Political fashions, much like their Parisian counterparts, often lack rational explanations. Take the case of the Karnataka government deciding to lend Rs 10,000 each to one million farmers from 1 April. No questions have been asked about the need for such loans or their repayment.
What makes such ruinous ideas possible? At one level, the inability of governments to realize their limitation is at the root of such schemes. The idea behind earlier waves of economic reforms was that the state could not be omniscient. There was no way for it to aggregate knowledge dispersed across millions of economic agents.
In the past five years, that fundamental wisdom has taken a beating. While it has not heralded a return to the old fashion of state-ownership of firms and assets, it has led to an overreach of the kind now being envisaged in Karnataka.