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INDUSTRIAL ECONOMICS II

INDUSTRIAL ECONOMICS II. Lecture 4: Policy Problems of the Industrial Organisation. Topics to be discussed. General and Specific Objectives of Public Policy – The Implementation of the Objectives of Public Policy Exemptions of Special Case Standard Regulation – Implementation.

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INDUSTRIAL ECONOMICS II

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  1. INDUSTRIAL ECONOMICS II Lecture 4: Policy Problems of the Industrial Organisation

  2. Topics to be discussed • General and Specific Objectives of Public Policy – • The Implementation of the Objectives of Public Policy • Exemptions of Special Case • Standard Regulation – Implementation

  3. 1.1: General and Specific Objectives of Public Policy • Economist often argue that governments should intervene in industry when markets fail to provide efficient utilization of resources. • But in real situation government often intervene for reasons that (at best) when the there is a hazy connection with market failure.

  4. The case for industry policy; • It must be carefully made: • How? • Objectives must be clearly specified • Theoretical justification must be spelled out • Resource implications must be carefully analyzed

  5. Example of the Policy Objectives of LDC: • General policy objectives – Government would normally reflect the development objectives it wishes to pursue plus the constraints (political, institutional, administrative, etc) that need to be considered. Efficiency-related objectives – the objectives are concerned with maximizing , over time, the total welfare accruing to the economy as a whole from the efficient use of scares resources which is at its disposal. Distribution-related objectives – concerned with achieving the most satisfactory distribution of the total welfare between the inhabitants of the economy.

  6. Specific Policy Objectives: • To Promote more competitive environment (competition policy). • To achieve maximum attainable economic welfare (policy towards monopoly) • To discourage mergers leading to monopoly positions (policy towards mergers)

  7. Specific Policy Objectives (contd.): • Discourage restrictive practices or agreements between firms that will reduce competition (policy towards restrictive and anti-competitive practices) • To discourage barriers to entry that will effect competition (Policy towards entry barriers). • To see to the success of the competition policy based on the theoretical stance adopted (Evaluation of the competition policy)

  8. Specific Policy Objectives (contd.): • To direct the spatial location of industry (regional policy. • To encourage innovation to enhance economic welfare (innovation policy). • Trade to achieve industrial objectives (trade policy). • Ect.

  9. The extent and form of government intervention in the industrial sector • Is likely to be influenced by 3 sets of factors: • The development objectives it pursues; • The conditions it faces • Its political commitment to, and administrative capability for market intervention.

  10. References: • Ferguson, Paul R. and Glenys J. Ferguson (1994) Industrial Economics: Issues and perspectives, The MacMillan Press Ltd., Britain • Kirkpatrick, C.H., N.Lee and E.I. Nixson (1985) Industrial Structure and Policy in Less Developed Countries, George Allen & Unwin (Publishers) Ltd. ; Britain.

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