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On Misunderstanding Government: an Analysis of the Art of Policy Advice
Author(s) -
Basu K.
Publication year - 1997
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/1468-0343.00032
Subject(s) - government (linguistics) , government failure , sign (mathematics) , roulette , public finance , subject (documents) , outcome (game theory) , advice (programming) , economics , public economics , law and economics , political science , macroeconomics , geometry , mathematics , mathematical analysis , philosophy , linguistics , library science , computer science , programming language , mathematical economics
In the traditional economics literature government is treated as an agent exogenous to the economy. When economists confront situations where individuals cannot sign binding contracts, they invoke government as the “third party” that can enforce the contracts; after studying the macroeconomic problems of a country, economists frequently go on to tell what government should do to improve the outcome. It is argued in this paper that this is an erroneous view of government and is the reason why the advice of economists and other social scientists have had so little impact on government behavior. The difficulties of advising an endogenous government are highlighted by developing a new game, the Cheater's Roulette. It demonstrates that even when the adviser and the politician have very similar objectives, there may be no straightforward way to transmit the knowledge of the adviser to the politician. Having analysed the subject of advising government, the paper goes on to discuss, more speculatively, some general issues concerning the modeling of an endogenous government.