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When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations

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  • Dani Rodrik

Abstract

Ideas are strangely absent from modern models of political economy. In most prevailing theories of policy choice, the dominant role is instead played by "vested interests"?elites, lobbies, and rent-seeking groups which get their way at the expense of the general public. Any model of political economy in which organized interests do not figure prominently is likely to remain vacuous and incomplete. But it does not follow from this that interests are the ultimate determinant of political outcomes. Here I will challenge the notion that there is a well-defined mapping from "interests" to outcomes. This mapping depends on many unstated assumptions about the ideas that political agents have about: 1) what they are maximizing, 2) how the world works, and 3) the set of tools they have at their disposal to further their interests. Importantly, these ideas are subject to both manipulation and innovation, making them part of the political game. There is, in fact, a direct parallel, as I will show, between inventive activity in technology, which economists now routinely make endogenous in their models, and investment in persuasion and policy innovation in the political arena. I focus specifically on models professing to explain economic inefficiency and argue that outcomes in such models are determined as much by the ideas that elites are presumed to have on feasible strategies as by vested interests themselves. A corollary is that new ideas about policy?or policy entrepreneurship?can exert an independent effect on equilibrium outcomes even in the absence of changes in the configuration of political power. I conclude by discussing the sources of new ideas.

Suggested Citation

  • Dani Rodrik, 2014. "When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 189-208, Winter.
  • Handle: RePEc:aea:jecper:v:28:y:2014:i:1:p:189-208 Note: DOI: 10.1257/jep.28.1.189
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    Cited by:

    1. David Autor & David Dorn & Gordon Hanson & Kaveh Majlesi, 2016. "Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure," NBER Working Papers 22637, National Bureau of Economic Research, Inc.
    2. Randall G. Holcombe, 2014. "What Stiglitz and Stockman Have in Common," Cato Journal, Cato Journal, Cato Institute, pages 569-579.
    3. Daniel Fackler & Claus Schnabel & Alexandra Schmucker, 2016. "Spinoffs in Germany: characteristics, survival, and the role of their parents," Small Business Economics, Springer, vol. 46(1), pages 93-114, January.
    4. Shastitko. Andrey & Komkova, Anastasia Andreevna & Kurdin, Alexander & Shastitko, Anastasia, 2016. "Competition Policy and Incentives for Innovation," Working Papers 1447, Russian Presidential Academy of National Economy and Public Administration.
    5. Pratap Bhanu Mehta & Michael Walton, 2014. "Ideas, interests and the politics of development change in India: capitalism, inclusion and the state," Brooks World Poverty Institute Working Paper Series esid-036-14, BWPI, The University of Manchester.
    6. Paola Profeta & Simona Scabrosetti & Stanley Winer, 2014. "Wealth transfer taxation: an empirical investigation," International Tax and Public Finance, Springer;International Institute of Public Finance, pages 720-767.
    7. World Bank, 2017. "Towards Privilege-Resistant Economic Policies in MENA," World Bank Other Operational Studies 27525, The World Bank.
    8. Toman Barsbai & Hillel Rapoport & Andreas Steinmayr & Christoph Trebesch, 2017. "The Effect of Labor Migration on the Diffusion of Democracy: Evidence from a Former Soviet Republic," American Economic Journal: Applied Economics, American Economic Association, pages 36-69.
    9. Giampaolo Garzarelli & Lyndal Keeton, 2016. "Policy Experimentation and Intergovernmental Grants in a Federal System," Working Papers 8/16, Sapienza University of Rome, DISS.
    10. Fikri Zul Fahmi & Philip McCann & Sierdjan Koster, 2017. "Creative economy policy in developing countries: The case of Indonesia," Urban Studies, Urban Studies Journal Limited, vol. 54(6), pages 1367-1384, May.
    11. Frieden, Jeffry, 2015. "The political economy of adjustment and rebalancing," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 4-14.
    12. Carsten Hefeker & Michael Neugart, 2017. "Non-cooperative and Cooperative Policy Reforms under Uncertainty and Spillovers," Volkswirtschaftliche Diskussionsbeiträge 181-17, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    13. Palley, Thomas, 2017. "A theory of economic policy lock-in and lock-out via hysteresis: Rethinking economists' approach to economic policy," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 11, pages 1-18.
    14. Majbouri, Mahdi, 2015. "Calculating the income counterfactual for oil producing countries of the MENA region," Resources Policy, Elsevier, vol. 44(C), pages 47-56.
    15. Pierpaolo Battigalli & Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Thomas Sargent, 2016. "A Framework for the Analysis of Self-Confi rming Policies," Working Papers 573, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Chris Berg & Sinclair Davidson, 2016. "Section 18C, Human Rights, and Media Reform: An Institutional Analysis of the 2011–13 Australian Free Speech Debate Patterns in Neighboring Areas," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 23(1), pages 5-30.
    17. repec:spr:joevec:v:27:y:2017:i:4:d:10.1007_s00191-017-0507-7 is not listed on IDEAS
    18. Yu-Fu Chen & Michael Funke, 2017. "Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area," Open Economies Review, Springer, pages 297-318.
    19. O'Reilly, Colin & Powell, Benjamin, 2015. "War and the growth of government," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 31-41.
    20. Faria, João Ricardo & McAdam, Peter, 2015. "Macroeconomic adjustment under regime change: From social contract to Arab Spring," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 1-22.
    21. Yu-Fu Chen & Michael Funke, 2017. "Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area," Open Economies Review, Springer, pages 297-318.
    22. Guido Baldi, 2014. "Endogenous preference formation on macroeconomic issues: the role of individuality and social conformity," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 13(1), pages 49-58, June.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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