Thread by @anandraman

Thread of ideas, observations, and assertions from #InServiceOfTheRepublic by Vijay Kelkar and Ajay Shah. (Roughly the first third of the book)
#SundayMotivation

Building the republic is about creating ethical control systems that contain and channel state violence for the common good.

The world of public policy is about three levers: rules about behaviour, taxation and spending money.

The state is a coercive agent. At the heart of market failure is a failure of coordination, of a lack of negotiation... problems of coordination are not easily solved through the tool of coercion.

When faced with potential government intervention, it is useful to ask three key questions: Is there a market failure? Does the proposed intervention address the identified market failure? Do we have the ability to implement the proposed intervention?

Why do things go wrong? Because we do not know enough to do the right things. Because every ₹ of public expenditure is more expensive than we think. Because it is difficult to build effective mgmt structures in Govt. Because people lack incentives to know about public policy.

The objective of reform is not to hire saints, but to achieve a state which yields good outcomes when each actor is self-interested.

...our way forward as a republic lies in learning how to make representative democracy work, and not in taking policy questions to the people.

People respond to incentives. When policy changes, human behaviour changes. (Politicians, bureaucrats, citizens all equally exhibit this human behaviour)

The policymaker should have no opinion on prices and not try to control prices. The field of public policy is about identifying and addressing market failures, not controlling prices.

Policymakers must constantly use the power of the state to prise open closed systems, to create conditions of extreme competition and to see the bright side of firm failure.

Creative destruction is not alien to India: for small firms, it is an everyday reality. It is only with large firms, and the areas connected with government, where competitive dynamics are poor.

All parts of the economy are connected together in ‘general equilibrium’. Every change in one firm or one market induces ripples in every other market. General equilibrium thinking has a lot to offer in understanding the policy issues.

In the class of solutions that are available for addressing a given market failure, we should favour the one which intrudes upon the lives of private persons as little as possible.

Growth is the most powerful, and only effective, anti-poverty weapon. Poverty is not a market failure. No country solved poverty through redistribution.

Fighting poverty should be the clear objective of one or two anti-poverty programmes. The objective of the remainder of government should be to address market failure, without bringing distributional considerations into the picture.

We should have greater respect for self-organising systems that do not require state capacity. When property rights and contract enforcement work well, private persons will negotiate their way to many good solutions.

In God we trust, all others must bring data. Cost-benefit analysis checks ... enthusiasm by demanding data. A sound cost-benefit analysis tries to quantify the overall costs and benefits to society, and not just the narrow zone of people who are lobbying the government.

Cost-benefit analysis is required for government intervention into society. The laws that give power to government agencies to intervene in society must codify the processes of cost-benefit analysis and ex post review.

Jan Tinbergen’s ‘assignment principle’ teaches us that one policy instrument can only be used for one objective. A publicly stated and clear objective, on each policy initiative, improves the policy process.

The ‘subsidiarity principle’ asserts that a function of government is best performed by the lowest possible level of government where it can be performed.

In a truly federal structure, state and local governments will have to design their own schemes. For decentralisation to work, the political system at the level of the state and the city requires reform in order to achieve adequate checks and balances and dispersion of power.

/End thread