Owing to a sudden rise in the national political temperature and a growing sense of 'change in the air, one is these days often confronted with the question: What can the new government do to resurrect the currently ailing economy? While the answer can surely be long and complex, a short and simple advice would be for the new team (as and when it comes in) to avoid fancy words and just concentrate on cold realities. The best thing that a government can do when looking for growth and real job creation is to understand that the old model still works just fine - as long as you move out of the way of the people with good ideas and the guts to try them Let the private sector juices flow freely and they will, in turn, create their own momentum. The idea is to strike a fair balance between regulation and freehand. While absence of prudent regulation leads to the jungle law syndrome and disturbs the societys essential element of equal distribution, an excess of it becomes a burden on progress. The government must understand that entrepreneurs, who innovate and take risks, do so to succeed and get rich, and if the state starts viewing this negatively (targeted taxation, for instance), it can turn into a strong barrier to growth and investment. Regulation, if not properly conducted, can often either impose direct new costs on businesses, or force them to go about their work in anti-economic ways. For example, in the UK, a study just revealed that UKs Department of Energy and Climate Change may have gone overboard in their policies as they place a direct burden of 18 percent on production costs, and on UK businesses their mandated energy premium could mean that the gas bills come out 24 percent higher than they need to be, and electricity bills come out 43 percent higher than they ought to be. Result: In spite of Chancellor George Osbornes famous policy announcement in June 2011 that, what our economy really needs is to return to its manufacturing roots and for this we will be willing to provide subsidies where needed, the UK national manufacturing numbers have still failed to pick up More importantly, care needs to be taken that the government does not overplay its hand when trying to boost economic activity. Just like un-needed regulation tends to be counterproductive, an excess of or misdirected facilitation can also turn out to be a waste of effort and resources. There is a useful lesson to be learned on 'why governmental facilitation/subsidies/grants/stimulus fail, by studying the a pair of new Mercatus Centre working papers by two of George Mason economists, Garett Jones and Daniel Rothschild, who did field research on what they call the supply side of the stimulus. The Keynesian theory was that a burst of new government spending would take up some of the slack in aggregate consumer demand. This was justified in 2008, again in 2009 (by the US government to provide stimulus packages), and perhaps still defended, which the duo argues is not based on real-world observations, but rather on abstract models that depend on the assumptions of the authors minds. By informative contrast, Messrs Jones and Rothschild interviewed actual people who received stimulus dollars and asked how they spent the money. In the first phase, the authors surveyed 85 different businesses, non-profit organisations and local governments across the US and concluded: As is often the case when economic models are transferred from the blackboard to actual public policy, there was found to be a gap between theory and practice. One of the major patterns they uncovered was that the top-down stimulus packages are invariably poorly targeted, because political governments (regardless of which country) are just not designed to get them right. In one redolent example of the US stimulus package, a federal contractor said that he was told to use smaller, non-standard tiles that are harder and more expensive to install in order to increase the cost of the project. That way, the government could claim the money was moving out of the door faster. The famous Milton Friedman line about the government ordering people to dig with spoons to employ more people comes to mind. In another case study by them, a budget shortfall forced a mid-size city to in fact lay off 185 public workers - but the city received a $4 million stimulus grant to improve municipal energy efficiency. The manager of a construction company received funds for the last thing on our list; and truthfully, the least useful thing. It happened to be a crane and a forklift. In their second paper (on primarily private-sector enterprises), Messrs Jones and Rothschild argue that stimulus packages do not create or save nearly as many jobs as the related model might indicate. On the basis of 1,300 interviews, they estimated that merely 42.10 percent of the firms that received grants hired people who were unemployed. Instead, they mostly poached workers from their competitors. This further suggests just how difficult it is for the Keynesian job creation to work in a modern-day economy, although their study was conducted in an environment when the Keynesian model had every chance of succeeding on its own terms However, we have to be very careful here, as these anecdotes do not mean that all government facilitation is a waste and, hence, should altogether be abandoned. The lesson is that all including the most reduction oriented Keynesians of the Paul Krugman School believe that what matters is where the government spends its money. A dollar that eventually is taken out of the private economy through borrowing or higher taxes if spent to fund pointless and ill-directed projects - a la the tiny tiles - will cause more harm to the economy, let alone nurture any type of recovery. Regrettably, the Pakistani economic policymakers seem to be making the same mistakes. What they or the new ones that fill their shoes need to remember is that it is the perception and confidence of the existing and potential investors they need to work upon, rather than scaring them away. An economy will benefit far more, if the government focuses on improving its own transparency and unleashing reforms-cum-incentives (not subsidies) that induce people and businesses to invest, produce and grow. The writer is an entrepreneur and economic analyst. Email: kamalmannoo@hotmail.com