Institutions of Restraint: The Missing Element in Pakistan’s Governance (Distinguished Lecture)

Governance and Institutions are not ends in themselves but it is well known by now that good governance and effectively functioning institutions are required, along with sensible policies and well designed public investment, to improve resource allocation and comparative advantage, enhance productivity, facilitate more efficient markets and distribute the benefits of growth more equitably in any economy. How do Governance and Institutions interact? Governance refers to the manner in which power is exercised in the management of a country’s economic and social resources. Good governance requires checks and balances in a country’s institutional infrastructure, such that politicians and bureaucrats have the flexibility to pursue the common good, while restraining arbitrary action and corruption. The state’s monopoly on coercion, coupled with access to information not available to the general public, creates opportunities for public officials to promote their own interests, or those of friends or allies, at the expense of general interest. The probabilities for rent seeking and corruption are considerabl