Paper Comments "Economics versus politics" (Acemoglu & Robinson)
ABSTRACT: "The standard approach to policy-making and advice in economics implicitly or explicitly ignores politics and political economy, and maintains that if possible, any market failure should be rapidly removed. This essay explains why this conclusion may be incorrect; because it ignores politics, this approach is oblivious to the impact of the removal of market failures on future political equilibria and economic efficiency, which can be deleterious. We first outline a simple framework for the study of the impact of current economic policies on future political equilibria and indirectly on future economic outcomes. We then illustrate the mechanisms through which such impacts might operate using a series of examples. The main message is that sound economic policy should be based on a careful analysis of political economy and should factor in its influence on future political equilibria." (http://papers.nber.org/papers/w18921#fromrss)
COMMENTS: This controversial paper might just be a good (new) beginning of an era of political considerations in economic modelling for public policies, which is actually different than the classical "aside" branch of political economy. The authors stand that there should be an end of the classical response on the "simple" elimination of market failures and other distortions (or inverse assumptions), instead of assuming them as variables in economic models. While Acemoglu and Robinson remain cautious, they still propose the concept of political equilibria, which could be interpreted as an economic analysis of politics that believes that an equilibrium exists beyond a typical market. Again, everything for the sake of a sound economic policy.