{ "title": "A Place for Politics by Jeffry Frieden", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden", "canonical": "https://www.imf.org/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden", "overlayPath": "/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden/index.md", "summary": "Politics is often messy, but it’s how society puts a value on things economists can’t measure", "sections": [ { "heading": "Main thesis", "content": "- Politics is the mechanism by which societies place value on goods and harms that economics cannot measure precisely.\n- Even economically optimal policies (for aggregate social welfare) create winners and losers, and politics determines how those trade-offs are weighed in practice.\n- Date: March 2024.\n- Read time: Less than a minute(0 words) Read." }, { "heading": "Distributional effects and compensation", "content": "- Free trade is identified as a policy that typically raises aggregate social welfare but generates losers (for example, firms and industries that cannot compete with imports).\n- Economic solution in theory:\n - Compensate those harmed using gains from those advantaged (for example, tax exporters and consumers to help displaced autoworkers).\n - If compensation is implemented, society remains better-off overall while being more equitable.\n- Practical obstacles to compensation:\n - Political resistance: beneficiaries are rarely enthusiastic about having gains taxed away.\n - Timing and intergenerational issues: appropriate compensation may require one generation to compensate another; borrowing to shift costs to the future risks unsustainable debt burdens.\n - Uncertainty about who will be helped or harmed: complex economies create prediction uncertainty, making legislators wary.\n - Lack of credibility: promises to compensate may not be kept by future governments; newly elected officials often reverse predecessors’ commitments." }, { "heading": "Nonpecuniary costs and community impacts", "content": "- Economic measures understate noneconomic harms that are hard to price:\n - Deindustrialization example: US Northeast and Midwest manufacturing decline left rusting steel mills and scarred communities despite aggregate gains from new industries.\n - Distressed regions may suffer declines in incomes, property values, tax revenue, local services, and social fabric.\n - Associated social outcomes include an epidemic of “deaths of despair” by alcoholism, drug abuse, and suicide (Case and Deaton 2020).\n- Coal-region case:\n - Coal industry decline (for environmental reasons, technological change, and climate policies) devastated many communities; many coal counties were isolated and undiversified.\n - One World Bank study found that of 222 Appalachian coal counties, only four had managed to remain “economically viable” (Lobao and others 2021).\n- Migration and social ties:\n - Moving unemployed workers to job-rich areas is often difficult due to falling home values and nonpecuniary attachments (family, traditions, community).\n - Individual migration decisions depend on others’ decisions: “Why stay if everyone is leaving? Why leave if everyone is staying?”" }, { "heading": "Politics as a measure of hard-to-price values", "content": "- Political processes reveal how societies weigh consumer benefits (cheaper goods) against community costs (loss of livelihoods, cohesion, culture).\n- Empirical pattern: elected officials are more likely to protect industries with low-wage workers than industries dominated by high-wage workers, reflecting political sympathy for displaced low-wage workers.\n- Political choices reflect intensity of preference: intensely held local attachments can outweigh diffuse consumer gains in political balancing.\n- Politics thus functions as the arena where values that are difficult to monetize—community, culture, family—are balanced against economic gains." }, { "heading": "Implications for policy", "content": "- Recognize that economic optimality alone is insufficient for politically sustainable policy; policies must gain acceptance among important social and political actors.\n- Design compensation or adjustment mechanisms with attention to:\n - Political feasibility and credibility across election cycles.\n - Timing and intergenerational fairness without creating unsustainable public debt.\n - Nonpecuniary losses to communities (social fabric, cultural ties) that may not be addressable by monetary compensation alone.\n- Accept that democratic politics will produce contested, imperfect trade-offs but provides information about how society values priceless or hard-to-measure goods.\n\nSource: F&D Magazine article “A Place for Politics” by JEFFRY FRIEDEN, March 2024. References cited in the article include Blonz, Tran, and Troland 2023 (NBER Working Paper 31072); Broz, Frieden, and Weymouth 2021 (International Organization 75 (2): 464–94); Case and Deaton 2020; Lobao and others 2021.\n\n---\n\n Content in this bundle\n\n- Rethinking Economics: A PLACE FOR POLITICS\n - Rethinking Economics: A PLACE FOR POLITICS (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Rethinking Economics: A PLACE FOR POLITICS (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden/bundle-manifest.json)", "Authors: Jeffry Frieden", "Published: February 27, 2024", "Politics is the mechanism by which societies place value on goods and harms that economics cannot measure precisely.", "Even economically optimal policies (for aggregate social welfare) create winners and losers, and politics determines how those trade-offs are weighed in practice.", "Date: March 2024.", "Read time: Less than a minute(0 words) Read.", "Free trade is identified as a policy that typically raises aggregate social welfare but generates losers (for example, firms and industries that cannot compete with imports).", "Economic solution in theory:", "Practical obstacles to compensation:", "Economic measures understate noneconomic harms that are hard to price:", "Coal-region case:", "Migration and social ties:", "Political processes reveal how societies weigh consumer benefits (cheaper goods) against community costs (loss of livelihoods, cohesion, culture).", "Empirical pattern: elected officials are more likely to protect industries with low-wage workers than industries dominated by high-wage workers, reflecting political sympathy for displaced low-wage workers.", "Political choices reflect intensity of preference: intensely held local attachments can outweigh diffuse consumer gains in political balancing.", "Politics thus functions as the arena where values that are difficult to monetize—community, culture, family—are balanced against economic gains.", "Recognize that economic optimality alone is insufficient for politically sustainable policy; policies must gain acceptance among important social and political actors.", "Design compensation or adjustment mechanisms with attention to:", "Accept that democratic politics will produce contested, imperfect trade-offs but provides information about how society values priceless or hard-to-measure goods.", "**Rethinking Economics: A PLACE FOR POLITICS**" ], "related": [ { "title": "Rethinking Economics: A PLACE FOR POLITICS", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2024/03/frieden.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2024/03/frieden.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2024/03/frieden.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden/index.md", "json": "/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden/index.json", "bundleManifest": "/en/publications/fandd/issues/2024/03/a-place-for-politics-jeffry-frieden/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T19:00:13.670Z" }