Author: Valentin Ionescu

Introduction. The European governance is an institutional arrangement enabling the cooperation and the competition among the states, the individuals and the pressure groups looking to maximize their welfare. The European governance system is a multi-level non-hierarchical structure, and authority is shared among the supranational bodies, as well as among the latter and the Member States. The structure of the European governance system is influenced by the need to achieve a political balance among the stakeholders, in the environment of a permanent conflict among the public interest regulations and the “captive” regulations, the latter being determined by the rent extraction/ rent seeking.

Aim of the study. In this short analysis I describe the European governance, taking into account the policy-making framework under, “Two-pack”, “Sixpack”, and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG) that increases the power of the supranational bodies. For this purpose I embarked on two different approaches: the economic theory of regulation (G. Stigler, G. Tullock, S. Peltzman, R.Posner) and the normative theories on power distribution.
Keywords: Economic theories of regulation, normative theories on power distribution, interjurisdictional competition, neofunctionalism and intergovernmentalism, competitive federalism, principal – agent.

Introduction.The first is informal and the latter is formal. Both contracts are concluded between the same actors. The first transaction sets the rent extraction from the firm, while the second contract establishes the decision-making mechanism for the allocation of the firm’s resources. The “rent” is not treated in this study as a surplus, as in Ricardo-Marshall model, but as a profit.

Aim of the study. This article is an analysis of a “contractual paradox” which exists in the relation between an agent and a principal, in the presence of rent extraction. This case focuses exclusively on the State Owned Enterprise – SOE in Romania. If the model built by MC Jensen and WH Meckling examines the agency costs occurring in the presence of an information asymmetry and conflicts of interest between the agent and the principal, “the contractual paradox” that I consider in this article assumes that the “agent” and the “principal” cooperate to extract a rent/profit detrimental to a State Owned Enterprise and, in this case, the conflict of interest between the two disappears or subsists only as regards rent extraction and risks sharing. The “contractual paradox” refers to the coexistence of two agency contracts in the same State Owned Enterprise.
Keywords: corporate governance, agent – principal, agency costs, rent seeking, rent extraction