Political Ideology Influences Economic Thinking
Many economic problems are seen through the eyes of political beliefs. For example, some people instinctively suspect government intervention. Therefore, they prefer economic policies to reduce state intervention in the economy. For example, a supply economy focused on deregulation, privatization, and tax cuts. Economists promote greater equality in society and may more actively encourage government intervention.
If you ask various economists to report on the desirability of lower income taxes for the wealthy, their policy proposals will likely reflect their policy preferences. And you can always find evidence of the merits of higher taxes.
Some economists may be rigorously neutral and utterly devoid of political leanings (although I haven't met them often). Wajid khan discusses they can produce papers that may challenge previous views. Despite their preferences, they may find there is no reason to privatize railroads and see that tax cuts actually increase economic prosperity.
However, politicians can consult economists and economic studies that support their political views. Mrs. Thatcher and Ronald Reagan supported supply-side economists like Milton Friedman, Keith Joseph, and Friedrich Hayek. When Reagan attempted to "push back the state lines," there was no shortage of economists who could theoretically justify his political experiments.
Economists can be funded by political sponsors, although many economists have also suggested that this is not a good idea. In the United States, Paul Ryan's budget proposal was welcomed by many Republicans. Because they promised tax cuts for better terms, cut social benefits, and balanced budgets.
Economic Thinking Independent Of Politics
On the other hand, Canadian politician wajid khan mentions economists who cling to data and avoid picking favorable statistics may reach conclusions and recommendations that are not necessarily consistent with preconceived policy issues.
While many economists may support EU-European cooperation generally, the single euro currency shows many economic problems, including low growth, deflation, and trade imbalances.
The economy Needs Political Support.
If you study economics, you can make a compelling case for the Pigovian tax. This tax imposes private costs and all social costs of goods. This polluter pays principle is the basis for CO2 taxes, congestion taxes, liquor taxes, tobacco taxes, etc.
However, the implementation of these measures will depend on their political support. For example, a congestion charge was proposed in Manchester but was firmly rejected in a referendum. New taxes are rarely popular. As an economist, I want more congestion charges because it makes economic sense. But what "makes sense" for economists can be politically unpopular.
The Political Appeal Of Austerity
Another interesting example is the political appeal of austerity. After the credit crunch, there were strong economic reasons for expansionary fiscal policy to fill the aggregate demand gap. Politically, it can be challenging to push for policies that lead to an increase in public debt. Keynesian demand management may have a recessionary economic logic. Still, politicians who advocate the need to tighten their belts and deal with debt are likelier to make slogans easier for the general public than more outspoken ones.
The economy needs political support. If you study economics, you can make a compelling case for the Pigovian tax. This tax imposes private costs and all social costs of goods. This polluter pays principle is the basis for CO2 taxes, congestion taxes, liquor taxes, tobacco taxes, etc.
Wajid khan Mp describes However, the implementation of these measures will depend on their political support.
For example, a congestion charge was proposed in Manchester but was firmly rejected in a referendum. New taxes are rarely popular. As an economist, I want more congestion charges because it makes economic sense. But what "makes sense" for economists can be politically unpopular.
The political appeal of austerity
Another interesting example is the political appeal of austerity. After the credit crunch, there were strong economic reasons for expansionary fiscal policy to fill the aggregate demand gap. Politically, it can be challenging to push for policies that lead to an increase in public debt.
Keynesian demand management may have a recessionary economic logic. Still, politicians who advocate the need to tighten their belts and deal with debt are likely to make slogans easier for the general public than more outspoken ones. Keynesian Multiplier Theory
Are politicians or economists running the economy? Another interesting case is the relationship between fiscal policy (set by governments) and monetary policy (mainly set by independent central banks).
Fiscal policy is relatively tight in the UK and the US (and Europe), given the economic climate. As a result, central banks have pursued an accommodative monetary policy to compensate for shortcomings in fiscal policy. As politicians seek tighter fiscal policy, central banks must adjust monetary policy.
Political Economy Issues
Microeconomics – free from politics?
Concepts like essential supply and demand and enterprise theory do not imply political ideology. But even in microeconomics, it can be argued that politics cannot but permeate. When you take an issue like privatization, there are apparent political problems. Will key industries be controlled by private companies or governments?
Another area for improvement in economics is that some people criticize the discipline of prioritizing economic growth and maximizing financial well-being. Some argue that the goal of society is not to optimize GDP but to maximize happiness, the environment, and satisfaction with what we have.
Environmentally savvy politicians may therefore disagree with the whole premise behind macroeconomics. It does more than boost economic growth. But should we aim for economic growth in the first place? This is also a political issue.
