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Arye L. Hillman There has been much economic theorizing directed at providing the politician with guidance in the design of policies that will amend market outcomes in ways that achieve specified efficiency or equity objectives. It has been common practice in economic models to portray the politician who implements the policy recommendations as a mechanistic individual who behaves as would a benevolent dictator to maximize a prespecified conception of social welfare or the utility of a representative consumer. The self-interest and discretion that is attributed to firms and consumers as optimizing agents is absent from the motives of such a politician. Economic policy choice is thereby depoliticized. How well depoliticized economic theory fares in explaining or predicting economic policy choice depends naturally enough upon how politicized is the economic system in which economic and political agents function. The papers in this volume recognize that politicians may exercise sufficient discretion so as not to behave mechanistically in correcting market inefficiencies or in pursuit of a somehow specified just income distribution. Since politicians are viewed as self-interested optimizing agents, just as are utility-maximizing consumers and profit-maximizing producers, the choice of economic policies is politicized. Coverage is provided of a broad spectrum of economic policy choice where markets and politicians interact. Section I is concerned with policy determination in western market economies, Section II with the introduction of markets into economies in transition from socialism, and Section III with international transactions.
List of contents
I: Economic Policies and Political Motives.- A. Theoretical Perspectives.- 1. Economic Policies and Political Competition.- 2. Voluntary collective action.- 3. Factor income taxation in a representative democracy.- B. Policy Choices.- 4. Macroeconomic stabilization policy: Does politics matter?.- 5. Accidental freedom.- 6. Europe 1992: From the common to the single market.- II: Markets and Socialism.- A. Market Socialism in Eastern Europe.- 7. Markets and ownership in socialist countries in transition.- 8. Socialism in less than one country.- B. Transitionary Policies.- 9. Restoring property rights.- 10. Liberalization dilemmas.- C. Economic Change in China.- 11. The failure of recentralization in China: Interplays among enterprises, local governments, and the center.- 12. Market-oriented reform and fiscal policy.- III: International Economic Policy.- A. International Trade.- 13. The political-economy perspective on trade policy.- 14. The economics and political economy of managed trade.- 15. Changes in trade-policy regimes.- B. International Monetary Transaction.- 16. Foreign-exchange markets and central-bank intervention.- 17. The political economy of the international debt crisis.- 18. Foreign-exchange market liberalization: Anatomy of a failure.
