ABSTRACT
While Iran has the economic resources for above-average economic growth rates and the potential to join the rank of high-income developing countries, it faces a number of major obstacles attaining this goal. A major lesson to be learnt from the history of economic development is: ‘basic needs first’. In the context of a developing society aiming for long-term progress, this translates into the recognition that individuals have a set of basic social and economic rights which must be recognized and protected by a strong legal foundations upon which institutions should be created to facilitate voluntary economic interaction and the flow of information (including price signals). Therefore, the basic policy challenge is the implementation of measures for the development of
socio-economic institutions, to encourage greater participation and effort by individuals (non-governmental entities) via reduction of uncertainty and transaction costs. Economic policies that foster efficiency and are friendly to growth have a much better probability of success once the above social infrastructure is in place. The government has a leading role in this process – as it has for the provision of public goods and basic infrastructure.
