Last week the New Zealand Productivity Commission (NZPC) published its second interim report on productivity in the private sector component of the services industry. This website provides easy access to this report and related documents.

The report is a well-written, 220-plus-page whopper. It takes 10 pages to list its 76 findings and 22 recommendations (pages 191-200). Each of its nine chapters starts with a helpful page of key points.

Three of those chapters seek to promote competition in the domestic services sector; five consider barriers to the uptake of information and communications technology (ICT) in New Zealand.

The performance of this sector matters. It accounts for over 70 per cent of registered companies, employment and national output.

Yet the NZPC reports that most of New Zealand’s service industries have lower productivity levels and lower productivity growth rates than their counterparts in Australia and the United Kingdom.

Ouch. One wonders glumly how our industries would compare in these respects with those in wealthier, higher growth, small population countries such as Singapore and Hong Kong.

A strong thrust of the report is that competition drives productivity growth. Indeed, the recommendations to reduce barriers to trade domestically and internationally, undue product regulation, and barriers to foreign direct investment (FDI) in services should be adopted.

Of course competition works its magic for product quality as well as quantity. Unhappily, much regulation of business in the last 15 years has been directed at reducing the role for competition to drive product quality. The NZPC’s questioning of the efficacy of occupational licensing has a sound basis, particularly in respect of its use to deprive New Zealanders of access to superior overseas expertise.

The report seems to be on much weaker ground in its “Finding 2.1: that asymmetric information is bad for market efficiency and dampens competition”. Information is not knowledge, and will always be widely dispersed. Competitive market processes can efficiently harness widely dispersed information. Why positive information costs would dampen competition is a further puzzle.

When information is costly, incentives to invest in it are important. The report’s drive to promote freer information, transparency and to strengthen competition laws, neglects in-depth consideration of property rights. The term “property rights” only appears in the bibliography!

Richard Epstein’s monograph on the concealment, use and disclosure of information here has a broader discussion.

The promotion of competition should respect property rights. Secure, well-designed property rights are critical for investment incentives, healthy competition and sustained growth.