The Everyday Economist

In my previous post, I discussed what I called the sleight of hand of an Olson-approach to political economy. The basic idea of that post was that Olson’s theory of concentrated benefits and dispersed costs is often used to malign policies deemed to be inefficient. The sleight of hand aspect is as follows. First, the economist deems a particular policy to be inefficient using a standard theoretical model. Second, the economist hypothesizes that the reason we have such an inefficient policy is due to special interests getting what they want because the costs are dispersed. Third, the economist examines either in historical detail or through regression analysis the role of special interests in getting the policy implemented. Fourth, if special interests are found to have had an effect on the policy being put into place, the economist concludes that the reason we have this inefficient policy is due to special…

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