Download - The India Economy Review
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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