03.01.2013 Views

Download - The India Economy Review

Download - The India Economy Review

Download - The India Economy Review

SHOW MORE
SHOW LESS

You also want an ePaper? Increase the reach of your titles

YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.

P LANNING P ARADIGM<br />

<strong>The</strong> Complexity and Need for<br />

Evaluation of Planning Agencies<br />

<strong>The</strong> evaluation of an entity such as government agencies is particularly diffi cult<br />

as the goods or services provided by them do not have any market value, so the<br />

effectiveness of cost-benefi t analysis becomes questionable as even the experts<br />

will have vested interest in providing the same goods and services<br />

William R. DiPietro<br />

Professor of Economics,<br />

Daemen College,<br />

Amherst, NY, USA<br />

<strong>The</strong>re seems to be a general<br />

tendency for modern gov-<br />

ernments to get bigger, more<br />

bureaucratic, and less effi -<br />

cient. Why might this be the case?<br />

Lately, many econometric studies are<br />

fi nding that the size of government in<br />

most countries is beyond the optimal<br />

level that is needed to provide maximum<br />

economic growth. When this condition<br />

exists, any further expansion of the government<br />

leads to a reduction in the rate<br />

of economic growth.<br />

Economic growth is essential for<br />

progress. It is economic growth that<br />

enables the standard of living to rise. It<br />

is through economic growth that surpluses<br />

above the basic needs of society<br />

become available. <strong>The</strong>se surpluses can,<br />

in turn, be used for investment in human<br />

capital, physical capital, research, infrastructure,<br />

and other important uses<br />

thereby creating a virtuous upward investment<br />

growth cycle.<br />

One of the key tenets of economics is<br />

16 THE IIPM THINK TANK<br />

that design or structure determines performance.<br />

A purely competitive market<br />

structure results in better outcomes from<br />

the viewpoint of society than monopoly<br />

even though business in both cases is<br />

conducted by self-interested profi t<br />

maximizing individuals. Similarly,<br />

within the framework of democracy,<br />

some governmental designs<br />

will be better than others<br />

from the social point of view.<br />

<strong>The</strong> question is what type of<br />

changes in the structure of the<br />

government is needed to move in<br />

this positive direction.<br />

A major factor underlying ineffi -<br />

ciency in government is that government<br />

bureaus, commissions, and programs are<br />

not, unlike the private sector, subject to a<br />

market test. Government agencies, programs,<br />

and departments that have long<br />

lost their functionality and purpose continue<br />

to exist. In the market place, when<br />

a product is no longer in demand because,<br />

for instance, it has been

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!