Dani Rodrik has a post on the following question: “do governments act the way they do because of the pressure of politically powerful and organized groups (“interests”) or because of prevailing views on what is desirable and feasible (“ideas”)?”
No-one could deny that interest groups play a role in shaping policy. But I would argue (i) that the identity of the groups that get to exercise power and (ii) the manner in which their interests are advanced are also determined by prevailing world views about the proper role and functions of government. On the first point, isn’t it the case that the reason trade unions, say, have lost power in recent decades is the ideology of deregulation which swept Washington, D.C.?…
On the second: Let us presume that banks somehow have gotten to be politically powerful and that public policy must therefore be directed at enriching them. The trouble is that there is an almost infinite variety of ways in which we can enrich bankers. We can lower their taxes and raise everybody else’s;…we can allow them to buy House and Senate seats so they exercise influence directly rather than indirectly; or we can loosen prudential regulation and supervision…
The fact that the U.S. wants fiscal stimulus and Germany doesn’t cannot be explained by the relative power of different groups within those countries. It has much more to do with the way in which their respective governments have defined the problem and the “lessons” of history they have drawn…
So where do ideas come from? Keynes had something to say on this, which is too well known to be quoted here. But surely one important source are economists.
But since I am an economist, it would be in my interest to say so, wouldn’t it?
The quote from Keynes, which apparently I hadn’t heard, is
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.
I will add that the relationship between ideas and interests needs to be unpacked a little more to explain the phenomenon that Rodrik is aiming for. Who can deny that the Cato Institute, Heritage Foundation, and even the Chicago School have seen their rise without help from powerful interests? The interests can choose the ideas which then put the policies in place that shape the ideas. I wonder how much easier it is for a neoclassical economist, in the last three decades, to get an NSF or NAS grant as opposed to a Keynesian, or god forbid, a Marxist or Institutionalist.
I think Rodrik’s point is well-taken, and I’m not promoting a conspiracy theory, but I think there are tacit relationships between ideas and interests that have shaped policy.