Passenger-vehicle sales in China rose at the slowest pace in five months in April 2015 as weaker economic expansion hurt demand (photo: dpa)

Unrealistic expectations of growth lead to wrong decisions

Governments have been ignoring the hard economic facts of life to deliver political dreams which meet the expectations of voters. They have been living in a world of make-believe by failing to deliver the reforms which current economic positions demand but meddling with more and more government intervention.

<i>Policymaking follows people’s expectations to an increasingly large extent. In turn, public opinion tends to neglect what the economy can really deliver, and focusses on the authorities’ moves to ensure that reality meets expectations. This results in a distorted causal mechanism which creates unrealistic expectations, provokes tensions, and creates a rising demand for m...

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Professor Enrico Colombatto
Questionable regulation and over-optimistic promises of high growth eventually led to disappointment about economic performance in a number of European countries prior to 2007
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