Submarines and Economic Efficiency
As a young economics student I was all for efficiency. So much so that if it could be proved that it was ‘efficient’ to send women and children down the mines – down they would have gone! But is economic efficiency to be our only criterion for evaluating government and infrastructure policy?
I thought of this when reading Leith van Oselin’s comment on the Federal Government’s submarine project. Writing in Macrobusiness as the ‘Unconventional Economist’, he nevertheless puts forward a very conventional economic argument. Using the release of the Productivity Councils’ 2014-15 Trade and Assistance Review as his starting off point, he argues: “Paying more for local builds, without sufficient strategic defence and spillover benefits to offset the additional cost, diverts productive resources (labour, capital and land) away from relatively more efficient (less assisted) uses. It can also create a permanent expectation of more such high cost work”. The article is titled “PC hits out at submarine pork”.
Our question today: Seems straightforward enough, doesn’t it? But is it?