Sunday, March 20, 2016

A Review of " An Economist in the Real World: The Art of Policymaking in India "

Kaushik Basu was the Chief Economic Advisor (CEA) to the Government of India in the same period when I was a student at IRMA. I say this because those years were the ones where I developed a deep interest in policy making, development , economics, and sociology. Hence this book took me to the days when EPW was favoured over HBR!

The CEA's role as Basu writes in his book is to generate new ideas and look at age old problems in a new way. Creativity is thus essential in this role. I still remember one of the Economic Survey during Basu's period had an IS-LM graph on the cover, possible depicting the impact of interest rates on the real world economy. Those were the days where India was facing massive inflation. Basu perhaps will also be known for advocating a unique solution to combat what he termed "harassment bribes". These are bribes which are given to people who are responsible for delivering goods or services to the citizens. These include for example, an electricity connection. His solution was to make the act of giving the bribe legal and only treat the act of accepting the bribe illegal. The solution was criticised heavily in the media. I personally felt it was worth a try.

The book itself is a good read for those trying to understand the problems that emerging markets face. These include food security, inflation, access to financial services, sanctity of contracts, etc. Basu also touches upon the impact of culture and social norms not only on policmaking but on the science of economics. He argues that policies developed for third world countries should take into account the social norms and culture of that particular country or region and first world policies should not, as we now know after observing the impact of Washington Consensus policies,  be thrust on these countries.

I was forewarned by friends that Basu can be too "heavy" to read. I accept that parts of the book require some basic knowledge of economics especially when he explains the mechanics of food procurement in India and the impact it has on prices and farmer welfare. This largely draws upon his article in EPW which was published sometime in late 2010 or early 2011.

The book is neither a memoir of a CEA nor an academic text on policymaking. This I believe is the strength of the book. For those interested to go beyond the politics of policies, and are looking for reasoned debate on why policies work and dont work, this book is essential read. But then, in countries like India, populism always trumps good policies!