Political business cycles can’t simply be wished away
It is impossible to consider the ordinary course of affairs in the United States without perceiving that the desire to be re-elected is the chief aim of the President... and that especially as [this election] approaches, his personal interest takes the place of his interest in the public good," observed Alexis de Tocqueville in his classic Democracy in America.
As India approaches general elections in 2024, there has been a spirited debate on economic policy. From the distribution of freebies (or revdis) like bus rides and electricity to the large infusion of government funds in BSNL, much-depleted public coffers are being put through a wringer.
The consensus has been that these policies are somehow economically “suboptimal" and represent fiscal mismanagement. While purely economic arguments may sound compelling, analyses often ignore the fact that economic policymaking does not take place in a frictionless vacuum, as envisaged by most ‘Homo Economicus’ rational-agent models, but amid the hurly-burly of legislative processes and the heat and dust of electoral politics.
A realistic assessment of policymaking demands a political-economy lens. A rational-minded sceptic might argue that contaminating economic analyses with politics does a disservice to the mathematical rigour with which the profession identifies itself currently, but this argument misses the fact that the origins of economics are deeply intertwined with politics, and most original thinkers in the field from Adam Smith and David Ricardo to John Maynard Keynes and Friedrich Hayek were essentially political economists in the sense that their theories combined politics, economics and moral philosophy.
Read more on livemint.com
