Of course a better policy might be removing as many transaction costs as possible in the first place and still letting the market pick the winner.

Thank you fine sir. I simultaneously finished forecasts, preparation of forecast presentations, and a course I was doing – so suddenly I had some time to write things. Add to this the fact that stuff happened around the place and posts appeared.

Good comment, agreed.

@Eric Crampton

Agreed. There are policy recommendations that I agree with in the report – for example, I think the efficiency costs stemming from taxation in for additional government spending needs to be taken into account, and I think the barrier for additional spending should probably be higher than it is.

But the report was a definite disappointment. Instead of looking at distortions from government spending it seemed focused on the fiscal deficit, instead of describing the underlying causes of imbalances in the economy it attributed them to a “high” real exchange rate – which was blamed on the current fiscal deficit. Not the high terms of trade, or the distortionary impact of changes in tax policy over the last decade. Sigh.

However, discussing that report is another post during a quieter time of the year 😉

Of course, the challenge for these governments is political – the need to balance economic growth with social development – this requires much more skill and courage in some ways.

I am not totally against our government intervening – but it needs to know exactly why it is doing so, and more importantly, have a rational evaluation of its own capabilities towards being able to achieve such an outcome – for example if there are barriers – say between universities and private firms in terms of the flow of information/research findings due to the different institutional cultures of universities and the private sector – it can provide incentives to bridge the gap. It can provide forums for the discussion of business opportunities and do various other things that help increase the flow of information. Beyond that I am much more skeptical.