Home' Policy Magazine : Policy Vol 31 - No 2 Contents 44 POLICY • Vol. 31 No. 2 • Winter 2015
FREE TRADE & ITS EXCEPTIONS
apparently successful industry policy are more likely
to reflect resource mobilisation rather than good
Economists tend not to favour industry policy.
There is no reason to deviate from that position.
These observations, however, do not preclude
any role for the state. In an environment of high
levels of creative destruction many businesses
will struggle, and even fail. Having effective and
efficient bankruptcy procedures will ensure that
resources are quickly reallocated from failed to
successful businesses. Ensuring that business
regulation is minimised will also ensure that
entrepreneurs can focus on their profitability
and business models and not needlessly engage
in compliance. Simultaneously, recognise that
the Australian education system provides ample
opportunity for individuals to train and retrain
for productive employment. In short, the role
of the government is to pursue the tolerable
administration of justice and easy taxes that Adam
Smith spoke of over 200 years ago.
1 David Ricardo, On the Principles of Political Economy and
Taxation, Third edition, London: John Murray (1821).
Available at http://www.econlib.org/library/Ricardo/ricP.html.
2 Adam Smith, On the nature and causes of the wealth of nations,
Chicago: University of Chicago Press (1976/1776).
3 John Burton, Picking losers? The political economy of industrial
policy, The Institute of Economic Affairs (1983), pg. 29.
4 Ken Henry, ‘Public policy resilience and the reform narrative,’
address to the Crawford School of Public Policy (2014).
Available at https://crawford.anu.edu.au/sites/default/files/news/
5 Alexander Kirk, ‘Carr hopes hybrid plan will stem job losses’,
ABC The World Today, 10 June 2008.
6 Ben Packham and Lanai Vasek, ‘Tony Abbott suggests ‘national
security’ may be a reason for manufacturing assistance,’ The
Australian, 29 August 2011.
7 John Stuart Mill, Principles of political economy with some of their
applications to social philosophy, London: Longmans, Green and
Co. (1848). Available at http://oll.libertyfund.org/titles/mill-
8 Charles Francis Bastable, The commerce of nations, Eighth
edition, London: Methuen and Co. (1917/1891).
9 Sabra Lane, ‘Australian Renewable Energy Agency head Greg
Bourne says scrapping RET would destroy industry’, ABC News,
5 September 2014.
10 Alexander White, ‘Australia needs the renewable energy target
(and should increase it),’ The Guardian, 18 August 2014.
11 Bryan Caplan, The Myth of the Rational Voter: Why Democracies
Choose Bad Policies, Princeton, NJ: Princeton University
12 Anti-Dumping Commission, undated, ‘Factsheet - Australia’s
anti-dumping system,’ About us, http://www.adcommission.
13 See Bruce Blonigen and Thomas Prusa, ‘Antidumping,’ in E.K.
Choi and J. Harrigan (eds.), Handbook of International Trade,
Blackwell Publishers (2003), and Douglas Nelson, ‘The political
economy of antidumping: A survey,’ European Journal of Political
Economy, 22 (2006), 554–590, for extensive survey discussions.
14 George Stigler, ‘The theory of economic regulation,’ Bell Journal
of Economics and Management Science, 2 (1971), 1 – 21.
15 Maurizio Zanardi, ‘Antidumping: A problem in international
trade,’ European Journal of Political Economy, 22 (2006), 591 –
617, pg. 592.
16 See, for example, Gordon Tullock, Bureaucracy, Liberty Fund
(2005/1965); William Niskanen, Bureaucracy and Representative
Government, Aldine-Atherton (1971); Mwangi Kimenyi,
‘Bureaucratic rents and political institutions,’ Journal of Public
Finance and Public Choice, 3 (1987), 189–199; Fred McChesney,
‘Rent extracton and rent creation in the economic theory of
regulation,’ Journal of Legal Studies (1987), 101–118; John Mbaku,
‘Military expenditures and bureaucratic competition for rents,’
Public Choice, 71 (1991), 19–31; and Kevin Murphy, Andrei
Shleifer, and Robert Vishny, ‘Why is rent-seeking so costly to
growth?,’ American Economic Review, 83 (1997), 409–414.
17 Zanardi, as above.
18 Blonigen and Prusa, as above, pg. 253.
19 Paul Krugman, ‘Increasing returns, monopolistic competition, and
international trade,’ Journal of International Economics, 9 (1979),
469 – 479.
20 Business Council of Australia, Building Australia’s Comparative
Advantages (2014). Available from http://www.bca.com.au/
21 Jacob Greber, Fleur Anderson and Luke Malpass, ‘Sims asks BCA
to please explain picking winners,’ Australian Financial Review, 30
22 The World Bank, The East Asian Miracle: Economic Growth and
Public Policy, Oxford University Press (1993).
23 Paul Krugman, ‘The myth of Asia’s miracle,’ Foreign Affairs 73:6
(November/December 1994), 62–78.
24 ‘Submarine policy: Nick Xenophon urges PM to “end the
uncertainty” over SA project,’ ABC News, 8 September 2014.
25 Australian Bureau of Statistics, Labour force Australia, Cat. 6202.0,
Canberra (July 2015).
26 Australian Bureau of Statistics, Government finance statistics
education 2012-13, Cat. 5518.0.55.001, Canberra (2014).
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