Market mechanisms for policy decisions: Tools for the European Union

The success of an enlarged European Union will require transparent and subt le mechanisms for policy coordination. A common policy is a public good, an d economists have developed many schemes for the efficient provision of pub lic goods. The European Union offers a promising soil for such schemes, but they must be simple and tailored to its specific needs. The paper discusse s two possible examples: A system of tradable deficit permits implementing the fiscal constraints of the Maastricht treaty; and a rule allowing countr y representatives to shift their own votes intertemporally when deliberatio ns are taken in periodic committee meetings. (C) 2001 Elsevier Science B,V. All rights reserved.