Reviving Political Economy

January 3, 2006

Reviving Political Economy

From my latest essay:

The mainstream approach treated economic behavior and political behavior completely differently. We viewed economic phenomena, such as a price change, as determined by an entire system. We took political decisions as arising from personal whim. We viewed market behavior as determined by contextual factors, notably tastes, technology, and competition. We treated political behavior as an independent causal force. In statistical jargon, we viewed economic phenomena as endogenous and political phenomena as exogenous. In describing markets, we used the term "equilibrium" to suggest that there is an inevitability to economic patterns. In politics, we acted as if any day policymakers could change directions at will.