A superb self-deprecating stuff from Dani Rodrik.
He points how policy decisions/interests are shaped by ideas which themselves keep changing. Some idea is fashionable today and some other tomorrow. And who brings these ideas in economic policy domain? It is econs:
Are German Chancellor Angela Merkel’s domestic political fortunes best served by stuffing austerity down Greece’s throat, at the cost of another debt restructuring down the line, or by easing up on its conditions, which might give Greece a chance to grow out of its debt burden? Are US interests at the World Bank best served by directly nominating an American, or by cooperating with other countries to select the most suitable candidate, American or not?
The fact that we debate such questions passionately suggests that we all have varying conceptions of where self-interest lies. Our interests are in fact hostage to our ideas.
So, where do those ideas come from? Policymakers, like all of us, are slaves to fashion. Their perspectives on what is feasible and desirable are shaped by the zeitgeist, the “ideas in the air.” This means that economists and other thought leaders can exert much influence – for good or ill.
John Maynard Keynes once famously said that “even the most practical man of affairs is usually in the thrall of the ideas of some long-dead economist.” He probably didn’t put it nearly strongly enough. The ideas that have produced, for example, the unbridled liberalization and financial excess of the last few decades have emanated from economists who are (for the most part) very much alive.
Special interest theory is something which econs love analysing. How about putting themselves into the game?
In the aftermath of the financial crisis, it became fashionable for economists to decry the power of big banks. It is because politicians are in the pockets of financial interests, they said, that the regulatory environment allowed those interests to reap huge rewards at great social expense. But this argument conveniently overlooks the legitimizing role played by economists themselves. It was economists and their ideas that made it respectable for policymakers and regulators to believe that what is good for Wall Street is good for Main Street.
Economists love theories that place organized special interests at the root of all political evil. In the real world, they cannot wriggle so easily out of responsibility for the bad ideas that they have so often spawned. With influence must come accountability.
How about Rodrik starting by putting some more thoughts on this via a paper or something..For instance, why would econs push for unbridled liberalization and financial excess when we have seen both these attributes leading to one crisis after the other? What is the special interest here? Is it just that most econs get compensation from Wall Street (in different forms) for pushing these interests? Or is there more to the story?
History and prominence of economic thought/ideas is something which is not as actively discussed..
