Richard S. Grossman is Professor of Economics at the Wesleyan University and a visiting scholar at the Institute for Quantitative Social Science at Harvard University
Why did you decide to go into economics?
I had always been interested in politics, international affairs, and public policy. As a university student, I was struck by how often the central issues in these areas were economic in nature. At that point, the only question was whether I should study them as an academic, policy maker, financial analyst, or journalist.
I decided that I would have greater freedom to study the contemporary and historical issues that interested me as an academic.
Why does ideology show up in economic policies?
Ideology may become entrenched out of habit. If we have “always done it this way,” policy-makers may be unwilling to risk making a change. And once an organization has a long-standing practice of doing business in a certain way, “groupthink” can take over, making it even harder to change direction.
Ideology can also take hold of economic policy because of policy-makers’ convictions or electoral concerns. The “no new taxes pledge” that so many Republican politicians have embraced in the US is a good example of an irresponsible position taken for electoral/ideological reasons. It is possible to favor lower taxes, but be open to the argument that sometimes higher taxes are necessary. To refuse to even consider the case for higher taxes under any and all circumstances is madness.
You describe in your worthwhile book (“Wrong”) some pretty painful outcomes for human being and countries in the history because of outsized influence of private interests relating to economic policy. How can the government be improved to protect the society?
This is a difficult issue. In free countries, individuals and firms have a legitimate right to advocate for economic policies that are favorable to them. As a society, we should favor rules that prevent any one group from exerting excessive influence over policy.
The best, but still highly imperfect, way of achieving this is by promoting as much transparency in the policy-making process as possible, so that excessive influence of private interests is exposed to public scrutiny. As the American Supreme Court Justice Louis Brandeis said, “Sunshine is the best disinfectant.”
Thank you very much.
Richard S. Grossman is Professor of Economics at Wesleyan University. He is the author of the book Unsettled Account: “The Evolution of Banking in the Industrialized World since 1800”