Raja Chelliah memorial lecture series – The termites of the State: Why the Normative and Positive Roles of Governments Differ by Vito Tanzi published by National Institute of Public Finance and Policy (3/2011).
“On the Desirable or Normative Role of the State When Raja Chelliah and I worked together for a few years at the IMF in Washington 30 or more years ago, we did not worry much about potential differences that could exist between the advice that we were giving to the government of countries and the implementation of that advice; or between what could be called the normative and the positive roles of governments. If a country had a level of taxation that was lower than its “taxable capacity”, determined on the basis of various statistical methods, we advised the country’s government to raise taxes. If the country’s tax system was not seen to be progressive enough, as determined by tax incidence studies, we advised the government to introduce progressive income taxes. If the country’s investment was too low, we advised it to raise taxes and to generate a surplus over current expenditure in the budget to allow it to increase public investment. If some social groups were not benefiting from the country’s growth, we recommended more social spending. That was a simpler and easier world for economists. Normative advice carried the day; worries about implementation or possibly, about negative reactions to the advice and about the policies needed to implement the advice were secondary or even non existent…”
