Tuesday, February 04, 2014

Economics isn't everything

Economists in reverse over our car industry

I think the sentiments expressed in this column are quite valid.

In particular, I want to hear from small government, uber free market types, where they think Australian economic future lies.  (I bet they shrug their shoulders and say something like "it's not up to me to decide, let the market work it out.")

The problems with letting long standing industries in manufacturing and food growing and processing die because of present difficulties not entirely within the industries' control are surely how quickly they can be replaced with alternatives, how viable the alternatives are in the long run, and whether you are allowing too much of a "monoculture" of economic activity to develop.
It seems to me that free marketeers have fanciful ideas that lowering wages enough, and de regulation, just magically leads to a wonderful diverse economic health, no matter which corner of the world you live in.   I am very skeptical.


nottrampis said...


If you put resources into an industry that is inefficient then that diverts resources going into industries that are efficient.

For example. The more you prop up the car industry the higher the price of cars. This may help in the manufacturing of cars ( although history shows this to be incorrect) but it hinders those who sell and/or service cars

One problem could well be that the industries that will go under and the industries that will grow ate on in similar areas.
That can be solved somewhat by funds directed to the re-training of displaced workers.

Steve said...

I know that's the theory, and that there are naturally going to be limits on how inefficient an industry it is wise to support.

But the whole point of the article is that there are reasons beyond economics that should lead to not taking a purely economic efficiency approach to the decisions.

Steve said...

By the way, Sharmon Stone was again quite convincing on AM this morning, debunking the "it's the unions and manufacturer's fault" meme re SPCA which it suits the government (and Judith Sloan) to run with politically.

nottrampis said...

I would think it is the $A's fault.

Sloan is an airhead.
Wages are at at almost alltime low!

John said...

In my limited economic reading I have noted that the free market economists are more vocal but not more numerous than "mixed economy" economists. I prefer the latter because they are much more empirical and recognise that there is no one size fits all solution to economic issues.

nottrampis said...

M/S Sloan's thesis has just been hit for six by SPC releasing its EBA.

she obviously uses peroxide to use the excuse Blondes cannot count!

The government has been shown to be really poor in examining this case