Taxes, welfare, immigration, conflicts – all types of government policy have big implications for the economy. And they affect almost everything in the lives of everyday people – from housing and employment to the price of food. For better or worse.
We interview the world’s leading economists to discover the real power of politics within the world’s financial system.
Are our voting systems democratic?
In Europe, the Brexit vote is an example of the voices of a generation not being heard. Seventy-five percent of young people in the UK voted to remain in the EU*, and yet, as a result of the voices of older people, the country is to leave the Union.
Even democracy comes with problems: politicians are only human
Talking of becoming better citizens, Nobel Laureate James M. Buchanan pioneered a new field of economics called 'Public Choice'. He was the first to realize that, unfortunately, politicians are only human, with flaws that can muddle their decision-making. But economic models had never taken this into account, which explains why politics sometimes didn’t work out as predicted.
How can governments (and politicians) work more effectively?
With these imperfect humans at the helm, Nobel Laureate Finn E. Kydland explored ways in which governments can make better decisions. He realized that policies with long-term commitment are key. The problem? It’s almost never in the interests of politicians to make them.
Should the state be hands on or hands off?
One of the key political debates across the world is how involved the state should be in the lives of its citizens. What should it provide? What should be the individual’s responsibility? And of the things it should provide, how much should be outsourced to the market? Nobel Laureate Oliver S. Hart’s work has influenced the US Government’s policy, and his framework for incomplete contracting shows us that there’s a world of difference between outsourcing garbage collection and something more serious:
How can governments create a better future?
Nobel Laureate Robert F. Engle III believes that debt and government go hand in hand. And when the government borrows money, it’s not just investing in buildings and land, it’s investing in the future.
But when interest rates are so low, should the global economy be spending its resources trying to repay debt? Engle doesn’t think so.
Should we be worried about levels of government debt?
Edward C. Prescott is another Nobel Laureate who doesn’t believe that governments should be solely focusing on debt-clearance. While he doesn’t say what an ideal level of public debt is, he’s certain of the number it shouldn’t be – zero. Talking about the USA, he says:
Is austerity ever the answer?
Southern Europe has experienced complete market failure, accompanied by a spike in unemployment. Nobel Laureate Sir Christopher A. Pissarides believes that austerity policies have tipped the region into a crisis similar to the one that led to the Great Depression.