On ideas, interests, and political economy

This column on “The Tyranny of Political Economy” quickly rose to become the most-read piece on Project Syndicate – quite to my surprise, as it deals essentially with an academic subject. I take the recent rational-choice political economy to task for ignoring the role of ideas in shaping how vested interests see their “interest” and how these “interests” can best be carried out.

It is in part self-criticism as well, as some of my earlier work was very much in this tradition.  The alternative title for the column was “Confessions of a One-Time Political Economist.”

I argue that there are three ways in which ideas shape interests.

First, ideas determine how political elites define themselves and the objectives they pursue – money, honor, status, longevity in power, or simply a place in history. These questions of identity are central to how they choose to act.

Second, ideas determine political actors’ views about how the world works. Powerful business interests will lobby for different policies when they believe that fiscal stimulus yields only inflation than when they believe that it generates higher aggregate demand. Revenue hungry governments will impose a lower tax when they think that it can be evaded than when they think that it cannot.

Most important from the perspective of policy analysis, ideas determine the strategies that political actors believe they can pursue. For example, one way for elites to remain in power is to suppress all economic activity. But another is to encourage economic development while diversifying their own economic base, establishing coalitions, fostering state-directed industrialization, or pursuing a variety of other strategies limited only by the elites’ imagination. Expand the range of feasible strategies (which is what good policy design and leadership do), and you radically change behavior and outcomes.  

As some of my readers complained, this argument is not unfamiliar to “constructivists” and others within political science who have long made the case for the supremacy of ideas. Economists too have recently begun to focus on the formation of political ideology (through media and other formative experiences). 

But what I have found missing in all this literature is an overarching framework that parses out the respective contributions of ideas and interests, without necessarily giving supremacy to one or the other. What is also missing is empirical work (“systematic empirical evidence” as an economist would call it) that takes this approach to the data. 

A fascinating research agenda. Stay tuned.   

Comments

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Thanks for the interesting post, Dani

You and your readers may be interested to see some work recently published by the ODI, on knowledge, policy and power. In the book published last year we tried to bring together the available evidence relating to the interaction of ideas and interests, and provide a framework for understanding this. http://www.policypress.co.uk/display.asp?K=9781447300953

We have also recently published some short briefing notes summarising the framework: http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/8201.pdf

There is definitely a need for more research, but I think we've provided a look at the current state-of-the-art. We're also currently conducting a number of studies applying the framework in Nepal, the Philippines, Cambodia, Vietnam and Indonesia, which should provide some ideas about the applicability to development issues.

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[andreazig]

It is in part self-criticism as well, as some of my earlier work was very much in this tradition. The alternative title for the column was “Confessions of a One-Time Political Economist.”
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