Micro Gains from Micro Reform

John Quiggin

Economic Analysis and Policy, 1998, vol. 28, issue 1, 1-16

Abstract: Large estimates of the benefits of microeconomic reform have been put forward in official studies. By contrast, Quiggin (1997) concludes that benefits of microeconomic reform have been modest. A key area of disagreement relates to the claim that increased competition leads to increases in technical efficiency. In the present paper, this issue is addressed. Possible sources of efficiency gains, including scale economies, technological innovations, X-efficiency gains and the removal of satisficing behavior, are considered. It is concluded that although ideas such as X-efficiency and satisficing suggest that competition may in some cases improve efficiency they do not imply that free market policies will maximise welfare. Overstated claims about the benefits of microeconomic reform have distorted Australia's economic priorities and encouraged an uncritical acceptance of economically unsound policies proposed in the name of competition.

Keywords: Behavior; Microeconomics; Satisficing (search for similar items in EconPapers)
JEL-codes: D00 J00 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (1)

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