Understanding the ramifications of government policies can be a complex task.
Is the policy good for society in general or is the government overreaching and interfering in markets?
Today’s edition focuses on building frameworks through which we can critique and analyse government actions.
8 false beliefs in Public Policy and lessons from them
Decoding government policies can be a complex and messy situation.
Inspired by @pranaykotas ‘s video, here is a guideline with examples and lessons to understand public policy.
Here are 8 false beliefs in Public Policy and lessons from them -
Good intentions are equal to good policy :-
Second and third order effects must be thought through.
E.g. To ensure food security sparrows were ordered to be killed by Mao but it was the sparrows who kept the insects at bay. The result- rice yields fell drastically. The same can be said about Demonetisation.
Lesson: Judge a policy by its results not its intentions.
Policies are great but implementation is poor :-
Making the policy easy for the society to adopt as well as enforceable rests on the govt’s shoulders.
E.g. Income tax; if rules are open for interpretation and compliance heavy, people will avoid paying taxes.
Lesson: Implementation and enforcement are key for a good policy.
Politics is disgusting :-
Politics is part of daily life. Understanding incentives of law makers as well as who the policy is going to affect is critical to a good policy.
E.g. Understanding how the electoral college works is key to understanding how campaigns are run in the USA.
Lesson: The reality of politics must be considered for a policy to be successful.
Judging a policy based on its benefits :-
Take costs of rolling out a policy into account while creating it.
E.g. Banning alcohol. This creates an opportunity for the market as demand is not falling and supply will be serviced by the black market and govt will lose out on tax revenue.
Lesson: The benefits must far outweigh the costs for a good policy.
Defending your worldview :-
Challenge yourself to process information which competes against your beliefs.
E.g. Drugs corrupt, state must fund zombie companies to safeguard employees- Air India.
Lesson: Be open to different opinions.
Economics is capitalism v/s socialism :-
Policies should prioritise benefits to the taxpayer.
E.g. Offering sops before elections to keep the vote bank happy is not a good policy. Planning for how to incentivise people sustainably is key.
Lesson: Is this the biggest bang for the tax-payer buck?
What works for one person will work for everyone else :-
E.g. In Punjab India, the govt is subsidizing high yield crops which need a lot of water in areas where there is water shortage. The cost- water shortage far outweighs the benefit- more rice. Rice grown in other areas is better for the country.
Lesson: There is no one policy fits all. There are limitations to central planning.
Rs.1 of Govt spending is equal to Rs.1 of social spending :-
The govt has limited resources. It is better spent in areas where market is unable to compete.
E.g. Vaccines and healthcare instead of transport and oil and gas.
Lesson: With limited resources it is important for policies to fill in the gaps left by market failures.
Inspired by the video available here:
When is Government Intervention required?
Does the government need to be omnipresent in all market sectors? When should the government intervene and when should it leave the industries alone?
Inspired by @ajay_shah's "Become a public policy thinker in three easy steps", here is a flowchart to guide our thinking.
If you liked the flowchart do make sure you read the piece that inspired it here: https://blog.theleapjournal.org/2015/02/become-public-policy-thinker-in-three.html
I want to hear your take on how to perceive government actions or even inactions. Let me know by replying to this email!
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