ABSTRACT
The chapter makes an attempt to understand the cause-and-effect relations as well as transformational conditions of economic policies and the alienated citizen–state relationship. The discussion posits that transformational institutions are key to a functioning market and state. Against the backdrop of different schools of thought, the chapter comes up with an alternative diagnostic framework, which has intrinsic properties to act as a theory of change. The framework introduced is concerned with state-building and economic policymaking, taking a historical institutionalism approach. It also questions the so-called apolitical approach of a new consensus, neoclassical monetarists and public choice theorists and establishes that fiscal policy is an overtly political process by demonstrating how the decisions of state–citizens–firms are shaped by formal institutions, contingent upon informal institutions of norms (informal codes) and values (reproduced by society).
