Ideas versus Interests: A Unified Political Economy Framework

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Abstract:

We develop a conceptual framework to highlight the role of ideas as a catalyst for policy and institutional change, making an explicit distinction between ideas and vested interests. We show how ideas and interests make separate contributions to the determination of policy, as well as how they feed into each other. In doing so we integrate the Keynes-Hayek perspective on the importance of ideas with the currently more fashionable Stigler-Becker (interests only) approach to political economy. The model allows us to distinguish between two kinds of ideational politics – the battle among different worldviews on the efficacy of policy (worldview politics) versus the politics of victimhood, pride and identity (identity politics). Our framework suggests a complementarity between worldview politics and identity politics. In particular, an increase in identity polarization may be associated with a shift in views about how the world works. Furthermore, an increase in income inequality is likely to result in a greater incidence of ideational politics.

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Last updated on 04/11/2016