Table of Contents

The Elgar Companion to Public Choice

The Elgar Companion to Public Choice

Elgar original reference

Edited by William F. Shughart II and Laura Razzolini

This authoritative and encyclopaedic reference work provides a thorough account of the public choice approach to economics and politics. The Companion breaks new ground by joining together the most important issues in the field in a single comprehensive volume. It contains state-of-the-art discussions of both old and contemporary problems, including new work by the founding fathers as well as contributions by a new generation of younger scholars.  

Chapter 20: Politics and the macro economy

Richard E. Wagner

Subjects: economics and finance, public choice theory, politics and public policy, public choice

Extract

Richard E. Wagner 1 Introduction Do macroeconomic conditions influence the electoral prospects of candidates? Do governing incumbents use their powers of office to influence macroeconomic conditions so as to improve their electoral prospects? The evidence currently available seems pretty strongly to support an affirmative answer to the first question. There is more controversy about the second question, and for good reason. If the second question is answered in the affirmative, it is possible that the very process of democratic competition for office might interject instability into the economy. This possibility contrasts starkly with the traditional view of macroeconomic policy, where a central role of the state is construed as acting to keep stable what would otherwise be an unstable market economy. Rather than being an antidote or corrective for economic instability, politics might be a source of instability. This chapter explores some recent scholarship on the relation between political competition and economic stability. It starts by setting forth the traditional, Keynesian vision of the corrective or stabilizing state. This vision located the state as outside or exogenous to the economic process. Public choice scholarship has relocated the state to an endogenous position within the economic process, and in so doing has raised the prospect of the destabilizing state. The resulting hypothesis of a political business cycle starts from a consideration of the impact of macroeconomic conditions on the electoral support that incumbents can expect to receive. At this point the literature on the political...

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