Economics and Power

One of the odd things in reading about the current economic troubles is that there is, outside of a very few economists, an explicit statement of the effect of political power on economic outcomes (maybe this has to do with the high number of former mathematicians and physicists who are economists?). So it’s good to see Mark Thoma take Brad DeLong to task for DeLong’s explanation of rising income inequality which ignores the more sociological aspects of political economy (boldface mine):

One complaint: It’s more than just economics. In my view, Brad doesn’t put enough emphasis on the changing political tide over the last few decades, and how that has altered public policy towards institutions such as unions that were able to help workers get a fair share of the output they produce (unions aren’t even mentioned in the article). The explanation for rising inequality makes it appear that economics — factors such as winner-take-all markets in an increasingly globalized world and skill based technical change — can fully account for the problem. I don’t see it that way. Economics surely contributed to the inequality problem, but the idea that those at the top haven’t received a penny more than they earned, that their incomes can be explained by economics alone, is hard to defend. Workers incomes have not kept up with productivity — they did not get a fair share of the output they produced over the last few decades — and that means some other group got more than it deserves. Given the stagnant incomes at lower levels and widening inequality from growth at the top, it’s not hard to think of who that group might be, and it is not the least bit surprising that this just happens to be the group with the largest amount of political influence.

I don’t have any problem with the statements made in the article about taxes on the wealthy and educational opportunity for working class households — we need more of both — but we also need to reform our institutions so that they work for all of us, not just the (ahem) job creators at the top.

There’s nothing wrong with recognizing that there’s more to economics than just deductive mathematical models–sociology and political science need to be incorporated too. After all, no one would argue that the events of Sept. 11, 2001 were primarily a structural engineering problem. I’m not sure how you can understand what happened during the last decade without those disciplines. And that’s OK.

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2 Responses to Economics and Power

  1. Ebenezer Scrooge says:

    Neoclassical economics is a language designed to contain no references to power. It is impossible to speak of power in this tongue, especially in the Chicago dialect.

  2. Calton Bolick says:

    Ebenezer Scrooge: You don’t know Brad DeLong at all, do you?

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