Sunday, July 3, 2022

Questions and tools in economics and political science

I spent the first part of the week that finishes today in Florence, in a workshop on “The dynamics of regulatory governance” organized by Eric Brousseau, with the support of the Florence School of Regulation. The meeting was used to discuss the initial ideas for a Cambridge University Press book on this topic. I presented the preliminary toughts of a chapter entitled “Regulatory commitment in fully democratic societies: the populist challenge,” on which I am working with two co-authors.

The format gave us an opportunity to discuss ideas with some of the top scholars in the field, something we have not been able to do in the last two years because of the pandemic. In this case, the multidisciplinary approach and web of contacts of Eric gave us the oportunity to interact with top political scientists, legal scholars and historians (in a way I had not done since the times of my interaction with colleagues in the four departments of the European University Institute). I am especially thankful to the feedback received by Standford University’s Barry Weingast and by former US Federal Trade Commssion Chairman William Kovacic, not only during the workshop’s presentations and debates, but also in private conversations in the breaks and meals.

Our project of a chapter includes case studies about the current populist wave from Chile and Spain. I should have known that Weingast had written about the two countries, here and here. The message of our contribution is that the current populist wave seriously challenges the institutions of regulatory commitment that have been put in place in the two countries, and presents ideas on how to make possible investment in infrastructure sectors (such as water and energy) in a fully democratic society subject to populist forces. In a way, the question we ask is what can be done when the equilibrium described by the two Weingast papers collapses. The political equilibrium in place so far was the result of democratic transitions that lowered the stakes of politics and created the necessary order to respect private investors. The (relatively mild, compared to others) populists coming from a new generation of politicians (who question the concessions of the democratic transition) challenge this order, especially in Chile.

In these workshops, the probability that someone knows what you are talking about sharply increases relative to normal life. For example, an author I have mentioned in several of my articles, a 1950s political scientist called Marven Bernstein, who raised an early critique of regulatory independence, turned out to be an idol for Barry Weingast. 

As we discussed in one of the workshop dinners, Economics and Political Science complement each other: in many cases, economists ask the wrong questions with the right tools, whereas much of political science asks the right questions with the wrong tools (especially when political science is not afraid to talk about politics, something that should not be taken for granted…).

The questions raised by Weingast and his coauthors (including the Nobel Prize economic historian Douglas North) in their work are important and difficult, especially if you share progressive values and you want to transform them into sustainable policies. Weingast and I probaly do not share exactly the same values, but it must be admitted that his and his coauthors questions about order and commitment in democracies are relevant and deserve to be answered. The conclusions they have reached are provisional and in some fields have already been challenged, but they have opened important paths to discuss the crucial issues of power, violence and order in our societies. We now know that they are more relevant than ever.

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