For those who haven't heard about Henry, he is a prolific commentator in Australian newspapers (apart from being an academic and consultant). What has interested me about his writings over the past few years is his sharp, incisive and even intuitive way of explaining things, always harking back to fundamentals.

I attended a talk at the Australian Conference of Economists recently in which Henry was a panelist, along with David Gruen and Michael Porter.

The issue under consideration was productivity in Australia, which is falling, and what can be done to lift it.

David Gruen gave the keynote speech (available here) to which Henry Ergas was given a chance to respond.

What I liked about Henry Ergas's response was his down-to-earth approach about why Australian managers are not particularly inefficient (a claim made by David). It is the system that makes them so. For instance, in India, it is not that IAS officers are bad, but the system degrades their capacity to perform. Basically, what Ergas was saying is exactly what I've stated earlier – that the system can make a clown even of a genius.

Ergas also showed that management can be readily imported, and buyouts can eliminate any constraint that may exist in this regard. It will therefore not do to blame management for poor productivity but relevant to examine the system in which they operate. Is it competitive enough? Does it allow managers to do actual work or does it tie them in red tape?

Henry Ergas noted that the issue boils down to bad policy. He gave an example where governments stifle competition and reduce incentives to innovate (vertical integration is  not permitted in the coal industry, leading to a very high cost structure). According to him, governments should not impose a particular market structure but let competitors work out the best fit, which can vary with circumstances – circumstances which no government planner can understand.

Henry Ergas also added an excellent point, that: "Bad apples pick you" (Losers are better at picking governments than governments are at picking winners). In other words, inefficient companies gain most from running to government after subsidies. Governments should never pick winners. The market should be allowed to work out the best solution to its problems.

See his more general article on productivity, here.

Henry Ergas is surely in the top 2-3 economists of Australia in terms of the strength of advice he offers.

Here's a link to his op-eds.

Related posts:

1. Economics: an Introduction for the General Reader, by Henry Clay
2. Google now promotes my advice on RSI and eyestrain – over advice from Harvard and other ‘experts’
3. Economics in One Lesson (by Henry Hazlitt)
4. Lessons for India from one of the best countries in the world
5. Adam Smith Pharmacy: Advice on protection of industry
6. Who says developed countries can’t manufacture? The amazing Daiso.
7. Indians hate capitalism but desperately want to migrate to capitalist countries
8. Great advice that the socialist Janata Party (1977) foolishly rejected: B R Shenoy on liberty.
9. Good advice for Indian voters from Madhava Reddy
10. Gurcharan Das’s advice continues to be relevant