Politics as a Peculiar Business: Insights from a Theory of Entangled Political Economy

By Novak, Mikayla | The Cato Journal, Winter 2017 | Go to article overview

Politics as a Peculiar Business: Insights from a Theory of Entangled Political Economy


Novak, Mikayla, The Cato Journal


Politics as a Peculiar Business: Insights from a Theory of Entangled Political Economy

Richard E. Wagner

Cheltenham, UK: Edward Elgar Publishing, 2016, 234 pp.

Over the past few decades, insights from complexity theory and networking analysis have increasingly infused the social sciences. A complex economics perspective stresses the interactional processes between heterogeneous individuals, fallible yet capable of seeking exchange advantages and whose actions unfold in both time and space.

Despite the growing popularity of complexity approaches in economics, it is reasonable to suggest the subdisciplines of public finance and public-sector economics have been, and still remain, largely immune to process-oriented thinking.

The exclusion of complex systems approaches from public economics is illustrated by how fiscal policy action is treated in most textbooks. Convention paints the comparative static portrait of an omniscient, benevolent planner aloofly injecting tax and subsidy interventions into markets, which allegedly fail to achieve optimal resource allocations or desirable distributional outcomes.

The work of George Mason University economist Richard Wagner directly challenges that orthodoxy. He emphasizes an evolutionary political economy wherein commingled economic and political actors all interact on the same social plane. Wagner's new book, Politics as a Peculiar Business, is the latest in his longstanding attempts to illustrate an alternative approach to fiscal theorizing and political economy.

What is most refreshing about Politics as a Peculiar Business is the intellectual honesty with which Wagner depicts economic and political life in the contemporary age. Breaking down the conventional vision of bifurcated economic and political spheres, he sees a remarkable similarity of observed behaviors regardless of institutional setting: "Political entities compete among one another just as do market entities, and with political and market entities also engaging in both competitive and collusive activities."

Although the pro-social Homo sapiens regularly demonstrates an inclination to compete and collaborate with one another, whether in a market or political setting, Wagner believes that the incentive structures within the economic and political spheres greatly differ.

Market participants try to create and realize economic value given the existence of private property, relative prices, and monetary profit-loss signaling. Politicians, on the other hand, seek prestige and fame, oftentimes by attempting to secure a policy legacy for themselves, and they do so in the absence of property rights, prices, and monetary profit and loss.

Furthermore, interaction between individuals in the market generally consists of mutually beneficial, value-added exchanges undertaken voluntarily. Wagner labels this "dyadic exchange"; they are the kinds of "win-win" economic interactions lauded by classical liberals as conducive to economic prosperity and social peace.

By contrast, there is a sense in which the politician and the beneficiary of a political act (say, a recipient of a tax break or a subsidy) engage in a somewhat loosely described "transaction," but affected nonbeneficiaries (typically a taxpayer forced into the given fiscal arrangement) lose out as a result. This "win-win-lose" configuration is denoted as a "triadic exchange," which tends to become more prevalent as the public sector expands.

The reality of extensive economic-political commingling enables Wagner to introduce the reader to his key concept of an "entangled political economy," in which "prudent commercial conduct cannot be determined independently of the desires expressed by political entities" and vice versa. From the vantage point of network theory, entangled political economy can be interpreted as a nonrandom and scale-free assortment of nodes and connections between economic and political actors. …

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