This is scandalous

From Henry via Marginal Revolution (emphasis added):

Hence, while Hacker and Pierson show that political science can get us a large part of the way [toward understanding the political causes of economic inequality], it cannot get us as far as they would like us to go, for the simple reason that political science is not well developed enough yet. We can identify the causal mechanisms intervening between some specific political decisions and non-decisions and observed outcomes in the economy. We cannot yet provide a really satisfactory account of how these particular mechanisms work across a wider variety of settings and hence produce the general forms of inequality that they point to. Nor do we yet have a really good account of the precise interactions between these mechanisms and other mechanisms (seeĀ here for more on this).

“Political economy” is the study of how politics and political institutions shape economic policy, systems, and outcomes. Hacker and Pierson’s point is that rising levels of economic inequality in the U.S. are not just an outcome of the functioning of free markets, but that the conditions for this phenomenon were created by politics and policy. Classic political economy. The “varieties of capitalism” work that I’ve written about here is, to me, one of the more valuable contributions of political science, and it’s all about political economy.

Especially in today’s virulently anti-government political climate, it’s important to remember that markets need government, not just to be in the background and serve as the night watchman, but to actively create the conditions that allow markets to emerge and function in the first place. The “varieties of capitalism” research gives us a useful account of how this works in other developed countries, and the work of Hal Wilensky takes this to a deep historical level. If Hacker and Pierson are right, to be missing that kind of depth for the U.S. case is just scandalous.

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