Thursday, November 6, 2014

The transformation of public policies

Subir Gokarn draws attention to the violation of Tinbergen's "one instrument for one objective" rule in public policy issues in India. Specifically, he points to the transformation of Minimum Support Price (MSP) from being an instrument to encourage foodgrain procurement to being also an instrument to sustain farm incomes. The other example presented is that of labor-friendly labor regulations, which while seeking to both job creation and unemployment insurance, have imposed prohibitive costs on businesses.

There are several other examples. The NREGA which began as an employment insurance program, got transformed into being also a job creation cum job entitlement program. Housing programs intended at providing shelter (rental or otherwise) for poor people, changes into home ownership program. More generally, the recruitment of teachers and other public workers, aimed at delivering specific public services, gradually become an end in itself, with attendant distortions, due to the creation of a constituency of voters who captures the bureaucracy.

Gokarn's point is well taken. But the challenge here is not so much the issue of violating the Tinbergen rule as one of managing the political economy. These examples are illustrative of the complex political economy that surrounds public policy decisions. While any policy generally begins as an instrument to address one objective, it difficult to keep it that way. As implementation proceeds, the emergent dynamics pushes policy makers to embrace other objectives, even when they conflict with the original objective. Further, most often, the new objective crowds-out the original one, thereby distorting the program's focus and making it dysfunctional. This is one of the biggest challenges in the management of public policy.  

1 comment:

Vijay Sharma said...

Indian govt is over burdened with salary n pension payments.rightly, u said, it has become an end in itself. Many departments have become purely 'rent seekers' ,giving no value creation. West bengal small industries development corporation is one such body. U wl be surprised to know they plan to increase rent n other levies by 25 times ie 2500%.
Because their office is over staffed wd political patronage wd fancy govt pay scale, they have been advised to raise rent by exorbitant 25 times. Such are their advisors n such is the wisdom of our govt.
West bengal has no Proletariats, only salaritariats. Govt running towards a Cliff ... Please take this matter. U r among very few indians, who can show path to save state frm this disaster. .