5. Conclusions
In the end the decision on where and how to intervene must involve a judgement about the various benefits and costs involved:
- on the one hand, the benefits to growth from intervening, the benefits from engagement of being better informed about the precise nature of the intervention required and the benefits of coordinated action;
- on the other, the costs of poorly directed policy, the resource cost of regulation and the possible costs imposed by rent seeking.
Making a decision about whether and how to intervene is not easy. However, what is clear is that the government cannot avoid the question. It must choose where and how to intervene ‑ not intervening is not an option.
My own judgement is that there is scope for further broad-based measures to improve New Zealand's economic growth performance. When interpreted in New Zealand's context, including in particular the impact of our distance from the rest of the world, the Economic Development Indicators (Ministry of Economic Development et al 2007) indicate a range of interrelated areas that may be deserving of attention ‑ for example, capital markets and exchange rate cyclicality.
In addition, there will be circumstances where it is beneficial to go beyond broad‑based policies that can be justified on the basis of robust statistical evidence. For example, we are unlikely to get the best outcome by allowing various parts of the transport infrastructure in the top half of the North Island to evolve organically in response to increasing demand. An integrated approach to the provision of that infrastructure would consider the impact of various transport modes on each other, the impact of providing various forms of infrastructure on economic development and transport demands, and the further impact of those transport demands (for example on congestion in Auckland, and on development of the Auckland waterfront).
At the same time, the information needs and rent-seeking opportunities associated with such interventions, and the danger that pursuing them will crowd out improvements in broad based policy, mean that a cautious approach and careful design and implementation are required to minimise the risks. In addition, successful design and implementation requires a high degree of competence on the part of officials. This will limit the scope for implementing such policies, reinforcing the need to focus policy attention where the scope for net gains is greatest.
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