The Real But Limited Effects of Ideas on Policy
Posted: 13 Aug 2009 Last revised: 1 Oct 2009
Date Written: 2009
A number of influential studies in political science argue that important economic policy changes in the rich democracies since the mid-1970s were caused by the introduction of new economic ideas. This paper claims that governments often rely on economic experts when they select policy instruments, but rarely when they set policy goals. In the 1970s, 1980s, and 1990s, the strength of Keynesianism in Austria and Denmark did not lead Austrian and Danish governments to maintain low unemployment longer than Sweden, where Keynesianism was weaker. But it did lead them to regard fiscal policy as an instrument that can be used to control the level of activity in the economy, while their Swedish counterparts instead relied on exchange rate and monetary policy.
Keywords: Experts, economic ideas, economic policy, Austria, Denmark, Sweden
JEL Classification: E63
Suggested Citation: Suggested Citation