Professor Giacomo Calzolari joins EUI as Professor of Economics after 15 years at the University of Bologna. Professor Calzolari spoke to EUI Life about his future research here, and his love of competition policy and banking regulation.
“I’m teaching Microeconomics 1, which is the first course in microeconomics that students face at entry, with maths, microeconomics, and econometrics”, he says. “The second course, which I’ll teach from February, will be a second year course on industrial organisation, competition policy, and banking regulation. It’s a blend of topics which are at the core of my research, and it’s about the application of economic tools to some policies, in particular competition policy, supervision and regulation of banks.”
Speaking of research, what is Professor Calzolari working on? “I’m working on industrial organisation, which is the set of tools that we use in order to understand how markets function and perform from the point of view of firms, and their different attitudes towards competition and their strategic choices which could inform pricing decisions, advertising choices, design of products, and decision on innovation. And then I build on this reasoning in more policy-oriented terms, in particular competition policy. I like the blend a lot – being a theorist gives you the technical tools, but I like to apply these tools that give a great deal of perspective in real market problems.”
The professor’s passion for the fusion of digital advances and economic theory is clear: “I’m advising the European Commission on competition policy. We regularly meet with the chief economist in DG-Competition, and discuss frontiers of economic policy and new issues driven by innovations in markets. For example, I’m working and advising on algorithmic pricing. Nowadays we know that in several markets, firms delegate most of the pricing decisions to intelligent softwares. Technically, you can see this as an optimisation process – delegating choosing the right price at the right moment for the right product to softwares. The new twist is that these softwares learn from their own experience. One potential issue in this environment is that algorithms may learn that the best way for them to make profits is by coordinating on high prices amongst themselves. We call that collusion, but since it’s done through algorithms, we currently don’t have the legal apparatus to fight this type of coordination.
“The other policy-related activity [which I work on] is banking supervision. If you think about big multinational banks, they are certainly creating a more competitive environment between different countries in which they are active, but supervising the banks is a daunting task. They are mobile, they may shop around countries with the most favourable rules – they are a real challenge for supervisors, and there’s still a lot of work to do in coordinating with national supervisors notwithstanding policy reforms such as the Banking Union. I recently published a research paper on this topic, and I’ll be going to Brussels in November for a meeting organised by the ECB and the Central Bank of Belgium – it’s a high-level meeting where we will discuss the status of what we learned and what we did in the financial crisis, and whether Europe is ready for the possibility of another financial crisis.”
Professor Calzolari is embarking on a new project: discovering the character of EUI and Florence. “In terms of teaching, the most significant difference is the fact that here we only have grad students. Teaching grad students and PhD students is stimulating, it’s very interesting, and allows us to keep track and transfer your research daily into interaction with students, which I find fascinating.” Beyond the classroom and the research articles, the professor is a keen jogger and epicure. For now, he is working his way through the local restaurants, and soon hopes to join the running club at EUI (although perhaps these two interests are related). While not currently supervising any students, the tech-savvy professor is quick to remind me of EUI’s “algorithms that match student’s interests to professors’ interests”. When he does supervise PhD students, then, we can assume that they will be a perfect match.