Subsidies, Price Disturbances, Institutional - Structural Inefficiencies

To implement goal-directed subsidies policy in framework of the its law is being seriously followed by state. Implementing this policy as it has been defined in the law could be a deep surgery of economy with big negative consequences both in demand and supply sides if its theoretical foundation is wrong. Hence, this paper aims to evaluate the theoretical sufficiency of Neoclassical Big Bang approach to economy reforms. The used method in this paper in called as critical analytical approach in which theoretical fallacies of goal-directed subsidies policy has been argued and documented to relative data. After introducing the Big Bang approach to economy reforms and its theoretical foundation, it’s criticized using a structuralinstitutional approach to main causes of Iranian economic problems and showed that this policy will fail in reaching to the defined aims due to its incorrect perception of main causes of problems. It seems that this policy is based on some methodological mistakes in estimation of subsidies and also identifying the poor which have been argued in the rest parts of paper. If the main root of Iranian economic problems is related more to organizational inefficiencies than price inefficiencies, goal-directed subsidies policy could not be a correct policy in treating the problems. Overestimation of subsidies which is related to some wrong methodological perceptions of subsidies could lead to wrong price decision making. There are two errors in identifying the poor which could decrease the efficiency of this policy. If there is a necessity to make a price reform in economy it would be better to follow the graduate price reform