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Policy Technicalities

Regulate?

When I first learnt about policy instruments for managing economic problems, I find it confusing that so many different schemes are discovered to achieve efficiency in the market. It seems strange to me that one could tax, subsidize, regulate, take over production (nationalize) in order to manage market failure or market dominance. The problem with policy choices is that we once again fall into the Perfect Choice Fallacy sometimes.

Unfortunately, the urge and will to get things right is much stronger in this case because lives and welfare of many people will be implicated. I once spoke to this civil servant who worked with a certain Ministry of Health, doing policy proposing related work. He studied Economics in Princeton and as an economist, he was not only influencing the economic lives of consumers in the economy; he was, in effect, deciding who gets to pay more/less to save their own lives. If we believe there is definitely a perfect/best choice out of the all the available options, we should try our best to work it out.

There exists trade-offs within policies and when you achieve a particular objective, it can be at the expense of another or it can create a problem that ought to be addressed using another policy. This creates endless chains of problems. It appears that each of those policies, taxation, regulation has these sort of trade-offs, taxing different stakeholders in the whole affair creates different outcomes that may not necessarily be very desirable. Something has to be done anyways; we try our best to create a more desirable society, or at least we think so, but we are absolutely clueless how exactly we can do that.