Political Economy: Explanation of Economic Policies

Author: Persson
Publisher:
Publish Date: 2007-01-01
Features: What determines the quantity and form of redistribution plans, the scope and type of public goods provision, the tax burden on different tax bases, the size of government deficits, and the state of monetary policy during business cycles and election cycles? A large body of rapidly growing literature in the field of political economy has attempted to answer these questions. However, so far, there has been no consensus on appropriate analytical models or answers to these issues. Persson and Tabellini combine the essence of three academic traditions—macroeconomic policy theory, public choice theory, and rational choice theory in political science—to propose a unified analytical approach. As in modern macroeconomics, the behavior of individual citizens is rational, and their preferences for economic outcomes lead to preferences for policies. Like public choice theory, granting political decision-making power to elected representatives may give rise to agency problems between voters and politicians. In rational choice theory, political institutions determine the processes for making policies and electing rulers. The two authors outline a general analytical framework, demonstrate several new conclusions, and highlight the main unresolved issues. The intended readers of this book include economists or political scientists who wish to learn about recent developments in political economy, as well as graduate students in economics or political science, and advanced undergraduate students. Although the book is self-contained and most introductions to concepts and methods are presented in a step-by-step manner, readers are expected to have a background in microeconomics, macroeconomics, and the application of game theory. This book provides a core textbook for graduate courses and will become the standard reference for scholars in this field.