The main headache for any economic policymaker is the conflicts that one is presented with between the different policy options. There may be situations where the policy options are seen to be limited but that is because a number would have already been discarded. Economic policymaking is (or should be) very much subject to the political and social vision that one has for the country, and this forces us to discard policies which may otherwise have a great deal of value.

If a political leader is very much liberal oriented, then one is likely to opt for certain types of policies. On the other hand, the opposite is also true. The less liberal a political leader is, the more likely it is that one opts for a different set of policies. Even the term ‘liberal’ presents its issues. Those who are socially very liberal are likely to hold not very liberal economic policies and the other way round. So, the socially liberal policymaker is likely to be a not so liberal economic policymaker.

The conflict gets more exacerbated when a politician seeks to occupy the centre ground. Very often one is placed in a situation where if one acts one way, one is damned, and if one acts the other way, one is equally damned.

Let us take a practical example without going into the merits of the case, to show the elements of this conflict. The previous US president, Donald Trump, had implemented tax cuts that essentially favoured the higher income earners.

What is crucial is that the choices one makes in economic policymaking are based on sound economic thinking and not on partisan political considerations

This reflected his political vision and the objective here is not to determine whether his taxation policy was the right one or not but to bring out these conflicting views. His successor, Joe Biden, is now seeking to fund the measures he has implemented to support businesses and families by taxing the higher income earners. Biden has been criticised that this policy was not bold enough and should have imposed an even higher tax rate on the higher income earners, while others said that this would eventually stifle investment. So whichever way he looks, he receives flak, whether it is justified or not is irrelevant.

There are other conflicts that an economic policymaker faces. For example, what economic growth rate would make sense without creating an unsustainable level of inflation? What level of unemployment is justified to maintain social cohesion? How much of a country’s resources should be used to stimulate current consumption as opposed to incentivising further investment?

What should a country’s taxation policy be? To what extent should foreign investors be favoured when compared to local investors? What sectors of the economy should be developed further while other sectors are allowed to lose their importance? What importance should one attach to the concept of the common good?

Students of economics learn about the concept of scarcity and opportunity costs very early on in their studies. This basically means that we cannot have the cake and eat it, and at the same time we need to look at both the long term and as well as the short term, even if, as Keynes said, “in the long run we are all dead”. This means that economic policymakers need to make choices and any choice has a cost attached to it.

What is crucial is that the choices one makes in economic policymaking are based on sound economic thinking and not on partisan political considerations.

There needs to be a road which leads to somewhere and not a road that leads to nowhere. An economic policy needs to have a vision and needs to provide a sense of direction. Any country deserves this from its government.