THE POLITICS OF MICROECONOMIC REFORM: STRUCTURING A GENERAL MODEL1

Abstract: This paper examines the current endeavours to render the Australian economy more economically efficient. While the case for microeconomic reform is clear in economic theory, Australian public policy analysts are less sanguine about the possibilities for its long-term success. This paper seeks to develop the parameters of a simple general model to explain both why microeconomic reform proposals are dominant today on the Australian policy agenda and, more importantly, what the conditions are for their success or failure. This general model provides a framework that will allow further elaboration in case studies of particular episodes of microeconomic reform.
The paper concludes pessimistically; micro-economic reform has been subsumed into the normal political agenda contests of Australian party politics. The pressures of such "politics" inclines Australian reforming towards incrementalism, rather than the Simon-style rationalism implicit from micro-economics. This mode of policy implementation will inhibit microeconomic reform in the longer term.