Economics versus Politics: Pitfalls of Policy Advice
AbstractThe standard approach to policy-making and advice in economics implicitly or explicitly ignores politics and political economy, and maintains that if possible, any market failure should be rapidly removed. This essay explains why this conclusion may be incorrect; because it ignores politics, this approach is oblivious to the impact of the removal of market failures on future political equilibria and economic efficiency, which can be deleterious. We first outline a simple framework for the study of the impact of current economic policies on future political equilibria and indirectly on future economic outcomes. We then illustrate the mechanisms through which such impacts might operate using a series of examples. The main message is that sound economic policy should be based on a careful analysis of political economy and should factor in its influence on future political equilibria.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18921.
Date of creation: Mar 2013
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Daron Acemoglu & James A. Robinson, 2013. "Economics versus Politics: Pitfalls of Policy Advice," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 173-92, Spring.
- O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
- P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philippe Aghion & Olivier J. Blanchard, 1994.
"On the Speed of Transition in Central Europe,"
in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330
National Bureau of Economic Research, Inc.
- Aghion, P. & Blanchard, O.J., 1993. "On the Speed of Transition in Central Europe," Working papers 93-8, Massachusetts Institute of Technology (MIT), Department of Economics.
- Blanchard, Olivier Jean & Aghion, Philippe, 1994. "On the Speed of Transition in Central Europe," Scholarly Articles 4481322, Harvard University Department of Economics.
- Acemoglu, Daron & Robinson, James A, 1998.
"Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective,"
CEPR Discussion Papers
1797, C.E.P.R. Discussion Papers.
- Daron Acemoglu & James A. Robinson, 2000. "Why Did The West Extend The Franchise? Democracy, Inequality, And Growth In Historical Perspective," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1167-1199, November.
- Acemoglu,Daron & Robinson,James A., 2006.
"Economic Origins of Dictatorship and Democracy,"
Cambridge University Press, number 9780521855266, December.
- Philippe Aghion & Olivier Jean Blanchard, 1994. "On the Speed of Transition Central Europe," NBER Working Papers 4736, National Bureau of Economic Research, Inc.
- Morgan, Horatio M., 2013. "The Political Economy of Trade-Financial Liberalization and Financial Underdevelopment: A perspective from China," MPRA Paper 50031, University Library of Munich, Germany.
- Lusk, Jayson L., 2013. "Lunch with Pigou: Externalities and the â€œHiddenâ€ Cost of Food," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(3), December.
- Morgan, Horatio M., 2013. "Financial Development and Economic Growth: New Lessons from Small Open Economies," MPRA Paper 49842, University Library of Munich, Germany.
- Hyytiainen, Kari & Ahlvik, Lassi & Ahtiainen, Heini & Artell, Janne & Dahlbo, Kim & Huhtala, Anni, 2013. "Spatially explicit bio-economic modelling for the Baltic Sea: Do the benefits of nutrient abatement outweigh the costs?," Discussion Papers 160728, MTT Agrifood Research Finland.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.