Coordination Failures and the Political Economy of Economic Policy

This article revisits the theme of coordination failures, as discussed by Trautwein, by examining whether divergences among three authors within Leijonhufvud's framework arise from differences in their analytical conceptions of coordination failures or from their views on economic policy. The argument focuses on the political economy of these divergences, suggesting that they are more about the authors’ perspectives on the role of politics in addressing coordination failures. Wicksell emphasizes social actions and believes macroeconomic coordination failures should not be managed by the state. Hayek, on the other hand, distrusts political intervention, advocating for individual empowerment and a laissez-faire approach to resolve coordination failures. Conversely, Keynes supports robust political intervention, with politics—guided by economists—actively steering the economy to address these failures. Thus, the article contends that the differences in economic policy perspectives stem from varying views on the political management of coordination failures.