Markets must work in favour of consumers and the public must be convinced of the benefits of competition or distrust in the market mechanism can grow, Australian Competition and Consumer Commission Chair Rod Sims warned today.
Addressing the 2017 Australian Conference of Economists in Sydney, Mr Sims signalled any loss of public confidence in market economics puts at risk the positive change countries and institutions are capable of if they embrace an open market system.
“I feel strongly that we will all be considerably worse off if this increasing disillusion with a market economy goes unchecked,” ACCC Chairman Rod Sims said.
“I have long held the view that the economics profession is best placed to advocate the virtues of market economies and competition and to guide public policy. However, I am disappointed that the economics profession has not been more influential in public policy debates in recent times. In practice, economics needs to be able to recognise the truth in statements such as ‘markets must work for consumers’.
“Economists who ground their contributions in the facts of everyday life and relax the often abstract assumptions of theory will find an audience more willing to listen. And we, as a society, will greatly benefit from more contributions to public policy from talented economic minds,” Mr Sims said.
While praising the benefits of open and competitive markets, Mr Sims did highlight the need for appropriate regulation to restrain the potential harm from a profit motive that is not always channelled towards productive ends.
Citing the landmark work of Harvard Business School economist Michael Porter, Mr Sims argued that firms may attain commercial success through anti-competitive means such as by reducing competition, by erecting high entry barriers, and by keeping suppliers dispersed and weak.
“The vast majority of what companies do is to the benefit of consumers. They spend a lot of time reducing costs, improving their products and opening new stores or facilities. This is why free market economies are so successful,” Mr Sims said.
“However, as anyone with any commercial experience knows, businesses are at least as much focussed on reducing competition and keeping potential or actual competitors out of the market as they are on ‘satisfying the needs of consumers’.
“It is not enough, therefore, to assert that the profit motive will always drive progress. Destructive, anti-competitive business practices must be discouraged so profits are not sought at the expense of long-term economic welfare.”
The speech is available here: Ceteris Paribus, Competition is King
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