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October 13, 2010

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As much as I like the idea of policy (industrial) intervention for binding constraints, I fear that in case of developing countries with unstable political structures, the policies will become permanent feature soon and then in the later stages will be designed for rent seeking and not for addressing binding constraints. This is precisely the case with South Asian economies. Macro level policy intervention is often with good intention and termed a one time affair - alas it becomes a permanent feature. Going from Diagnostics to Design to Institutionalization is also attractive. But again for say countries like Pakistan, Bangladesh etc. where governments rarely complete their tenure,there is hardly time for institutionalization. May be better not to recommend intervention!

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