Economic Policy and the Progressive Idea
AbstractThe paper argues that a progressive policy does not only require a proper theory of the economy but also a theory of economic policy. To this end, it points out that, in order to think about a policy, one has to identify a divergence between the actual and the desired state of affairs. The main issue is who identifies it. Better said, who decides what is desirable and who decides whether it is also possible.
The conventional view is that political authorities what is desirable according to what economists proved to be possible. This may appear to be a reasonable framework for specific issues. Unless economic laws are deemed eternal, however, policy may determine long-term changes in the very nature of the economy, so that the distinction between possible and impossible goals turns out to be blurred. Furthermore, the economy’s performance may be constrained by non-economic circumstances (e.g. power relations) while, on the other hand, economic policy may affect the non-economic environment, e.g. changing those power relations. Just as above, this interdependence makes it difficult to distinguish technical assessments from value judgments.
The issue underlying these problems is that the conventional distinction between what is and what should be is not only fragile. It neglects a third issue: what can be, that is, what might happen if economic change were to subvert or drastically question present representations of the economy. The issue has less to do with value judgments concerning what is desirable than with a proper understanding of how an economy should be thought out once it is conceived of as an open system, one where it is important not only to understand relevant interactions but also how these may lead to new ones.