DOCSLIB.ORG

The Political Economy of Economic Policy – IMF F&D

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Political Economy of Economic Policy – IMF F&D THE POLITICAL ECONOMY OF ECONOMIC POLICY We should pay closer attention to the interactions between politics, economics, and other realms Jeffry Frieden 4 FINANCE & DEVELOPMENT | June 2020 he COVID-19 pandemic strik- microbes do not respect borders. A coor- ingly illustrates the intersection dinated international response is clearly of politics, economics, and other the best way to confront an international considerations. Public health public health emergency. Yet policymak- Texperts have long warned that the world ers under pressure from their constituents was likely to face a major pandemic and have diverted resources away from other called for greater preparedness. Yet poli- countries, banned the export of food and cymakers who have to focus on the next drugs, and hoarded essential supplies. Each election find it difficult to invest the time, of these measures—popular as they may money, and political capital to address the be to national publics—imposes costs on abstract possibility of a future crisis. And other countries. In the final analysis, the so most of the world was unprepared for a lack of cooperation makes everyone worse global public health threat of the magnitude off. Such international institutions as the posed by the novel coronavirus. World Health Organization attempt to As the pandemic has raced across the coordinate a cooperative global response to world, the policy response has continued the global crisis—but they can be powerless to be tempered by political realities. Some in the face of potent nationalist political We should pay closer attention to the interactions between politics, economics, and other realms members of the public, and some policy- pressures (see, for example, Goodman and Jeffry Frieden makers, have resisted the recommendations others 2010). of public health experts, hoping for relaxed Every government faces tough decisions restrictions and a return to normalcy before about the appropriate measures: what the dangers have passed. At the same time, restrictions to impose and when to loosen business interests have pressed for excep- them, where money will be spent and how tions to benefit themselves, and for sub- it will be raised, and what national con- stantial subsidies—bailouts—to help them cerns can be limited to favor international through difficult times. cooperation. These decisions have to take At the international level, government into account public health recommen- responses to the pandemic illustrate the dif- dations, economic considerations, and ficult politics of worldwide cooperation. A political constraints. Just as the policy global pandemic requires a global response: response to the 2007–08 financial crisis ART: ISTOCK / YEVHENII DUBINKO; JAMIE CARROLL JAMIE YEVHENII DUBINKO; / ISTOCK ART: June 2020 | FINANCE & DEVELOPMENT 5 varied from country to country in line with local past 100 years of US presidential elections (see, for political economy conditions, so national policy example, Fair 2018). So why don’t elections work to responses to the COVID-19 pandemic vary for push politicians to choose the best policies? health, economic, and political reasons. Where you stand Politics at play depends on where you sit This hotly contested policy response to a universal A basic economic principle is that any policy that is threat is no surprise to political economists. It good for society as a whole can be made to be good happens all the time. For example, just about every for everyone in society, even if the policy creates economist believes that small countries would be winners and losers. It requires only that the winners better off if they removed all barriers to trade. Yet be taxed just a bit to compensate the losers—and unilateral free trade is practically unheard of, and everyone is better off. Economists use powerful tools no country in the world today pursues it. Why not? to clarify which economic policies are best for society. More generally, why do governments have so much So why should economic policy be controversial? trouble getting economic policies right? Why does A basic political economy principle is that the the advice of independent observers, analysts, and winners don’t like being taxed to compensate losers. scholars go so often unheeded? And the battle is joined, not over what is best for Politics is the usual answer, and the answer is society but rather over who will be the winners usually right. But that is too vague—like saying and losers. What is best for the country may not that some countries are rich and others poor due to be best for my region, or group, or industry, or economics. Exactly how does politics keep govern- class—and so I will fight it. ments from making better policy, even in the face Even in democracies, plenty of citizens might of imminent crises? What does that tell us about agree that politics obeys the golden rule: those with how economic policy can and should be made? the gold make the rules. Special-interest groups do Political economy is about how politics affects seem to play an outsize role around the world, dem- the economy and the economy affects politics (see ocratic or not. These include wealthy individuals, box). Governments try to pump up the economy powerful industries, big banks and corporations, before elections, so that so-called political business and formidable labor unions. cycles create ebbs and flows of economic activity How else to explain why Americans pay two or around elections. By the same token, economic three times the world price for sugar? There are a conditions have a powerful impact on elections. handful of sugarcane plantations and a few thou- Political economists have uncovered the simple sand sugar beet farmers in the United States—and (perhaps disturbing) fact that the rates of economic 330 million sugar consumers. You’d think that the growth and inflation are all the information we 330 million would count for a lot more in politics need to predict quite accurately the results of the than the several thousand, but you’d be wrong. For WHAT IS POLITICAL ECONOMY? the early 20th century economics and political science were established as separate disciplines. Adam Smith, David Ricardo, and John Stuart Mill are widely For much of the 20th century this division reigned. With the regarded as the originators of modern economics. But they Great Depression and problems of development, the purely called themselves political economists, and Mill’s Principles of Political Economy was the fundamental text of the discipline economic issues were daunting enough to occupy economists. By from its publication in 1848 until the end of the century. These the same token, the political problems of the era—two world early theorists could not conceive of the economic and political wars, the rise of fascism and communism—were so serious as to worlds as separate. require separate attention. Two trends divided the political from the economic analysis. By the 1970s, however, it was clear that the separation First, governments began to reduce their direct control over the between the economic and political spheres was misleading. economy. Second, different political forms emerged: Europe That decade saw the collapse of the Bretton Woods monetary went from almost exclusively monarchical to increasingly order, two oil price shocks, and stagflation—all highlighting representative, and highly varied, forms of government. By the fact that economic and political matters are intertwined. 6 FINANCE & DEVELOPMENT | June 2020 POLICIES, POLITICS, AND PANDEMICS In the final analysis, the lack of cooperation makes everyone worse off. decades, subsidies and trade barriers have raised the supportive policies. Who is to say that their jobs price of sugar to the benefit of the sugar planters are less important than lower prices for consum- and farmers and to the detriment of everyone else. ers? There is no simple, widely accepted way to Why does a tiny group of sugar producers matter balance the benefits against the costs—is cheaper more than the rest of the country? A commonplace sugar important enough to bankrupt thousands of of political economy is that concentrated inter- hardworking farmers? Politics is, in fact, the way ests usually win over diffuse interests. The sugar society adjudicates among conflicting interests, producers are well organized and work hard to and maybe those with more at stake should have influence politicians. If they didn’t get favorable a bigger say. government treatment they’d go out of business, Political economists don’t usually take stands so it’s important for them to organize to lobby and on complicated moral and ethical issues of this fund politicians. The cost to consumers is estimated sort. They try to understand why societies choose at $2 billion to $3 billion a year. That’s a lot of to do what they do. The fact that sugar or car money—but it comes to a couple of cents a day producers have much more at stake and are much for the average American. No consumer is going better organized than sugar or car consumers helps to talk to an elected representative or threaten to explain why government policies favor sugar and vote for an opponent over a couple of cents a day. car producers over consumers. The fact that producers are concentrated while Some consumers are concentrated, though. Sugar consumers are diffuse helps explain trade protection. is sweet, and the corporations of the Sweetener A few automobile manufacturers can organize them- Users Association want it to be cheap as well. selves; tens of millions of car buyers can’t. That’s not Coca-Cola, Hershey, and the like have pushed all. Management and labor in the auto industry may hard to change American sugar policy. The fact not agree on much, but automakers and autoworkers that there are powerful concentrated interests on agree that they want to be protected from foreign both sides of the issue helps explain why prices competition.
Load more

Recommended publications
  • COVID-19 and Economic Policy Toward the New Normal: a Monetary-Fiscal Nexus After the Crisis?
    IN-DEPTH ANALYSIS Requested by the ECON committee Monetar y Dialogue Papers, November 2020 COVID-19 and Economic Policy Toward the New Normal: A Monetary-Fiscal Nexus after the Crisis? Policy Department for Economic, Scientific and Quality of Life Policies Directorate-General for Internal Policies Author: Thomas MARMEFELT EN PE 658.193 - November 2020 COVID-19 and Economic Policy Toward the New Normal: A Monetary-Fiscal Nexus after the Crisis? Monetary Dialogue Papers, November 2020 Abstract Current developments during the COVID-19 pandemic involve strongly complementary monetary and fiscal policy, but both as responses to COVID-19 and not the outcome of an emergent monetary-fiscal nexus. Therefore, the ECB maintains its independence by using unconventional monetary policy measures to reach price stability, according to its mandate. This document was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 19 November 2020. This document was requested by the European Parliament's committee on Economic and Monetary Affairs (ECON). AUTHOR Thomas MARMEFELT, CASE – Center for Social and Economic Research (Warsaw, Poland) and University of Södertörn (Huddinge, Sweden) ADMINISTRATOR RESPONSIBLE Drazen RAKIC EDITORIAL ASSISTANT Janetta CUJKOVA LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR Policy departments provide in-house and external expertise to support European Parliament committees
    [Show full text]
  • Political Economy in Macroeconomics I Allan Drazen
    account libcralization as a signal of commitmcnt to economic reform. Wc also summarizc thc empirical rcscarch on political determinants of capital Political Economy in controls. Another major issue in open-economy macroeconomics is sovereign Macroeconomics debt, that is, the debt owed by a government to foreign creditors. hsucs of sovereign debt arc substantially different than those concerning nonsovereign debt and arc inherently political. For example, since it is oWed by the government, repayment decisions are not connectcd with any question of the ability to repay. With few exceptions, a borrower country has the technical ability to repay the debt, so that non-repayment is a ALLAN DRAZEN political issue. In Section 12.8, we analyze basic models of sovereign ,c,, borrowing and its repayment, especially the role of penalties in enforcing repayment. We also consider the importance of political versus nonpoliti­ cal penalties in the decision of whether to issue debt at home or abroad. Copyright © 2000 by Princeton University Press The final topic considered is foreign assistance, especially lending by Published by Princeton University Press, 41 William Street, governments and international financial organizations to developing coun­ Princeton, New Jersey 08540 tries for the purpose of structural adjustment. Our point of departure is In the United Kingdom: Princeton University Press, the strikingly disappointing results that foreign aid programs have had in Chichester, West Sussex alleviating poverty and stimulating growth in the recipient countries, a All Rights Resm;ed failure that we argue reflects the political nature of aid. Foreign assistance is inherently political for a number of reasons. First, the incentives of the donors may be political, not only in the obvious sense that aid is often given for strategic political reasons, but also because the nature of aid (and Library of Congress Cataloging-in-Publication Data especially its ineffectiveness) often reflects political and bureaucratic con­ flicts within the donor organizations.
    [Show full text]
  • Uncertainty and Hyperinflation: European Inflation Dynamics After World War I
    FEDERAL RESERVE BANK OF SAN FRANCISCO WORKING PAPER SERIES Uncertainty and Hyperinflation: European Inflation Dynamics after World War I Jose A. Lopez Federal Reserve Bank of San Francisco Kris James Mitchener Santa Clara University CAGE, CEPR, CES-ifo & NBER June 2018 Working Paper 2018-06 https://www.frbsf.org/economic-research/publications/working-papers/2018/06/ Suggested citation: Lopez, Jose A., Kris James Mitchener. 2018. “Uncertainty and Hyperinflation: European Inflation Dynamics after World War I,” Federal Reserve Bank of San Francisco Working Paper 2018-06. https://doi.org/10.24148/wp2018-06 The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System. Uncertainty and Hyperinflation: European Inflation Dynamics after World War I Jose A. Lopez Federal Reserve Bank of San Francisco Kris James Mitchener Santa Clara University CAGE, CEPR, CES-ifo & NBER* May 9, 2018 ABSTRACT. Fiscal deficits, elevated debt-to-GDP ratios, and high inflation rates suggest hyperinflation could have potentially emerged in many European countries after World War I. We demonstrate that economic policy uncertainty was instrumental in pushing a subset of European countries into hyperinflation shortly after the end of the war. Germany, Austria, Poland, and Hungary (GAPH) suffered from frequent uncertainty shocks – and correspondingly high levels of uncertainty – caused by protracted political negotiations over reparations payments, the apportionment of the Austro-Hungarian debt, and border disputes. In contrast, other European countries exhibited lower levels of measured uncertainty between 1919 and 1925, allowing them more capacity with which to implement credible commitments to their fiscal and monetary policies.
    [Show full text]
  • Estimating the Effects of Fiscal Policy in OECD Countries
    Estimating the e®ects of ¯scal policy in OECD countries Roberto Perotti¤ This version: November 2004 Abstract This paper studies the e®ects of ¯scal policy on GDP, in°ation and interest rates in 5 OECD countries, using a structural Vector Autoregression approach. Its main results can be summarized as follows: 1) The e®ects of ¯scal policy on GDP tend to be small: government spending multipliers larger than 1 can be estimated only in the US in the pre-1980 period. 2) There is no evidence that tax cuts work faster or more e®ectively than spending increases. 3) The e®ects of government spending shocks and tax cuts on GDP and its components have become substantially weaker over time; in the post-1980 period these e®ects are mostly negative, particularly on private investment. 4) Only in the post-1980 period is there evidence of positive e®ects of government spending on long interest rates. In fact, when the real interest rate is held constant in the impulse responses, much of the decline in the response of GDP in the post-1980 period in the US and UK disappears. 5) Under plausible values of its price elasticity, government spending typically has small e®ects on in°ation. 6) Both the decline in the variance of the ¯scal shocks and the change in their transmission mechanism contribute to the decline in the variance of GDP after 1980. ¤IGIER - Universitµa Bocconi and Centre for Economic Policy Research. I thank Alberto Alesina, Olivier Blanchard, Fabio Canova, Zvi Eckstein, Jon Faust, Carlo Favero, Jordi Gal¶³, Daniel Gros, Bruce Hansen, Fumio Hayashi, Ilian Mihov, Chris Sims, Jim Stock and Mark Watson for helpful comments and suggestions.
    [Show full text]
  • A WILPF Guide to Feminist Political Economy
    A WILPF GUIDE TO FEMINIST POLITICAL ECONOMY Brief for WILPF members Table of Contents Advancing WILPF’s approach to peace . 2 Political economy as a tool . 4 A feminist twist to understanding political economy . 4 Feminist political economy in the context of neoliberal policies . 5 Gendered economy of investments . 7 Feminist political economy analysis - How does WILPF do it? . 9 What questions do we need to ask? . 10 Case study . 12 © 2018 Women’s International League for Peace and Freedom August 2018 A User Guide to Feminist Political Economy 2nd Edition 13 pp. Authors: Nela Porobic Isakovic Editors: Nela Porobic Isakovic, Nina Maria Hansen, Cover photo Madeleine Rees, Gorana Mlinarevic Brick wall painting of faces by Design: Nadia Joubert Oliver Cole (@oliver_photographer) www.wilpf.org on Unsplash.com 1 Advancing WILPF’s approach to peace HOW CAN FEMINIST UNDERSTANDING OF POLITICAL ECONOMY IN CONFLICT OR POST-CONFLICT CONTEXT HELP ADVANCE WILPF’S APPROACH TO PEACE? Political economy makes explicit linkages between political, economic and social factors. It is concerned with how politics can influence the economy. It looks at the access to, and distribution of wealth and power in order to understand why, by whom, and for whom certain decisions are taken, and how they affect societies – politically, economically and socially. It combines different sets of academic disciplines, most notably political science, economy and sociology, but also law, history and other disciplines. By using feminist political economy, WILPF seeks to understand the broader context of war and post-conflict recovery, and to deconstruct seemingly fixed and unchangeable economic, social, and political parameters.
    [Show full text]
  • The Economic Policy Response to the Covid-19 Crisis Note for Discussion April 9, 2020 *
    The economic policy response to the Covid-19 crisis Note for discussion April 9, 2020 * The dramatic social distancing measures that were needed to contain the Covid-19 outbreak and save lives have resulted in a major economic crisis. The magnitude and spread of the global decline in output exceeds that triggered by the Global Financial Crisis, if not the Great Depression. But the very nature of the crisis is unprecedented. As in previous major downturns, developing countries are facing a decline in foreign demand and a drop of commodity prices. They are also being locked out from global financial markets, suffer capital outflows and experience a fall of remittances. But in addition to the demand shortfall and the financial stress, this new crisis involves a major supply shock. Domestically, social distancing measures drastically reduce labor supply and increase transaction costs. Internationally, supply chains break down, which may result in shortages of key inputs and potentially in higher food prices. Another important difference with previous crises is the potential, recurrent return of the supply shock until a vaccine is developed, weighing on the prospects for recovery. A crisis of this magnitude and nature is not going to be reverted quickly. Even once the crisis bottoms out, widespread bankruptcies, increased unemployment and under-employment, and a depressed investment climate will make its effects persist. Moreover, developing countries are confronting this crisis from a weaker position compared to the Global Financial Crisis. Some financial sectors are vulnerable, corporate debt is generally high, and sovereign debt levels often constrain the fiscal space available to governments.
    [Show full text]
  • The Political Economy of Adjustment and Rebalancing
    May 2014 The Political Economy of Adjustment and Rebalancing Jeffry Frieden Department of Government Harvard University This essay is based on an address to the JIMF-USC Conference on Financial Adjustment in the Aftermath of the Global Crisis, Los Angeles, April 18-19, 2014. The author thanks Joshua Aizenman, Lawrence Broz, Menzie Chinn, Dani Rodrik, Kenneth Rogoff, Francesco Trebbi, and Stefanie Walter for very helpful comments and suggestions. 2 The world’s recovery from the Global Financial Crisis (GFC) was extraordinarily slow and difficult. In the United States, it took some fifty months for employment to return to pre-crisis levels. This contrasts dramatically with the norm in American recessions: since the 1930s, employment has on average taken about ten months to return to pre-recession levels. 1 Output, similarly, regained its pre-crisis levels far more slowly than in other post-Depression recessions. And five years after the crisis began, median household income was still over 8 percent below its pre-crisis level. 2 Recovery in Europe was even slower and more difficult. The region fell into a second recession soon after the first one ended; unemployment soared in many countries, and has remained extremely high for a very long time. The painful recovery was due in part to the severity of the crisis itself. The Global Financial Crisis was, after all, the longest downturn since the 1940s, and the steepest 1 Employment reached pre-recession levels in May 2014. For previous experiences, see http://www.pewresearch.org/fact-tank/2013/09/25/at-42-months-and-counting-current- job-recovery-is-slowest-since-truman-was-president/ accessed May 16, 2014 2 http://www.pewresearch.org/fact-tank/2013/09/18/four-takeaways-from-tuesdays- census-income-and-poverty-release/ accessed May 16, 2014.
    [Show full text]
  • Law-And-Political-Economy Framework: Beyond the Twentieth-Century Synthesis Abstract
    JEDEDIAH BRITTON- PURDY, DAVID SINGH GREWAL, AMY KAPCZYNSKI & K. SABEEL RAHMAN Building a Law-and-Political-Economy Framework: Beyond the Twentieth-Century Synthesis abstract. We live in a time of interrelated crises. Economic inequality and precarity, and crises of democracy, climate change, and more raise significant challenges for legal scholarship and thought. “Neoliberal” premises undergird many fields of law and have helped authorize policies and practices that reaffirm the inequities of the current era. In particular, market efficiency, neu- trality, and formal equality have rendered key kinds of power invisible, and generated a skepticism of democratic politics. The result of these presumptions is what we call the “Twentieth-Century Synthesis”: a pervasive view of law that encases “the market” from claims of justice and conceals it from analyses of power. This Feature offers a framework for identifying and critiquing the Twentieth-Century Syn- thesis. This is also a framework for a new “law-and-political-economy approach” to legal scholar- ship. We hope to help amplify and catalyze scholarship and pedagogy that place themes of power, equality, and democracy at the center of legal scholarship. authors. The authors are, respectively, William S. Beinecke Professor of Law at Columbia Law School; Professor of Law at Berkeley Law School; Professor of Law at Yale Law School; and Associate Professor of Law at Brooklyn Law School and President, Demos. They are cofounders of the Law & Political Economy Project. The authors thank Anne Alstott, Jack Balkin, Jessica Bulman- Pozen, Corinne Blalock, Angela Harris, Luke Herrine, Doug Kysar, Zach Liscow, Daniel Markovits, Bill Novak, Frank Pasquale, Robert Post, David Pozen, Aziz Rana, Kate Redburn, Reva Siegel, Talha Syed, John Witt, and the participants of the January 2019 Law and Political Economy Work- shop at Yale Law School for their comments on drafts at many stages of the project.
    [Show full text]
  • Monetary Policy and the Long Boom
    NOVEMBER/DECEMBER1998 John B. Taylor is a professor of economics at Stanford University. The article that follows is a reprint of The Homer Jones Lecture delivered at Southern Illinois University-Edwardsville on April 16, 1998. Kent Koch provided research assistance. this lecture. This month (April 1998) the Monetary Policy United States economy celebrates seven years of economic expansion. By definition and The Long an economic expansion is the period between recessions; that is, a period of con- Boom tinued growth without a recession. The last recession in the United States ended in April 1991, so as of this April we have had seven John B. Taylor years of expansion and we are still going. This current expansion is a record breaker: regret that I never had the opportunity to to be exact it is the second longest peacetime work or study with Homer Jones. But I expansion in American history. Iknow people who worked and studied with But what is more unusual is that this him, and I have enjoyed talking with them and current expansion was preceded by the reading about their recollections of Homer first longest peacetime expansion in Amer- Jones. What is most striking to me, of all that ican history. That expansion began in has been said and written about Homer Jones, November 1982 and continued through is his incessant striving to learn more about August 1990. It lasted seven years and economics and his use of rigorous economic eight months. Although the 1980s expansion research to improve the practical operation of was the first longest peacetime expansion in economic policy.
    [Show full text]
  • Economic Integration, Macroeconomic Policy and Micro Markets*
    Economic integration, macroeconomic policy and micro markets¤ Christopher Loewald South African National Treasury ABSTRACT: The New Partnership For Africa’s Development (NEPAD) has been established to provide a substantive platform for African countries to initiate a series of policy steps toward more rapid economic growth and poverty reduction. Critics have argued that some of the policies, especially regional integration, will do more harm than good, and have cast the debate as a binary choice between the open and closed economy. Neither a fully closed nor a fully open economy is likely to maximize welfare and growth. In contrast to the notion of policy autonomy in the closed economy, the closed economy requires far more stringent application of price controls, monetary, …scal, and competition policies than do more open economies to prevent rising in‡ation and worsening income distribution. On balance, more open trade and capital relationships are preferred, because they help to ensure consistency between macroeconomic policy and microeconomic behaviour and are more conducive to improving income distribution. ¤Dr Christopher Loewald is Chief Director of International Economics in the National Treasury. The views and opinions in this paper are solely those of the author. They should not be attributed to the National Treasury. The author thanks Kevin Fletcher, Johann Fedderke, Adam Schwartzman and John Luiz for their helpful comments. Economic integration, macroeconomic policy and micro markets 1 1 Introduction Over the past year, NEPAD has emerged as the primary vehicle for bringing African countries into what might be described as the ‘reformist’ wing of the world’s economic and political community.
    [Show full text]
  • New Perspectives on the History of Political Economy Robert Fredona · Sophus A
    New Perspectives on the History of Political Economy Robert Fredona · Sophus A. Reinert Editors New Perspectives on the History of Political Economy Editors Robert Fredona Sophus A. Reinert Harvard Business School Harvard Business School Boston, MA, USA Boston, MA, USA ISBN 978-3-319-58246-7 ISBN 978-3-319-58247-4 (eBook) https://doi.org/10.1007/978-3-319-58247-4 Library of Congress Control Number: 2017943663 © Te Editor(s) (if applicable) and Te Author(s) 2018 Tis work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifcally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microflms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Te use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specifc statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Te publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Te publisher remains neutral with regard to jurisdictional claims in published maps and institutional afliations.
    [Show full text]
  • Political Economy Analysis for Development Effectiveness by Olivier Serrat
    Knowledge September 2011 | 107 Solutions Political Economy Analysis for Development Effectiveness By Olivier Serrat Define:Political Economy Economics—the social science that deals with the production, Political economy distribution, and consumption of material wealth and with the embraces the complex theory and management of economic systems or economies1— political nature of was once called political economy.2 Anchored in moral decision making to philosophy, thence the art and science of government, this investigate how power articulated the belief in the 18th–19th centuries that political and authority affect considerations—and the interest groups that drive them— economic choices in have primacy in determining influence and thus economic a society. Political outcomes at (almost) any level of investigation. However, with the division of economics and political science into economy analysis distinct disciplines from the 1890s, neoclassical economists turned from analyses of offers no quick fixes power and authority to models that, inherently, remove much complexity from the issues but leads to smarter they look into.3 engagement. Today, political economists study interrelationships between political and economic institutions (or forces) and processes, which do not necessarily lead to optimal use of scarce resources.4 Refusing to eschew complexity, they appreciate politics as the sum 1 There is no universally accepted definition of economics. Two other characterizations that both place an accent on scarcity consider it the study of (i) the forces of supply and demand in the allocation of scarce resources, and (ii) individual and social behavior for the attainment and use of the material requisites of economic well-being as a relationship between given ends and scarce means that have alternative uses.
    [Show full text]