## Worlds Apart

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**Canonical URL:** [Worlds Apart](https://www.imf.org/-/media/files/publications/fandd/article/2026/03/blinder.pdf)

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### Overview
- Chronic clash between sound economics and good politics often blocks better policy.
- Economists and politicos (politicians and their entourages) “hail from different civilizations,” speak different languages, define success differently, have dramatically different time horizons, and employ different logic.
- Common myth dispelled: economists do not have enormous influence on public policy.

### Political logic (illustrative arithmetic example)
- Example presented:
  - A tax break would yield $1 million in gains for each of 10 people but cost 20 million people $1 apiece.
  - Economic logic: this counts as bad policy.
  - Political logic: the 20 million people who lose $1 apiece will barely notice; the 10 million-dollar winners will notice and be grateful to the politicians who bestowed it.
  - Political payoff (support, campaign contributions) can dwarf political losses.
- Conclusion: Economic and political logic often point in opposite directions; politicos will follow political logic.

### Time horizons and political feasibility
- Political advisers often focus only on the next opinion poll or tweet; time horizons may extend only until that evening’s news broadcasts.
- US presidential timeline noted:
  - A US president’s four-year term is sometimes long enough for major effects of most economic policies to be felt.
  - The policy phase of a new presidential term rarely lasts more than 12–18 months.
  - By the 18th month of a new presidency, attention turns to midterm congressional elections, making it harder to push major initiatives through Congress.
- Implication: There is a brief window (roughly 12–18 months early in a term) when economic and political time horizons can dovetail.

### Trade example and transition costs
- Trade theory compares full-employment steady-state equilibria; David Ricardo taught free-trade equilibrium is better for society as a whole (though not necessarily for every person).
- Adjustment to the superior free-trade equilibrium can be lengthy and painful: job losses, reduced incomes for some, decimated communities.
- Economists know this but often underweight transition costs; politicians live in the world of transition costs and may not be in office long enough to enjoy equilibrium benefits.
- Recommendation: Economists should spend more time and effort thinking about painful transition costs and how to mitigate them, and think more about what happens before steady-state effects arrive.

### Recommendations for politicos and economists
- Suggestion for politicos:
  - Persuade politicians that current short-term political habits can be counterproductive so they might change tactics to win elections—implying an incentive-based route to longer horizons.
- Two suggestions for economists:
  1. Shorten economists’ effective time horizons when engaging in policy:
     - Economists typically focus on equilibrium or steady-state effects; political reality requires attention to transitions and non-equilibrium lives.
     - Transition costs should not be brushed off as fleeting details.
  2. Pay more attention to fairness as well as efficiency:
     - “Economists should pay more attention to fairness rather than doting almost exclusively on efficiency.”
     - In politics, perceived fairness almost always trumps efficiency; discussions of fairness dominate legislative debates (example: tax code).
     - Maintain efficiency as a guidepost but temper its primacy with respect for political feasibility, which often hinges on perceived fairness.

### Practical strategy for economists
- Accept political constraints and aim to “nibble at the edges”:
  - Work below the political headline level to make complex policy packages less inefficient.
  - Embrace a “theory of the third or fourth best,” accepting incremental improvements rather than idealized optimal solutions.

*alan s. blinder is a professor of economics at Princeton University and a former vice chair of the Federal Reserve. This article draws on a past lecture to the American Academy of Political and Social Science.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2026/03/blinder.pdf_