Friday, February 6, 2009

What Is This 'Politics' Of Which You Speak?

. Friday, February 6, 2009

Wilkinson unwittingly explains why I decided to become an international political economist rather than an international economist:

The deeper problem, I think, is that the textbook theory doesn’t have any politics in it. In macroeconomics textbooks, government is a benevolent central planner beyond politics. It is assumed, for simplicity’s sake, that governments can act in perfect compliance with theory. It is also assumed that theory is settled before coming to a policy problem, that motivated disagreement over theory is not an essential element of democratic policymaking. But of course, there is politics, which trashes hope of either consensus on or compliance with theory. And that’s how we ended up with the legislative monstrosity actually under consideration in Congress.

Economists are often befuddled when politicians act "irrationally" by not putting standard economic theory into practice, and when voters reward them for this sort of behavior*. Strangely, the answer to the conundrum is often explained best by the economists' best friend: incentives. Politicians, interest groups, and the electorate all respond to their own incentive structures, and quite often that leads to "perverse" economic outcomes. Political scientists, on the other hand, spend our days looking at precisely these questions, and we even (sometimes) have answers to them! See, for example, this recent post by Dr. Oatley. Unfortunately, Wilkinson (and most of the rest of the commentariat) seems to be completely unaware that international political economy exists as a formal discipline.

Still, the whole post is worth reading. Two Nobel Prize-winning economists make appearances, and Wilkinson lays into Krugman's style as a commentator.

*Public choice economists do better at this. But public choice economists are a relatively new breed, and comprise a small minority of economists. Additionally, the public debate over the stimulus bill is being conducted by old-school macroeconomists, economic historians, and international economists. Public-choicers have barely had a cameo.


What Is This 'Politics' Of Which You Speak?




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