The Political Limits of Economics

Luigi Zingales

No 296, Working Papers from The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State

Abstract: "War is too serious a matter to entrust to military men." (Georges Clemenceau) – In the spirit of Clemenceau, Huntington (1981) claims that in a democracy the ultimate responsibility for a country's military strategy belongs to the civilian political leadership. If, instead, the military controls the political decisions, it is a military dictatorship. In the same way, the ultimate responsibility for a country's economic policy should belong to the political leadership. If economists control it, it is a technocratic dictatorship. In spite of Arrow's (1951) impossibility theorem, most economists accept - at least in theory - the idea that social preferences should be determined through a democratic process and that the role of an economist is simply to maximize the social welfare function derived from these preferences. In practice, many of us economists, both in our theoretical work and in our policy advising, seem to break this separation and take a more patronizing attitude, where we claim (explicitly or not) that we know what is good for society more than its elected representatives. Thus, rather than playing a mere advisory role, we use our tools and expertise to impose our view. When we do so, however, we generally do not question the principles of democracy, but we identify a reason why the political system fails to represent the will of the majority. Thus, the substitution of our preferences in place of those of the majority's becomes not only legitimate but also necessary to fix the political failure. It is a dangerous process, whose causes and remedies I will try to explore in this short essay. Tucker (2018) studies the problem of political limits of expert in the context of independent government agencies. He designs five principles of delegation that should prevent excessive power grabbing by experts. By contrast, I focus on what we economists can do inside our profession to ameliorate this problem.

Date: 2020
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