Tamil Nadu turns to star economists. Will it work?
The recent announcement that the newly elected government of Tamil Nadu, led by Chief Minister Stalin’s Dravida Munnetra Kazhagam (DMK), will create an Economic Advisory Council (EAC) made up of renowned economists has been rightly welcomed. . Its members include such luminaries as Nobel economist Esther Duflo, former Reserve Bank of India governor Raghuram Rajan and former chief economic adviser Arvind Subramanian. Other members include economist Jean Drèze, who was a member of the late National Advisory Council set up under the previous Union government led by Congress, and former Union finance secretary S. Narayan.
Perhaps the most immediate value of the creation of Tamil Nadu’s new EAC is a signal from its Stalinist government that domain expertise and intellectual excellence are important when it comes to the economic policy of the ‘State. The fact that the new body is likely to liaise closely with the state finance minister, PTR Palanivel Thiagarajan, bodes well, given that the new minister himself has considerable expertise in the field, including diplomas. postgraduate studies in operations research and financial management from reputable universities.
Of course, whether the creation of the EAC has a significant impact on policy will depend on the extent to which the state government solicits its contributions and heeds its advice. As my last article noted, political decisions ultimately involve political judgment and are not made on the basis of technocratic advice alone. So, while genuinely ‘evidence-based’ policy making remains a pipe dream, real-world policy making should, at the very least, be informed by the latest knowledge and ideas from relevant disciplines – in the real world. this case, economics and finance.
On this point, the diversity of EAC members shows a good mix of ideological and sub-disciplinary perspectives in economics. So while Duflo and Drèze are center-left leaning development economists, University of Chicago professor Rajan claims impeccable free market credentials, and Subramanian can be described as a classic pragmatic centrist. . The way they filter out possibly divergent views on potentially contentious issues – like the debate over cash and in-kind rights regimes – could help shape how the government fine-tunes its social protection programs.
Caution is always in order while praising the creation of a new advisory body like this one. Its success or failure will depend on the receptiveness of the government it advises. While the Congress-led Union government that was in power from 2004 to 2014 boasted many well-known economic reformers in its ranks – starting with the Prime Minister himself, Manmohan Singh, and working his way down – this government was notable for the absence of any significant structural reform, or “second generation,” under its leadership.
While it would be easy to say that the Singh government has been unable to undertake reforms due to the reluctance of coalition allies, the truth is that the ideological orientation of the president of the ruling coalition , Congresswoman Sonia Gandhi, and her advisers were more in tune with the deployment of newer, larger and better compensation regimes than they were in removing structural bottlenecks on the side of the world. offer of the Indian economy.
On the other hand, when good economic policy goes hand in hand with good economic advice, the direction of causation is not necessarily from the adviser to the politician but sometimes works in reverse. Simply put, governments tend to appoint advisers who share a philosophical and ideological bent. Thus, reformist governments tend to recruit reformist advisers. Would it then be said that their good economy is the result of good advice? Or rather, does good advice provide the intellectual framework for a good economy that emerges as political consensus? This is not empty speculation, as it describes the success of the PV Narasimha Rao government in pushing forward the difficult macroeconomic and structural reforms following the 1991 crisis in India. So, as I wrote in these pages a long time ago, the success of the original economic reforms of 1991 and beyond must be attributed, at least as much if not more, to the political cover that Rao gave to these reforms regarding to their technocratic execution by his finance minister Manmohan Singh. As is known, IG Patel was Rao’s initial choice and Singh was only chosen after declining. It is hard to imagine how the reforms would have been markedly different under Patel instead of Singh.
This is in no way to disparage the important role Singh has played. Rather, it is to underline the fact that the first generation of economic reforms followed a pattern which in 1991 represented a consensus among market-oriented economists and political analysts, dating back to the foundational works of Jagdish Bhagwati and others. back to the 1960s.
Of course, often bad economic policy also gets some intellectual coverage for bad economic advice that has been solicited. For any economic idea, good or bad, there is usually an economist ready to provide a rationale. Former US President Donald Trump surrounding himself with protectionist advisers is an obvious example.
Ultimately, then, the success of the Tamil Nadu EAC will primarily reflect not the expertise of the eminent economists who populate it, but the wisdom of the government that appointed it.
Vivek Dehejia is a columnist for La Monnaie
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