Rodrik: Ideas over Interests

Dani Rodrik:

Ideas over Interests, by Dani Rodrik, Commentary, Project Syndicate: The most widely held theory of politics is also the simplest: the powerful get what they want. Financial regulation is driven by the interests of banks, health policy by the interests of insurance companies, and tax policy by the interests of the rich. Those who can influence government the most ... eventually get their way.

It’s the same globally. ... It is a compelling narrative... Yet this explanation is far from complete, and often misleading. ... Our interests are in fact hostage to our ideas.

So, where do those ideas come from? Policymakers ... perspectives on what is feasible and desirable are shaped by ... economists and other thought leaders... The ideas that have produced, for example, the unbridled liberalization and financial excess of the last few decades have emanated from economists...

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.

There are differences on these issues among economists. The fact that some ideas, e.g. that austerity is somehow expansionary, take hold while others do not has a lot to do, I think, with the interests of the powerful. So I'm not fully convinced that economists are the primary driving force. They are part of it, to be sure, but when those with the most political power promote one idea over another, it matters.