NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Economic Analysis and the Political Economy of Policy Formation

Michael Bruno

NBER Working Paper No. 3183
Issued in November 1989
NBER Program(s):   ITI   IFM

The first part of the paper analyzes the various components (as well as likely failures) in the complex two-way market chain that links the supply of economic theories with the design, sale and implementation of workable economic policies. Among other aspects of this link two points are stressed. One is the relative contribution to knowledge of economists inside the government machine, which by nature is often not diffused to the profession at large. Another very major point is the advancement of knowledge through the reverse link from policies that have worked in practice, often without prior theoretical grounding, to their subsequent rigorous theoretical formulation and empirical testing. This discussion is followed by detailed first-hand illustrations from the politico-economic experience of Israel, in which government (and economists') involvement in the economy has traditionally been far-reaching. The illustrations which have their parallels in other countries are given in historical order, from the contributions to the literature on trade and development policy issues (paramount in the 1950s and 1960s), on tax and transfer schemes as well as on open economy macro policies and exchange rate regimes (mainly in the 1970s). This is followed by reference to the policy experience and failures of living with high inflation and, in particular, the political economy of the more recent stabilization efforts which provide considerable support for the general points made in the first part of the paper on the workings of the market for ideas and policies. The paper ends with brief references to two important topics for the 1990s - the uncharted practical area of institutional reform in socialist economies and the recent theoretical literature on game-theoretic approaches to policy formation.

download in pdf format
   (413 K)

download in djvu format
   (348 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3183

Published: European Economic Review, vol. 34, no. 43, May 1990.

Users who downloaded this paper also downloaded* these:
Bruno w2718 Econometrics and the Design of Economic Reform
Heller, Shah, Guryan, Ludwig, Mullainathan, and Pollack w21178 Thinking, Fast and Slow? Some Field Experiments to Reduce Crime and Dropout in Chicago
Currie, DellaVigna, Moretti, and Pathania w14721 The Effect of Fast Food Restaurants on Obesity and Weight Gain
Chetty, Friedman, and Saez w18232 Using Differences in Knowledge Across Neighborhoods to Uncover the Impacts of the EITC on Earnings
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us