An Economist Thinks About Politics

How should an economist think about politics?

Not, mind you, an Indian economist thinking about Indian politics. That is far too specific for us today. No, my question is more general in nature - how should a student of economics think about the study of politics?

Jim Buchanan has a lovely answer in an essay that I keep going back to:

Economics is the study of the whole system of exchange relationships. Politics is the study of the whole system of coercive or potentially coercive relationships.

As Buchanan goes on to say in the rest of the paragraph that follows this excerpt, almost every social institution that you think of has both of these elements within it.

Consider, for example, the case of the parent who would like their child to go to bed. The child, in the time-honored tradition of all children everywhere, would rather not go to bed just now. How can this issue be settled?

Option A (Child to Parent): "If I help you lay the table for dinner tomorrow night, can I watch TV for an extra fifteen minutes?"

Option B (Parent to Child): "Go to bed right now, because I am saying so."

Which of these two options is an economic solution, and which is political? That's the difference between economics and politics. Or as Buchanan says, "only in those situations where pure rent is the sole element in return is the economic relationship wholly replaced by the political." So long as you have "alternatives of action", you meet your "associates in some sense as an equal".

If, that is to say, you don't have any alternatives of action, you are not in an equal relationship, whereby you can disagree and suggest some of these alternatives. You are instead in a hierarchical relationship, and that makes it political.

As Buchanan puts it, politics is the study of coercive or potentially coercive relationships.

This distinction isn't just academic; it helps us better understand some of society's most deeply entrenched problems. Here's an example for your consideration:

https://twitter.com/betwasharma/status/1944301229833589044

If you click through and read that article, you'll see this excerpt:

It is clear that the Rs-10 patriarchal tax in Thoothukudi is not about profit. It appears to be a tool to preserve a social hierarchy that reinforces and reminds women of their place in power structures.

"Hierarchy". "Of their place". "Power". This is, per Buchanan's framing, a political problem, not an economic one.

Now, I come from The Gokhale Institute of Politics and Economics, and my Pavlovian response is to say that this is why we study the political economy. It also explains, as I like to say, the "P" in GIPE.

(I'll note in passing that Buchanan disagreed with the term. He preferred to replace both "economics" and "political economy" with the word "symbiotics". That is the study of association between dissimilar organisms.)

Now, I hope you agree with me that the content of that tweet is political, and that it is a problem.

That is, I hope you agree that a world in which this pay disparity no longer exists is a better world (and that makes this, our current world, a problematic one in at least this one regard). I also hope you agree that the solution to this problem lies not in the field of economics, but in the field of politics.

How do we think about this problem? How to solve it is a much more tricky thing, and you and I may not be able to come up with the answer, at least right away. But why get ahead of ourselves? In order to come up with even a proposed solution, we must first understand how to think about the problem, which means we need a framework.

And in tomorrow's blog post, we will learn about a framework that helps us think about, and through, politics.