A Theory of Entangled Political Economy, with Application to TARP and NRA

48 Pages Posted: 24 Aug 2010

See all articles by Adam Smith

Adam Smith

George Mason University - Department of Economics

Richard E. Wagner

George Mason University - Department of Economics

Bruce Yandle

Clemson University; PERC - Property and Environment Research Center

Date Written: August, 18 2010

Abstract

The recent financial crisis has provoked a raft of contending claims as to whether the cause of the crisis is better attributed to market failure or political failure. Such claims are predicated on a presumption that markets and polities are meaningfully separate entities. To the contrary, we argue that contemporary arrangements create an entangled political economy that renders theorizing based on separation often misleading. Within this alternative framework of entangled political economy, questions of market or polity as the source of crisis recede into the analytical background. What comes into the foreground is recognition that crisis is a systemic feature of a system of deeply entangled political economy. Control over such crises is thus more a matter of constitutional-level endeavors to curb the extent of entanglement. We use this framework of entangled political economy to illuminate both the recent Troubled Assets Relief Program (TARP) and the New Deal’s National Recovery Act (NRA).

Keywords: bailout, political economy, credit markets, economic calculation, constitutional economics

JEL Classification: E6, D7, H1

Suggested Citation

Smith, Adam and Wagner, Richard E. and Yandle, Bruce, A Theory of Entangled Political Economy, with Application to TARP and NRA (August, 18 2010). GMU Working Paper in Economics No. 10-22. Available at SSRN: https://ssrn.com/abstract=1661510 or http://dx.doi.org/10.2139/ssrn.1661510

Adam Smith

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

Richard E. Wagner (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
334 Enterprise Hall
Fairfax, VA 22030
United States
(703) 993-1132 (Phone)

Bruce Yandle

Clemson University ( email )

101 Sikes Ave
Clemson, SC 29634
United States

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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