Making Better Use of Markets

In its annual report for 2001-02, released today, the Productivity Commission discusses lessons from recent government initiatives to extend markets into new areas.

‘Assessments across such diverse activities as helping the unemployed, managing the airwaves and conserving biodiversity are showing how well market mechanisms can achieve community objectives,’ said Gary Banks, Commission Chairman.

The Commission found that competition, choice, property rights and cost reflective pricing have proven more effective in delivering desired economic, social and environmental outcomes than where governments have allocated resources administratively or provided services themselves.

‘Market mechanisms can make a difference but they are not a magic wand,’ Mr Banks cautioned. ‘They need to be carefully designed and implemented, particularly when there are multiple objectives. Education and health care present particular challenges.’

The Commission identified a need for governments to remove unnecessary impediments to the development of markets, as well as to experiment with new approaches and monitor their effectiveness.

‘One size won’t fit all. Case-by-case assessment is needed. In some cases, markets may not have a place and in others they may play only a partial role. But recent initiatives are encouraging and need to be built on,’ Mr Banks said.