On Tuesday the Herald published an article by Minister of Economic Development Stephen Joyce titled Each time we say ‘you can’t’ it carries a cost. It’s an important point, and the article makes it well.
The Minister does, however, blur the argument by seemingly slipping into central planning mode with his use of the dreaded ‘we’ word:
We need to ensure we make resources available for businesses to use.
Who exactly is ‘we’? And how do ‘they’ decide what resources to make available, and by what means? The ‘we’ word is a Wellington speciality, and its imprecise use never fails to cause confusion by begging such questions. See Roger Kerr’s article here on this problem.
Presumably, the Minister meant that the government wants to facilitate resource flows to their highest use through decentralised market-driven pricing, rather than by central planning direction.
Another question raised by the article was what is meant by the concept of a country’s natural advantage:
We therefore need to stop the endless debate about which industry will save us and focus on all industries where New Zealand has a natural advantage.
The concept of comparative advantage is well understood in economics, but the concept of natural advantage is not. Did the Swiss have a natural advantage in watches, or was it a developed advantage? If it is only a developed advantage, should ‘we’ focus on it? What about Silicon Valley? Should ‘we’ focus on it at all, or should ‘we’ instead just stand back and let those who think they see an opportunity go for it, if they can attract backers?
These questions were prompted in part by a salutary chart here, courtesy of the UK Economist, that focuses on the market values of entirely unnatural things, like Google and Facebook, compared to the market values of widget makers, like Toyota and McDonalds. It is a striking chart of our times, and a challenge for central planners everywhere.