Economics vs politics

Malcolm Gladwell has written a very positive review of Jerry Adelman’s Albert Hirschman bio,

. The review also offers a superb thumbnail sketch of Hirschman’s character and philosophy. I’m looking forward to reading the book myself.

[amazon_image id=”0691155674″ link=”true” target=”_blank” size=”medium” ]Worldly Philosopher: The Odyssey of Albert O. Hirschman[/amazon_image]

Meanwhile it sent me back to thumb through

, and I found this paragraph that speaks to my current preoccupations:

“Exit and voice, that is market and non-market forces, that is economic and political mechanisms, have been introduced as two principal actors of strictly equal rank and importance. … I hope to demonstrate to political scientists the usefulness of economic concepts and to economists the usefulness of political concepts. This reciprocity has been lacking in recent interdisciplinary work as economists have claimed that the concepts developed for the purpose of analyzing phenomena of scarcity and resource allocation can be successfully used for explaining political phenomena as diverse as power, democracy and nationalism. They have thus succeeded in occupying large portions of the neighbouring discipline.”

[amazon_image id=”0674276604″ link=”true” target=”_blank” size=”medium” ]Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States[/amazon_image]

He hoped the book would restore the balance, but the succeeding decades were to be characterised by the primacy of market mechanisms in political decisions. Perhaps that’s just starting to change now.

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2 thoughts on “Economics vs politics

  1. “but the succeeding decades were to be characterised by the primacy of market mechanisms in political decisions.”

    Mmmmm. As Chris Dillow has said: imagine this way of buying our groceries. Every five years we all vote on which supermarket is to provide shopping to every house in the country. The winner will then provide every household with a basket of groceries their management decide on, with very little variation. We get no more say on what we get until the next election, when we can vote again.

    Obviously, there are very good reasons why we can’t have government like a supermarket. Governments provide public as well as private goods. Still, when we think like that, it’s not so obvious why market-mechanisms, with the huge range of choice they provide, are inferior to political decision making.

    Similarly with something like housing. If it were left to market forces, I’m sure there would be affordable housing. As it is, with huge political involvement in land use and planning, I doubt I’ll move out of my parents until I’m nearing 40. Again, I don’t want a market free-for-all in housing, but I don’t necessarily think political decisions give better outcomes than market ones.

    • Of course. However, the dial has been turned all the way over to ‘market’ for a generation and there are some areas where that has, at a minimum, had some damaging side-effects. Particularly the assumption that in the public sphere financial and other direct incentives deliver better outcomes than social norms and intrinsic motivations. The public choice/NPM approach put into practice has undermined public service ethos – it has been performative, to a degree. So I believe non-exit mechanisms need to be restored to a role – which is not at all the same as saying everything must be planned by bureaucrats and politicians. I think you over-interpreted my comments.

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