Sunday, October 11, 2020

Integrating modern populism into modern political economy

One of the most important political phenomena of our times, with important economic implications, is populism. The fact that it is difficult to define, and that it comes with many forms, is not stopping many researchers in social sciences from approaching the topic as scientifically as possible. 
In my course on applied microeconomics in the Master of Applied Research in Economics and Business (MAREB) in my university, I include a chapter on political economy where we discuss traditional social choice results such as the Condorcet Paradox, Arrow's Impossibility Theorem, and the Median Voter Theorem, together with modern developments on corruption and incentives in the public sector. I frame this in terms of a balanced approach between market imperfections and government imperfections, to justify its inclusion in a Micro course. These are some random thoughts as I prepare for this session, which should take place soon.
Almost all social choice theory, which is still very useful to understand the challenges of democracy, starts with exogenous and given individual voter preferences, and the role of the supply side in politics is quite passive.
A recent article by Dani Rodrik on populism emphasizes the role of supply, and the distinction between levels and changes in the support for populism. Although cultural issues may explain some constant aspects, economic changes related to globalization may mobilize some of the cultural prejudices. 
The survey by Guriev and Papaionnou in the CEPR covers definitional aspects, evolution and the economic and cultural drivers of populism, as well as a brief overview of seminal theoretical models most of which incorporate behavioral aspects.
These behavioral aspects contribute to explaining the Paradox of Voting through social norms and civic duty, or identity group voting as suggested in the book by Achen and Bartels "Democracy for Realists."
A dynamic view of exploiting political rents to shape the preferences would be more realistic for political competition. Bonica et al.'s article on why democracies do not stop concentrating income and wealth on the 1% should add a section on how emotions and identities are mobilized to make new dimensions salient and try to manipulate the perception of voters that otherwise would vote for their redistributive preferences.
And one final note: the fact that some rich regions have top academics supporting secessionist national-populist movements should not stop other academics from developing case studies about these cases, alongside references to Trump, Brexit, Salvini, Orban, Modi, Erdogan… Because the parties supporting these movements are classified as clearly populists according to modern measurement efforts.
When the future of human societies as we know them is at stake, the traditional view that public policies and economics should stay away from influencing preferences perhaps could then be revised.

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