If there is a central argument to 13 Bankers,
it is that politics matters. The financial crisis was the result of a
long-term transformation of the financial sector and its place in the
overall economy, and that transformation occurred because of—and
contributed to—a shift in the political balance of power.
Daron Acemoglu and James Robinson, authors of Why Nations Fail, take up this theme on a much broader scale in their recent article in the Journal of Economic Perspectives, “Economics Versus Politics: Pitfalls of Policy Advice,” burnishing their reputations as two of the most subversive thinkers around. People have always known that economics and politics are related: that economic power produces political power and that political institutions constrain economic policy choices. Still, however, at least for the past several decades, the universal assumption has been that good economic policy is always good policy, full stop: for example, that it is always good to eliminate market failures.
This is what Acemoglu and Robinson contest. For example, assuming for the sake of argument that unions create economic distortions, unions also engage in politics on behalf of workers and, in some cases, lower-class people more generally. Policies that weaken unions not only reduce this economic distortion, but weaken the political power of the working class—which was already outgunned by capital to begin with. Given the role of unions in supporting participatory political institutions, this can be bad for democracy and for economic growth in the long run.
http://baselinescenario.com/2013/07/08/the-costs-of-good-economics/
Daron Acemoglu and James Robinson, authors of Why Nations Fail, take up this theme on a much broader scale in their recent article in the Journal of Economic Perspectives, “Economics Versus Politics: Pitfalls of Policy Advice,” burnishing their reputations as two of the most subversive thinkers around. People have always known that economics and politics are related: that economic power produces political power and that political institutions constrain economic policy choices. Still, however, at least for the past several decades, the universal assumption has been that good economic policy is always good policy, full stop: for example, that it is always good to eliminate market failures.
This is what Acemoglu and Robinson contest. For example, assuming for the sake of argument that unions create economic distortions, unions also engage in politics on behalf of workers and, in some cases, lower-class people more generally. Policies that weaken unions not only reduce this economic distortion, but weaken the political power of the working class—which was already outgunned by capital to begin with. Given the role of unions in supporting participatory political institutions, this can be bad for democracy and for economic growth in the long run.
http://baselinescenario.com/2013/07/08/the-costs-of-good-economics/
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