Political economy

In his excellent survey of the literature on the political economy of trade policy Rodrik (1995) emphasizes the challenge facing economic theorists to explain why trade policy is chosen in equilibrium if other policies, which are more efficient for redistributing income, are available. 2 There are only a few theoretical contributions along these lines, and all of those achieve this by highlighting some form of asymmetry between tariffs and the alternative instruments that may make tariffs an equilibrium choice despite their inefficiency. 3 In the present paper, this asymmetry is with respect to the ability of both instruments to affect relative prices, which in our setup exists for tariffs but not for the comprehensive income tax. Hence in our two-country model there is an incentive for strategic use of tariffs that does not exist for income taxes.

Abstract: Microfinance has evolved as a financial and social innovation aimed at reducing global poverty through socio-economic empowerment of the poor. It has enjoyed a widespread patronage in the global economy in spite of the views held by its critics. Though many impact assessment studies have suggested that there are no convincing evidences to justify the massive interest andinvestments in microfinance, renownedinstitutions, politicians, philanthropist andgovernments have demonstrated commitment to advancing its cause. This paper examines how the global political economy has shaped the development of microfinance. Based on a descriptive analysis and review of related literature, its findings suggest that the major phases of transformation in microfinance have occurred in response to the interests of stakeholders in the global political economy.

I argued earlier that political economy can over-complicate causation and needs the discipline of dialectics to provide a tractable dynamic theory of capitalism. The ontology of connectivity when combined with systematic dialectics (Reuten and Williams, 1989) provides a framework for this. The former focuses attention on the relationships between classes and the latter conceptualises these relationships as ‘unity in difference’, providing a basis for exploring the process of change inherent in capitalism. Systematic (or systemic) dialectic imposes priorities on the process of development of class conflict, production first and circulation second (see chapter six), while the ontology of connectivity allows these conflicts in relationships to evolve in both the real and ideal domain. ‘Truth’ lies in the relationships between classes, which should be grasped as a series of contradictions evolving, step-by-step in the real and ideal domains. Chapters four (value) and five (methodology) apply these ideas to the accounting firm. The justification for doing this is that accounting can allow us to measure these contradictions, and thereby provides the epistemological foundation of the ontology of connectivity.

This dissertation consists of two chapters on topics in political economy. In the first chapter, using hand- collected data from collective bargaining agreements for state-level public sector unions, I develop and calibrate a stochastic bargaining model as in Merlo and Wilson (1995) and investigate the effects of political and economic variables on wages, pensions, and delay in reaching agreement. In the model, a governor and a union bargain over a wage and pension outcome. The economic state, as measured by the unemployment rate, evolves stochastically and affects the propensity of the governor and union to reach agreement in any given period. Furthermore, political variables, including party of the governor, partisanship of the district, and incumbency, affect the relative payoffs and therefore the wage, pension, and time to agreement. I find that negotiated wage and pension growth is higher under Democratic governors, while increases in the unemployment rate at the beginning of bargaining have a negative impact on compensation levels, the magnitude of which varies by party and time before the next election.

Yet few among these new ventures — many of which focus on analyses that are part of challenging the orthodoxy of society, polity, and economy — challenge the political economy of academic journal publishing. Conventional publishing methods for journals in paper are increasing in price, partly because the circulation of “specialized” journals is smaller and partly because of the shifts and changes in the telecommunications industry with the popularization of, and easier access to, the internet. In many fields the “state of the art” has changed by the time articles come out in print. The relative quickness that e-journals can provide is increasingly attractive as demands on more publications prior to tenure rise. The challenge to publishers of paper journals has been so strong that publishers are providing electronic versions of articles in print — accessible as long as you or your institution’s library has paid a subscription fee. The electronic versions are still available only upon publication in paper copy format.

Proudhon's political economy is based on arrangements negotiated by essentially free subjects who come together to exchange their products in order to acquire goods that they cannot themselves find or produce. It will be seen that this view of society is one regulated by some sort of implicit contract between productive beings that make rational assessments of how to acquire the means of subsistence by forming productive alliances which benefit all parties. No shades of exploitation, no shadow of the acquisition of surplus value, no traces of class inequality, mar this liberal idyll in which the rationally apprehended and rationally fulfilled needs of each and all provide the economic basis of the social fabric. For Proudhon, ‘man’ is the essential category of political economy, and ‘man’ is understood a human subject rationally seeking to fulfil ‘his’ needs. The given, autonomous human subject, endowed with reason and free-will, is the starting point of orthodox political economy, which regards society as being merely an aggregate of individual subjects whose essential nature is something that in some fashion determines the nature of society, rather than as something which is determined by a particular social and cultural order.

Public health problems have a political economy rooted largely in public and private laws that both reflect the distribution of power in society and shape its policy responses. In this Article, we apply this perspective to the U.S. opioid crisis, which was triggered by a quadrupling of opioid prescribing beginning in the mid-1990s. Such staggering increases in opioid use are impossible to understand without unpacking the incentives and institutional pressures associated with the distribution and use of addictive legal drugs, particularly how those pressures can dilute the substantive goals and efficacy of regulatory governance. The policy response to the explosion of opioid use, addiction, and overdose contrasts sharply with the swift and punitive response to illicit drug markets in the 1980s and early 1990s, which involved harsh sentences, increased policing, and stricter border controls. Subsequently, as Americans increased their unlawful use of legally available drugs—products nominally subject to controls but often distributed in large quantities by actors with major incentives to encourage their use— pharmaceutical companies encountered, for the most part, a combination of legislatively created regulatory loopholes as well as patterns of lax state and federal enforcement. Doctors also encountered regulatory loopholes and lax enforcement, despite some efforts to develop databases in order to track

Taking agency more centrally, through the challenge of ‘transforming practice’ rather than form ulating ideal types, has been an increasingly influential group of feminists who have drawn early inspiration from Marxist critiques of capitalist development, but have been largely eclectic in their theoretical approach. Two areas have been at the core of this critique of development - women's work, and the gendered nature of structural adjustment policies of the 1980s and 1990s ( Elson, 1995). As we have seen above, in insisting upon opening up the area of work to economic analysis these feminists have posed difficult issues for the development economists, and the development establishment. They have built upon Sen's critique of the altruistic family, to show how not only the life chances of women are affected by the gender relations obtaining within the family, but how their contributions to family income are being appropriated without acknowledgement within the 'family income'. In disaggregating the impact of structural adjustment policies on the family, and focusing on the disproportionate burden of the privatisation of social welfare that women are being forced to carry, this powerful critique has resulted in some important shifts within the economic discourse of international institutions. -They have as much built upon the Marxist understanding of the bases of gender inequality, as they have on the liberal concepts of equality and equal opportunity. They have also further developed the interventions of Third World feminist and development groups, such as DAWN, that have advocated a strategic engagement with the policy community, and with state and international economic institutions in order to challenge the assumptions of neutral goals of development (Sen and Grown, 1985). Because the focus of this group of feminists has been the achievable, and because they have engaged actively with the policy machineries especially at the international level, their influence in the field of political economy and their interventions in the debates on development have grown considerably. The key point here is that whatever the theoretical framework within which feminist political economists have worked; the recognition of social reproduction has been a common thread to their arguments.

We draw on two different themes of the political economy literature: pre-electoral manipula- tion, and the role of information in voting. Empirical research on pre-electoral manipulation finds evidence of partisan and opportunistic cycles in fiscal policy choices, where political par- ties target public goods to specific groups as an electoral strategy to maximize votes (Dixit and Londregan [1996]). Often termed ‘pork-barrel spending’, parties change the level and compo- sition of government spending in pre-election years. As for the electoral returns, these studies conclude that election year deficits lower the probability of re-election, but voters do respond to re-allocated spending. Hence, this literature concludes that the optimal strategy for an incum- bent is targeted increases in spending financed by cuts on other types of spending (see Drazen and Eslava [2010], Drazen and Eslava [2006], Veiga and Veiga [2011], and Vergne [2009]). Brender and Drazen [2005] shows that the political deficit cycle phenomenon is more prevalent in young democracies. Brender and Drazen [2008] tests whether deficit spending in the pre- election year influences the election outcome, and find no evidence in a wide array of countries of different development levels and democracy.

In several countries, practical approaches are helping to address the coordination challenge, with concerted effort to share lessons among different countries. For example, in SUN countries, at the national level, the SUN focal point takes on a leadership and coordination role, convening stakeholders through multi-stakeholder platforms. However, there remain significant challenges to planning and implementing national plans at the sub- national level [14]. In countries where REACH is active, the initiative has facilitated multisectoral nutrition plan- ning and catalyzed the establishment and functioning of coordinating mechanisms at national and sub-national levels, by using specific tools and approaches [15]. However, as revealed by independent evaluations of SUN and REACH, several areas for improvement remain: moreover, these approaches could be better informed by political analysis and action. For example, specific political strategies could be employed to seek common goals among different players and persuade Table 1 Political economy challenges facing nutrition policy reform

A first aspect future research could take into account is the broad distributive effects of conceptions of the corporation and of corporate governance. The notion of what corporate governance is and who it is for (Veldman and Willmott, 2013) prioritizes particular legal and economic claims over others. In this sense, financialized versions of corporate governance provide micro-level principles for theory and regulation that have strong effects in terms of macro-level wealth distribution (Lazonick and O’Sullivan, 2000; Fligstein, 2001; Piketty, 2014). There is, as of yet, little consideration of how this distribution of wealth might be produced and legitimated by particular ideas of the corporation and its governance or by the contract as a key building block of a capitalist legal architecture (Mitropoulos, 2012). Because corporate governance is of fundamental importance to all constituencies involved in the process and for broad sections of society who are outside this process, we propose to focus specifically on the rules and regulations that currently reinforce a financialized conception of the corporation, a shareholder value-oriented conception of corporate governance, and, ultimately, the reinforcement of a political economy that prioritizes the interests of a very small subsection of the constituencies that have a direct or indirect claim on the modern corporation.

But, as will be seen at this congress, there are also other fields for fruitful politico-economic analyses. The fact that Modern Political Economy is, to a large extent, today fully integrated in mainstream Economics does not imply that there is no need for further development in Political Economy. Take, just as one example, Public Finance. If you go to the leading journals in this field you will still find at lot of papers where it is assumed that the government maximises a social welfare function, thus, ignoring the more than 50 years old insights of Kenneth Arrow and Anthony Downs. Such models are hardly useful, for example, to analyse the development of public debt. Modern Political Economy, on the other hand, taking into account that governments might have a tendency to have too large deficits, shows how political institutions like debt brakes can counteract this tendency of government behaviour and – hopefully – lead to sus- tainable public finances. 9

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 (in- terests 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.

This e¢ciency result contrasts with signi…cant political economy contributions which viewed in- kind transfers as the distortionary result of political redistribution. For instance, Epple and Romano (1996a) state that if in-kind transfers are purely a consequence of the redistributive motive, then the equilibrium allocation of goods is Pareto ine¢cient. However, that ine¢ciency arises because of the restrictions on the technology of taxation but not by the political process. Once I remove these constraints allowing for di¤erential targeting of cash and in-kind transfers, allocative ine¢ciencies disappear. This result is consistent with Besley and Coate (1998) and Besley (2007) critique to the common claims about ine¢ciency of political equilibria in static settings. Ine¢ciencies would be due to the imposed modeling constraints in order to get existence of equilibrium. In static political economy models without constraints in policy tools e¢ciency should be reached. 16

work, which carefully unearths the role of moral tropes and technical instruments in constituting finance as a productive and rational aspect of economy. Beneath all this historical detail is a more fundamental invitation to view ‘the economy’ itself as a product of discursive (which is to say ‘social’) practices. De Goede’s is thus a radical post-structuralism in which political economies must first be made before they can make things like goods, services, or profits. This is by now an established move within the IPS canon (for example see Reid 2007). It is also, however, a move that bears some resemblance to Richard Ashley’s (1983) earlier critique of economism, which cast the instrumental logic of economy as an incursion into the lifeworld of society. We raise this here because it is precisely such an opposition between economy and society that David Blaney and Naeem Inayatullah (2010) have sought to challenge in their recent work. For these authors, Ashley and other critics of economy miss the irreducibly social aspect of economism itself, which is what enables economies to produce subjects that think and act instrumentally. They thus reject the critique of economism, but only in order to recognize political economy as a both contested and polarizing social project.

Finally, the rapid integration of national markets since the 1970s has produced an outpouring of research, transforming ‘international political economy’ (IPE) from a niche literature into a massive scholarly field. Amongst the numerous insights IPE can offer into the study of democracy worldwide, two stand out as particularly relevant here. First, from the 1990s onwards, many scholars began suspecting that globalization, to the extent that it constrained the policy autonomy and capacity of states, also undermined democracy. In turn rising actors of this new era, from multinational corporations to international and supranational organizations, suffered from varying levels of democratic deficit (Held 1997). This global context put developing countries at a particular disadvantage. Fragile democracies were sorely tested as premature exposure to global markets triggered financial crises that bred political instability, the neoliberal reordering of production and investment regimes strained preexisting distributive contracts, and the global South appeared shut out from decisionmaking in platforms of global economic governance such as the IMF and the WTO. Only countries with extensive social safety nets were able to put global integration in the service of democratic strengthening (Rudra 2005). Yet despite these visible challenges, the 1980s and 1990s were surprisingly good decades for democratization, with significant overall progress recorded in Asia, Central and Eastern Europe, and Latin America.

Empirical analysis of voting data presents a particularly challenging exercise for political scientists due to the large number of factors driving voter be- havior, endogeneity induced by party competition and candidate selection, and behavioral phenomena driving individual voter decisions. Including early work from Rothschild (1978) and Jacobson (1978), a number of political scien- tists have explored the effect of campaign spending on aggregate vote shares, often coming to different conclusions on its importance in influencing vote share by informing, motivating, and persuading voters. These inconclusive results arise in part due to challenges in identifying valid and relevant instru- ments (Jacobson, 1985; Green and Krasno, 1988; Gerber, 1998). Gordon et al. (2012) discuss several challenges to this research agenda, highlighting the value of incorporating historically underutilized empirical methods from marketing researchers.

Moreover, recent research in …nance has led to a better understanding of the dynamic properties of the term structure of interest rates. The models are parsimonious, …nancially coherent, and able to capture some important stylized facts. Most of these bond pricing models, however, are based on unobserved risk factors that are not easy to interpret. In this literature, Diebold, Piazzesi and Rudebusch (2005) and Christensen, Diebold and Rudenbusch (2009) aim to draw explicit connections between the latent risk factors that drive the dynamics of the term structure and the observable macroeconomic variables that characterize the state of the economy. Interestingly, Dewachter and Lyrio (2006) …nd that each latent factor has a macroeconomic source. The level e¤ect can be linked to lung-run in‡ation e¤ects the slope factor correlates well with the predictable in‡ation and the business cycle components, and the curvature e¤ect is related to the current stance of monetary policy, i.e., to real interest rate movements not related to the standard macroeconomic conditions. This con…rms the strong relationship between macroeconomics and …nance in this area of research. Monch (2008) suggests the following interpretation: "Almost 80% of the variation in the slope of the yield curve is explained by the macro factors. Both the business cycle related …rst and the in‡ation-related second factor are positively linked with the slope of the yield curve. This is consistent with the fact that short-term interest rates are expected to rise relative to long-term interest rates in an in‡ationary environment. Moreover, the short rate has a strongly signi…cant negative coe¢cient in the slope equation which is consistent with the intuition that rises in the short rate lead to a decreasing yield curve slope".

On the other hand, when δ ∈ (0 , 1), this is not possible, and the poorer non-veto player always demands a positive share of the dollar to support any allocation that makes the veto. pla[r]

Karl Polanyi (1944/2001) claimed that nineteenth-century British laissez-faire was underpinned by the concept of a ‘self-regulating market’ – although this was more fiction than reality. Laissez-faire emerged as a social order from new understandings of the market and economy, and new forms of economic organization. Going back to Adam Smith, it was centred on epistemic claims that individual, self-interested action would create social benefits through market interaction (Barkan, 2013: 44, 58); these new ideas promoted the view that large- scale economic organizations – whether the state or quasi-state entities like joint- stock companies – disrupt markets through collusion and monopoly (see Arrighi, 1994/2010: 21, 252; Hessen, 1983). Market competition and prices were naturalized as objective forces, according to Bratton (1989: 1471), while large- scale organizations were characterized as disrupting this natural order. Certain forms of business enterprise dominated the British economy during this period, namely small- and medium-sized owner-managed firms and partnerships or unincorporated joint stock trusts which acted like partnerships (Gillman and Eade, 1995; Guinnane et al., 2007; Cheffins, 2008; Schrauwers, 2008). These business enterprises did not entail a separation of ownership and control, and were part of a highly competitive, mainly familial business tradition; for example, they formed what Arrighi and Silver (1999: 127) call ‘an ensemble of highly specialized medium-sized firms held together by a complex web of commercial transactions’. Their success and failure depended on price competition since success was supposedly rewarded and failure punished on the basis of market decisions (Ireland, 2010).