The Political Economy of Ideas: On Ideas Versus Interests in Policymaking

42 Pages Posted: 2 Apr 2018

See all articles by Sharun Mukand

Sharun Mukand

University of Warwick - Department of Economics

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: March 2018

Abstract

We develop a conceptual framework to highlight the role of ideas as a catalyst for policy and institutional change. We make an explicit distinction between ideas and vested interests and show how they feed into each other. In doing so the paper integrates the Keynes-Hayek perspective on the importance of ideas with the currently more fashionable Stigler-Becker (interests only) approach to political economy. We 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). Political entrepreneurs discover identity and policy ‘memes’ (narratives, cues, framing) that shift beliefs about how the world works or a person’s belief of who he is (i.e. identity). Our framework identifies a complementarity between worldview politics and identity politics and illustrates how they may reinforce each other. 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. Finally, we show how ideas may not just constrain, but also ‘bite’ the interests that helped propagate them in the first instance.

Suggested Citation

Mukand, Sharun and Rodrik, Dani, The Political Economy of Ideas: On Ideas Versus Interests in Policymaking (March 2018). NBER Working Paper No. w24467. Available at SSRN: https://ssrn.com/abstract=3154249

Sharun Mukand (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-9454 (Phone)
617-496-5747 (Fax)

HOME PAGE: http://www.ksg.harvard.edu/rodrik/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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