Can the gap between economics and politics be bridged?
In this lecture, Alan Blinder argues that economists and politicians come from different “civilizations” with different goals and logic. He dispels the myth that economists have major influence over public policy and cites research showing economists have little sway, as economic logic and political logic often conflict. However, Blinder believes the gap can be narrowed if both economists and politicians change their behavior:
- Politicians should adopt longer time horizons beyond the next election cycle to allow good economic policies to take effect.
- Economists should pay more attention to transition costs and fairness, not just long-run efficiency. They should provide politically feasible options, even if suboptimal, rather than insist on textbook solutions.
Finally, Blinder uses examples like trade deals and climate policy to show how a focus on fairness over efficiency could produce policies with wider political support.
So here’s my advice to economists interested in actual–as opposed to theoretical– policymaking. Don’t forget about efficiency. It matters. We are right about that. But we may have to content ourselves with nibbling around the edges, below the political headline level, to make the details of a complex policy package less inefficient. Call it the theory of the third or fourth best.
Economics and Politics: On Narrowing the Gap
By: Alan S. Blinder – Princeton University
More on the “theory of second or third best advice”
The paper by Stefan Decron examines the political economy of economic policy advice and how to maximize its impact by accounting for the political incentives of policymakers. Decron argues that standard economic advice often assumes policymakers want to maximize economic outcomes like growth but in reality, policymakers have other political objectives like staying in power. As a result, advice that ignores political constraints may be ignored or have unintended consequences. “First best” advice is not necessarily optimal given political realities. Instead, “second best” advice considers political constraints and aims to maximize economic outcomes within them. Ideally, advisors should be “politically informed” to work within constraints or “politically subversive” to shift political equilibria over time. What are the implications of such an approach?
- Researchers should analyze political incentives and constraints to make advice impactful.
- Programs should be designed to recognize political realities, not just technical merits.
- Advice needs to go beyond technocratic solutions to incorporate political economy analysis.
- More investment is needed in research on implementing development policies given political constraints.
Decron cites a couple of examples in developing countries where his approach has yielded results: a) Removing fossil fuel subsidies faces political opposition. Compensating households, even if not first best, enabled successful reform in Iran; b) Learning interventions require political commitment. In Kenya, politicians insisted on “one laptop per child” even though it was well-known that in other countries this policy typically failed to deliver improvements in educational outcomes.
The Political Economy of Economic Policy Advice
Author: Stefan Dercon
From: University of Oxford
