Institutional Reforms for Sustainable Monetary and

Transcript:Institutional Reforms for Sustainable Monetary and:
Institutional Reforms for Sustainable Monetary and Fiscal Policy In a democracy, it is easy enough to put forth proposals for reform in support of some larger goal. In an authoritarian regime, it could cost you your life. Our suggestions thus are framed within the context of democratic institutions. The first question is: Why undertake any reforms? There is a powerful set of incentives to extent the status quo. This arises typically from elected officials and special interests who stand to gain from keeping things as they are. Even if nothing constituting fraud is apparent, the fact that someone gains from keeping things as they are may simply reinforce rules and laws that prevent change that could bring about a greater level of public satisfaction. The second question is: What kinds of reforms make sense? The world reform carries almost biblical weight in public discussions. Yet there is no guarantee that a particular reform would increase total public satisfaction. The simple explanation here is that voters often are less than fully informed as to the content and significance of any proposed reform, be it by a candidate running for office or someone already in office. The behavior of elected officials can be explained as much as anything as self-interest, even if couched in noble language. A catalog of economic reforms Economic reform has an enduring appeal, if for nothing else than the fact that it so often is so ill defined. Let us consider, at a macro and microeconomic level what principles should guide any list of reforms. In the first instance, there is near universal agreement that a government gains political legitimacy when it achieves a measured degree of economic prosperity, as measured by the mean and median level of per capita income. In the second instance it increases when the mix of incentives also results in a minimization of an economy’s misery index. And third, it does so when economic growth is environmentally sustainable. In short, a simple benchmark is a minimization of the simple misery index that is compensated by increases in sustainable real per capita income. To this, political legitimacy also is enhanced when a society judges that distributive justice has been achieved, a subject we have treated before, but placed only passing emphasis on here. How a society defines distributive justice is a function of which norms should apply: distributive justice as one in which the