|Photo taken by me, copyright|
Written by Wannaphong Durongkaveroj
According to the popular quote in laws, "Fruit of Poisonous Tree". It refers to the situation that illegal source must lead to wrong results. However, in economics, there is also a situation which can be explained by this quote.
For policy intervention, followed classical paradigm, market failure can occur if government intervention is implemented when the market is already in equilibrium. Also, negative and positive spillover can be solved by intervening the market through tax or subsidy. There are many types of government interventions including tax, subsidy, price - distortion (price floor and price ceiling). Populism policy always exaggerate the positive thing. When political party used populism policy aimed at winning election, those populisms are always tied with government interventions that, finally, they all will create market failure.
Example, populism in Thailand promised by Pheu Thai Party. Rice pledging is the main populism policy of this party in 2011 representative election. This policy aimed at farmers in rural area. It is a tool used to make a promise to raise citizen's well - being. Of course, Pheu Thai party won election. The problem begins. Corruption is a longstanding problem in Thailand. For the method of rice pledging. Farmers take their ton of rice to rice miller for evaluating the price of rice output. The price is higher than market price. Rice miller will issue "paper" recorded amount of money that farmer will receive. Then, farmer takes paper to national agricultural bank. And the money (revenue from rice output) will be transferred to farmer's account. Higher revenue promised to farmer create "artificial" incentive for planting rice more than usual level. A lot of rice output is in market. However, the main problem is government. Government has to be rice seller by making G-to-G contract through exportation. The problem is that nowadays, Laos, Vietnam, and other countries plant more rice with a cheap cost. So, they can sell in cheaper price. When Thailand's rice price is relatively high than other countries, Thailand lose "competitiveness" followed Heckscher - Ohlin Rule.
We cannot deny that rice from Thailand is delicious but dont forget the fact that in economic instability and unstable income of foreign customer, they "eat" for "living" instead of "live" for "eating". Then, medium quality with cheaper price product is more ,of course, interesting. Thus, fruit of ineffective policies cannot yield a good expectation first and that result will be wasted finally.