The Problems of Economic Theory in Explaining Economic Performance

Abstract

The analytical, policy, and ethical issues raised by the contemporary crises of economic performance in the United States and the attendant crisis in economic theory might well serve as a critical catalyst for consummating a marriage of political science and institutional economics. Besides generally compatible modes of reasoning about economy and polity, political scientists and institutionalists share two essential perspectives on the problems of explaining economic performance and prescribing government roles in the economy which suggest a common research agenda: (1) a similar dissatisfaction with the epistemological and ideological characteristics of the mainstream economic debate about the policy and performance failures of the 1970s; and (2) some initial distinctive propositions about the institutional, structural, and political determinants of contemporary economic performance in the United States that can be empirically tested and that may serve as an entry point into the academic and policy debates of the 1980s.

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References

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Robert Solo , The Positive State (Cincinnati: South-Western Press, 1981).

3. James W. Dean , “The Dissolution of the Keynesian Consensus,” The Public Interest (special issue, “The Crisis in Economic Theory”), XX:19-34 (1980).

4. James Q. Wilson , “ `Policy Intellectuals' and Public Policy,” The Public Interest, 64:66 (Summer 1981).

5. Ibid., p. 33.

6. Charles W. Anderson , “Political Theory and Political Science: The Rediscovery and Reinterpretation of the Pragmatic Tradition” (Paper delivered at the Shambaugh Conference on Political Theory, University of Iowa, 1981), pp. 1-2.

7. Ibid., p. 14.

8. Philip A. Klein , “Confronting Power in Economics: A Pragmatic Evaluation,” Journal of Economic Issues, 14(4):878 (Dec. 1980).

9. Ibid., p. 891.

10.

and Richard G. Lipsey , “The Understanding and Control of Inflation: Is There a Crisis in Macro Economics?” Canadian Journal of Economics (Nov. 1981).

11.

11. See inter alia the essays in The Public Interest (special issue, “The Crisis,” 1980). For a moderate monetarist account, see Philip Cagan , Persistent Inflation (New York: Columbia University Press, 1979).

12.

12. James M. Buchanan , Introduction to William Mitchell, “The Anatomy of Public Failure: A Public Choice Perspective” (Paper delivered at the Institute for Economic Research, Los Angeles, June 1978).

13.

13. Dean , “Dissolution of the Keynesian Consensus”; and The Public Interest (special issue, “The Crisis,” 1980).

14.

14. Much of this section draws from a project I co-directed with Charles S. Maier for the Brookings Institution, The Politics and Sociology of Global Inflation. I gratefully acknowledge my debt to Charles S. Maier, Albert O. Hirschman, Robert Keohane, Colin Crouch, John Zysman, Rudolf Klein, David Cameron, Douglas Hibbs, John Woolley, Brian Barry, Michele Salvati, Norbert Kloten, Kozo Yamamura, and Andrew Martin.

15.

15. For an influential statement, see Peter J. Katzenstein , “Conclusion: Domestic Structures and Strategies of Foreign Economic Policy,” in Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States, ed. Peter J. Katzenstein (Madison: University of Wisconsin Press, 1978), pp. 295-336.

16.

16. John Zysman , Political Strategies for Industrial Order: State, Market and Industry in France (Berkeley: University of California Press, 1977).

17.

Mancur Olson , “The Political Economy of Comparative Growth Rates,” unpublished manuscript; Hayes and Abernathy , “Managing Our Way to Economic Decline,” Harvard Business Review (July/Aug. 1980).

18.

18. Robert Solo , Economic Organizations and Social Systems (Indianapolis: Bobbs-Merrill, 1967); idem, The Postive State, ch. 8.

19.

Katzenstein , Beyond Power and Plenty.

20.

20. John Zysman , The State as Economic Player (forthcoming).

21.

21. For a general discussion, see essays in Philippe Schmitter and Gerhard Lehmbruch , Trends Toward Corporatist Intermediation (Beverly Hills, CA: Sage Publications, 1979).

22.

David Cameron , “Does Government Cause Inflation? Taxes, Spending and Deficits,” in The Politics and Sociology of Global Inflation, eds. Leon N. Lindberg and Charles S. Maier (forthcoming).