Many economists are becoming increasingly technocratic in their desire to shape the economy to fit their favourite theory. However, behind their desire to improve the lot of their compatriots looms the shadow of public choice theory, scorning their efforts to shape public debate. Indeed, many libertarians are so persuaded by public choice ideas that they advocate limited government largely because they have no faith in elected officials. So can one both appreciate the consistency of treating public servants as our theory would treat anyone else, and at the same time believe in engineering a better state?
There are three ways in which ideas shape interests. First, ideas determine how political elites define themselves and the objectives they pursue – money, honor, status, longevity in power, or simply a place in history. These questions of identity are central to how they choose to act.
Second, ideas determine political actors’ views about how the world works. Powerful business interests will lobby for different policies when they believe that fiscal stimulus yields only inflation than when they believe that it generates higher aggregate demand. Revenue hungry governments will impose a lower tax when they think that it can be evaded than when they think that it cannot.
Most important from the perspective of policy analysis, ideas determine the strategies that political actors believe they can pursue. … Expand the range of feasible strategies (which is what good policy design and leadership do), and you radically change behavior and outcomes.