of fact no decision process is contemplated in this context. The barter economy dealt with in the analysis is made to move along the sequence of periods from the one technique to the other by means of the mechanism provided by the assumption of Full Performance. This implies that all the output not absorbed by consumption out of wages paid to workers engaged on existing production processes or by consumption of other kinds, is in fact used to start new production processes. The rate of starts, thus made endogenous, sketches out the path followed by the economy, a fully predetermined path once the values of the technical parameters of the model are given. Full Performance, on the other hand, also implies flow equilibrium in each period, both in the sense that final output is totally absorbed by existing demand and in the sense that investment is equal to ex ante saving. Thus the existing productive structure is smoothly transmuted into the one adapted to the new technique as resources are gradually freed and invested into the 4. The Neo-Austrian analysis of the production process is consistent with Richardson's vision of the nature of the firm. In his paper on Adam Smith (1975) Richardson considers "the implications of giving firms the freedom to practise a vertical division of labour", i.e. the implications of bringing back to the surface the temporal dimension of the production process. This leads him "to regard firms as undertaking activities rather than making and selling products, these activities having to do with the discovery and estimation of future wants, with research development, and design, with the execution and co-ordination of processes of physical transformation, with the marketing of goods, and so on". These activities look very much like vertically integrated (and separable) production processes as defined in the Neo-Austrian model.

building of the latter one. In this context no co-ordination problems can arise: Full Performance assures co-ordination 6 .

The importance of dealing with the decision moment of economic actions in a sequential context is recognized explicitly by Hicks himself in his attempt to define sequential causality as opposed to the contemporaneous causality concept prevailing in economic theory [START_REF] Hicks | Causality in Economics[END_REF]. "Even the simplest case of sequential causation in economics has two steps in it: a prior step, from the objective cause to the decisions that are based on it, or influenced by it, and a posterior step, from the decisions to their (objective effects). With respect to the decision, the prior step is one of formation, the posterior of execution"(ibid. p. 88). We have thus a posterior lag (it could be Richardson's gestation lag, or the construction lag in the Neo-Austrian model) and a prior lag, the consideration of which might appear as the missing link for developing a thorough dynamic analysis along Neo-Austrian lines. But this is not so, at least in the way Hicks himself deals with the problem. Although stressing that the problem raised by the existence of a prior lag consists of two logical moments -the first one, which is a matter of information, concerning the decision in itself, and the second one, which is a matter of negotiation, concerning the arrangements for making the decision effective -he actually focuses only on the second moment. Thus the constraints, not the motivations of the decision process come into light 7 . This allows to put the accent on the existence and the role of reserves -and in particular on liquidity, which in this light appears as freedom from financial constraints as it gives ability to respond to oncoming opportunities -but not to grasp the implications of a decision process: in the first place, its interaction with the intertemporal complementarity of the production process interpreted as construction (or creation). It does not allow, in other words, passing from a sequence 'constraintsconstraints' to a sequence 'constraints-decisions-constraints', which is the effective backbone of an out-of-equilibrium process of change.

The co-ordination problem in a dynamic context

This is where Richardson comes to the rescue. His analysis of the delay of transmission of information is the missing link that we need. It makes it possible to account for the specific co-ordination problem that characterizes a process of qualitative change; a problem that arises at the junction of two strictly related lags: the phase of construction of productive capacity -which entails sunk costs -and the delay of transmission of information -which implies uncertainty. Both lags must be taken into account in the analysis, because cancelling one of them also cancels the co-ordination problem. 5. This is the likely reason why there have been only scanty and unsuccessful attempts to pursue the line of research proposed by the Neo-Austrian model. 6. Which is rather odd, in a context where productive capacity is not adapted and that hence, in principle, should deny co-ordination. This is why we stressed that it is indeed the absence of the latter lag in the Hicksian analysis of the 'Traverse' that eliminates the problem of co-ordination by automatically assuring the equilibrium between supply and demand in each period of the sequence through which a superior technique is adopted by the economy. On the other hand overlooking of the lag represented by the construction phase, even in presence of incomplete information leading to mistakes in investment, allows not only a revision of plans, but this to be instantaneous, so as to cancel imbalances at the very moment of their appearance. In this case too, hence, no co-ordination problem arises.

When both lags are properly taken into account, and a co-ordination problem then arises, it can be shown that any kind of qualitative change that involves a modification of the productive structure of the economy may (and will actually do, failing very specific assumptions) bring about a distortion of productive capacity that implies that not only construction and utilization, but also investment and consumption, and supply and demand, are no longer harmonized over time. The initial distortion, through the interaction of the intertemporal complementarities of production and decisions, stirs an out-of-equilibrium process, which carries and possibly amplifies the existing imbalances over a sequence of periods. This process, via expectations, may become cumulative, so that its very viability may be hampered. The problem, then, is to bring to light the conditions for viability, that is, what is required to re-establish the consistency over time of the relevant interacting magnitudes of the economy [START_REF] Amendola | The Innovative Choice[END_REF], 1992[START_REF] Bruno | The New Theoretical Limits of Laissez Faire[END_REF][START_REF] Amendola | Out of Equilibrium[END_REF].

This means in the first place to re-establish the harmony between construction and utilisation, so as not to have too strong imbalances between supply and demand of final output that might render the economy not viable. The required out-of-equilibrium strategy -which must be aimed in particular at dealing with the sunk costs due to the dissociation over time of inputs from output, and of costs from proceeds, as the result of the distortion of productive capacity -is more properly examined with reference to the most typical qualitative change, innovation interpreted as a process of creation of resources.

This strategy, as already mentioned above, needs market connections usually considered as market imperfections -that is, implicit or explicit agreements with other firms -but also to establish more complex relations than the market ones. Price relations, the only market relations usually considered, give information on what exists, allow learning in the sense of getting to know what is already there. A process of creation of resources, instead, needs creation of information, that is, creative learning that can only take place through an out-of-equilibrium process [START_REF] Bruno | La concorrenza come 'viaggio esplorativo verso l'ignoto': dai giochi di prezzo alle azioni sperimentali[END_REF]). Out-of-equilibrium contexts, on the other hand, need stressing non-price relations that allow focusing on quantity adjustments besides the price ones. Price rigidity -rendered by a fix-price hypothesis [START_REF] Hicks | Capital and Growth[END_REF][START_REF] Hicks | A Market Theory of Money[END_REF], which on 7. Like in the analysis of the Traverse, where the assumption of Full Performance is made exactly in order to one hand allows disequilibria to come to the surface through the appearance of stocks -is on the other hand the expression of a behaviour which, through the management of these stocks, tries to correct the sheer working of price adjustment mechanisms. In particular in the utilization phase, when the problem is harmonising step by step final demand with the existing productive capacity, the role of sales intermediaries is paramount as regards avoiding strong fluctuations in prices which would be a threat to the required harmony over time between supply and demand.

In order to assure the viability of a process of change, co-ordination through co-operation or direct relations between firms may be more effective than co-ordination through anonymous market transactions, which may induce ever growing distortions in the structure of productive capacity. As a matter of fact, if demand and supply are continuously kept in equilibrium by flexible prices, strong (and may be erratic) variations of quantities exchanged may be recorded in a context of imperfect competition. Thus the practice not to allow prices to vary can be the correct method by which the relevant information is acquired (Richardson 1960, p. 66). However, while prices are kept fixed, the need for adaptability persists. This is assured by holding reserve assets -be they real or financial assets. As a matter of fact, the degree of synchronization between costs and proceeds "will be either neither complete nor wholly predictable" (ibid. p. 154). Thus the possibility of making expenses in excess of income appears as a condition for adaptation and viability. Of course viability will be enhanced "by the possession (...) of some source of readily-available purchasing power" (ibid.) whatever the way in which it is provided.

In order to better understand this point we can refer to an analysis of liquidity along Hicksian lines.

Uncertainty calls for reserve assets (or borrowing power). Reserve assets reflect a precautionary motive: when information about the future is incomplete firms look for more liquid positions.

Whatever the source of liquidity firms have access to (reserve assets, overdrafts,...) "liquidity is not a property of a single choice, it is a matter of a sequence of choices, a related sequence" (Hicks 1974, p. 38). In this perspective, reserve assets belong to a bundle of complements. Firms need reserve assets to realize their choices and carry out production processes. Reserve assets and real (productive) assets appear as complements: they are complements over time [START_REF] Amendola | Liquidity, Flexibility and Processes of Economic Change[END_REF]. And this complementarity relation is essential for rendering viable a process of change out of equilibrium.

In Information and Investment, Richardson had already developed a similar argument. Indeed in discussing the way in which a firm selects a strategy under conditions of imperfect knowledge, he stresses "it is necessary not only to construct the probability estimates, but also to judge how far the relevant information could be augmented by inquiry, by experiment or by the mere postponement of the decisions to be taken" (ibid. p. 147). Thus he recognises that any choice, at any period of time, actually dispense with the problem of the constraints. belongs to a related sequence of choices, and that this sequential character of the procedure of choice is the main reason for holding liquid assets or being able to rely on borrowing power. Summing up.

Richardson's ideas and Hicks' insights evoke essential points for sketching out a proper out-ofequilibrium analysis and strategy; and their similarity -often a thorough complementarity -is striking.

The focus on intertemporal complementarity and on co-ordination problems, the need for adjustment and the role of real and monetary reserves in this process, the role of fix prices in the acquisition of information, are but ones of these points.

Co-ordination ex ante versus co-ordination ex post

The analytical considerations developed above are rich of normative suggestions. These concern both the firms and the governments wanting to foster development and change, though obviously in slightly different ways.

When we place ourselves in an ex ante perspective, only rather vague options for building-up something new appear to the firms which are or might become involved in a process of innovation.

Such options acquire increasingly definite features only as the process of exploration and experimentation takes place and sunk costs are met. In any case, in order to proceed in the construction of innovative options, the involved firms have to set up organizational strategies aimed at re-shaping through time the relationships of which the environment is made, "because during the process of transformation the borders defining the environment itself cannot exist since the innovation consists exactly in the fact that some of the elements previously external to the activity performed by the firm are now made internal to its strategy, in accordance with the changes actually taking place in the process of production" (Amendola and Bruno 1990 p. 420).

On the other hand the intertemporal co-ordination, required to carry out the above-mentioned strategy, involves several agents. However, the way the co-ordination of activities may be planned, at least in principle, and organized in the case of an outcome which is well specified ex ante, highly differs from the way the co-ordination of activities may be set up in the case of the creation of innovation. Consider the case of the inter-firm co-operative agreements, which are needed when the problem is that of "the matching, both qualitative and quantitative, of individual enterprise plans" (Richardson 1972, p.98).

The possibility of co-ordinating plans is actually open only at the condition that some fairly detailed knowledge about what should be planned does exist already within the cluster of companies that are deciding to co-operate. This might occur either in the case of the development or in that of the adoption of already existing innovations, but it cannot occur by definition in the case of firms that decide to co-operate in order to find out the way of setting up an innovation in the sense of creation of technology.

If firms decide to co-operate for the creation of innovation, therefore, the content of the agreement must be else than the planning of the activities regarded as actual pieces of production along an established time schedule. It cannot but be (a) the intention to establish a long-run co-operation in certain 'directions' for not precisely specified 'common aims', (b) the generic and specific resources they decide to put in common, at the purpose of engaging them in the innovative effort (and thus rendering them even more specific), (c) the rules and the procedures according to which to take future decisions 'on the way', and finally (d) the rules and the procedures concerning the exploitation of the commonly produced outcome (Bruno andDe Lellis 1992, Bruno 2004 8 ).

On the other hand the more the setting up of an activity requires specific inputs, the more the involved agent is obliged to (a) take care and plan the time scheduling of his undertaking; (b) establish reliable and specific relationships with the agents from whom he wants to obtain the desired inputs; (c) meet the costs and face the risks which are connected to (a) and (b). And the more specific some, or many of the involved inputs are (up to the point of being new and unique, as in the case of absolute innovations), the more (d) the relationships with the other agents have to be personal, non anonymous (as basically are, instead, the pure market transactions) 9 ; (e) the object of such relationships must be the establishment of co-operative activities (as opposed to simple 'acts') the aim of which is the setting up of an environment for common learning (see in this direction [START_REF] Ciborra | Innovation Networks and Organisational Learning[END_REF].

The normative implications also concern the organizational patterns. A shift of the attention from how economic structures and systems are and function to how do they change and why also implies a shift of the focus from competitive relations 10 to co-operative ones, which are of interest from the viewpoint of the processes aimed at constructing them through time, efforts and investments.

Furthermore, the attention should be shifted from the organizational patterns to the processes of 'organising', that is, to the activities that concern the organizational structuring of the relationships among the firms and within them. This implies that finding out what the optimal boundaries of the firm are -which is the crucial issue in modern industrial organization theory -is not what really matters. As also stressed by Richardson "established positions are constantly under pressure not merely because of autonomous changes in taste and technique but also by virtue of the fact that at any 8. Both substantiate the hints by [START_REF] Hayek | The Meaning of Competition[END_REF]Hayek ,1968. 9. 9. This was well perceived by [START_REF] Richardson | Information and Investment[END_REF]. When the environment is large relatively to a single agent who decides to invest and the inputs are not specific, pure anonymous market transaction would be sufficient. If the magnitude of the devised investment is high relatively to the environment, as it happens in underdeveloped countries or areas and for investments presenting important indivisibilities, the relationships, which need to be established, tend to be unavoidably more personal. But even in a well developed environment, when the inputs must be specific and/or the magnitude of the orders is relatively large, explicit and direct co-ordination and cooperation will be likely to be needed or preferred. point of time there will exist unexploited opportunities for the division of labour and the consequent regrouping of activities. For, according to Smith's theory of economic development, industrial structures will be in constant need of adaptation; the very process of adaptation, by increasing productivity and therefore market size, ensures that the adaptation is no longer appropriate to the opportunities it has itself created" (1975, p. 358). Thus what matters from an analytical as well as a business viewpoint, is not to know what the optimal organization of industry is but how this organization changes and why.

Of crucial importance, in this context, are the human resources: how are they formed before hiring and on the job, how are they cared and motivated within the companies industrial relations, which kind of hiring strategy is adopted by the firms. Once again the problem is far away from the standard optimality criteria: optimality requires that a firm has exactly the labour required for carrying on its present productive tasks with no excess both in its quantity and quality. But a firm that behaves optimally in this sense, which has no human resources whose skills and knowledge are above and beyond its present needs is blind: the firm cannot perceive the options for innovation, it cannot cultivate and develop them, it has difficulty to establish constructive relationships with other firms which could become the complementary partners of the development of the envisaged innovation.

This observation has implications not only for the firms and their strategies, but also for governments, since high quality human resources are generated by a continuum of back-stages, which involve universities and the research network at large, and which require much in advance financial resources and care.

Economic policy implications

The analytical framework sketched out also helps to understand the methodological flaws of the traditional theories of economic policy, be them of the Paretian or of the Tinbergen type 11 .

Again, Richardson gives the hint. As he puts it "the Pareto optimum is conceived in terms of the categories of centrally planned allocation on the basis of full knowledge" (1960, p. 43). Now, in a context of incomplete information, efficiency cannot be considered by reference to a Paretian situation, that is, by reference to equilibrium with full co-ordination. It should be considered with reference to the process of adjustment. As a matter of fact those who consider perfect competition as a benchmark and those who advocate central planning have much in common. Both believe that it is 10. Which are instead the focus of standard economic theory and that become interesting from a dynamic and transformation point of view only in so far as change of the competitive rules is concerned. 11. In the Paretian tradition the public intervention is aimed at reaching a Pareto-efficient solution, given the distribution of individual endowments, or, for those who believe in the possibility of deriving or of having a Social Welfare Function, the Pareto-efficient and most equitable solution; such solutions amount to the always possible to obtain the right structure of information and ignore how the relevant information may be acquired, how the optimal state of affairs is to be brought about and what are the institutional and market arrangements required for the task. Thus while from a normative viewpoint the reference to Pareto optimum implies to look for the specific incentives that are a good substitute for perfect information, the normative implication of Richardson (and ours) viewpoint is that what matters is to promote the general rules that allow the firms to acquire the relevant information step by step.

But there is a deeper difference of perspective in the background. The traditional theory of economic policy has been established with reference to a world made of what we might call 'parametric optimizers'. By this we mean that the individual agents, as well as their aggregations, self-determine their behaviours through the solution of some problem of maximum (minimum), operated upon a set of functions whose general shape is uniform for the same kind of agents and whose parameters depend on the systemic forces and on the institutional set-up. In such a world, the policy instruments consist in a change of some of the parameters, which also implies a change -whose direction is known and whose intensity may usually be estimated -in the optimal solution adopted by each of the relevant agents. The so-called decision-makers are thus pure automata, which give basically mechanical responses to appropriate stimuli [START_REF] Bruno | The New Theoretical Limits of Laissez Faire[END_REF].

The out-of-equilibrium process outlined in this paper admits instead a plurality of dynamic paths. This implies that the system, though heavily bounded by its inner dynamic structure, is still open to a plurality of possible strategies on the side of the actors, who not only play within the system, but also contribute in shaping its patterns, while building up the productive capacity, while setting up cumulative systems of rules and relationships, while learning. This immediately suggests that there is a wide room for policy actions.

It is interesting to stress some of the most important consequences of the above outlined change of perspective:

i) no mechanical correspondence between policy actions and individuals' responses can be established, as it happens under traditional schemes based upon optimization hypotheses;

ii) there are asymmetries of information not only among private actors, but also among institutions and between private actors and institutions (comprising governments, national and local, and government agencies);

iii) various forms of informational exchange may, and usually do take place, and have to be regarded as the key factor of the new economic policy.

maximum satisfaction of consumers' preferences. In the Tinbergen tradition, instead, the public action is aimed

The last point is paramount. As a matter of fact the common everyday perception is that the economic agents' interaction does not bring about chaotic results, so long as the decision-makers are characterized by roughly stable patterns of behaviour and/or as long as a fair amount of co-ordination takes place, through various forms of cognitive exchange. It is true, in fact, that if synchronous decisions undertaken by different subjects are shaped not only independently, but under conditions of reciprocal ignorance, this would hardly produce the regularities we observe in our societies; but the point is exactly this, that in our societies, under normal circumstances, some form of co-ordination among the subjects has been created in advance e through long lasting cumulative but someway differentiated processes 12 .

The adoption of routines, the compliance to rules and customs, communicative action, the sharing of expectations about the behaviour of the system, the use of signalling (encompassing the announcement of policies), explicit communication, the search for explicit agreements, are all mechanisms (or strategies) producing some degree of co-ordination, which confer order and stability to the environment and reduce the uncertainty or the risks and costs associated to it (North 2005).

It is finally worth spending a few words on the issue of monopolistic features. Richardson has been among the few to acknowledge that various forms of inter-firm agreements might play a crucial role in the fostering of development and innovation. According to him the entrepreneurs can obtain the required market information only if it exists a variety of restraints. These restraints, by definition, restrict freedom but provide secure expectations that allow the firms to commit themselves to irreversible investments. Thus "they (...) constitute at worst a necessary evil" (1960, p. 69). Courage was needed to hold such a position in a world that is traditionally biased against oligopoly structures.

As a matter of fact more attention should be paid to the fact that the attainment of extra profits constitutes the motivation (ex ante) and the reward (ex post) of previous efforts and costs for finding out new goods and/or new and less costly processes of production. The existence of such extra profits is thus the mechanism that induces the firms to continue to take risks and spend in research and development in order to introduce further innovation and to improve their competitive performance.

This should prescribe a selective attitude on the side of anti-trust authorities, which should be able to discriminate which are the actual features of oligopoly situations in single cases, abstaining from the application of exceedingly general rules, such as the traditional one, based on the actual existence of innumerable, powerless and fragmented firms. However, this calls for a change of analytical perspective along the lines pointed at in this paper. As a matter of fact "in the great contemporary discussion of monopoly policy, the contribution of economic science has been, in the end, rather at optimising an exogenously given set of objectives. 12. This explains also why sudden changes may impair or destroy regularity.

disappointing; an important reason for this (...) may be the inadequacy of the basic conceptual instruments with which we endeavour to analyze the process of economic adjustment in competitive conditions" (Richardson 1960, p.71).