Worlds Apart

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Bibliographic details

• Authors: Alan Blinder
• Published: March 3, 2026

Overview

• The chronic clash between sound economics and good politics often blocks better policy.
• The chasm is wide and won’t be fully bridged, but it can be shrunk with effort and goodwill.
• The piece draws on a past lecture to the American Academy of Political and Social Science.

The divide between economics and politics

• Economists and politicos hail from different civilizations: they speak different languages, define success differently, have dramatically different time horizons, and employ different logic.
• Common perception that economists have enormous influence on public policy is disputed; in truth, they don’t.
• The author previously argued, seven years ago, that economic policymaking often adheres to the Lamppost Theory: Politicians use economics the way a drunk uses a lamppost—for support, not illumination.

Political logic (illustrative arithmetic example)

• Example setup:
  • A tax break yields $1 million in gains for each of 10 people.
  • The tax break costs 20 million people $1 apiece.
• Implications:
  • Economic logic counts this as bad policy.
  • Political logic values the concentrated, obvious gains for the 10 winners more than the diffuse, barely noticed losses for 20 million.
  • Politicians gain support and campaign contributions from the beneficiaries; only highly principled politicians would resist.
• Conclusion:
  • Economic and political logic often point in opposite directions; improving politicians’ understanding of economics would not by itself resolve the divergence.

Narrowing the gap: a suggestion for politicos

• Political advisers often have extremely short time horizons—focused on the next opinion poll or the next tweet.
• A US president’s four-year term is long enough for major effects of most economic policies to be felt.
• Policy window:
  • Sound economic policies enacted in the president’s first year or two are likely to show major benefits before the next presidential election.
  • 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 major initiatives harder to push through Congress.
• Recommendation:
  • Persuade politicians that longer-term habits can be politically productive because good economics can also be good politics within the initial 12–18 month policy window of a presidency.

Narrowing the gap: two suggestions for economists

• High-level summary:
  • Economists must change more than politicians; two specific changes are proposed.
• First suggestion — pay attention to transition costs and shorter horizons:
  • Economists typically focus on “equilibrium” or “steady-state” effects; these questions are often close to irrelevant in politics because people live through transitions.
  • Economists often brush off “transition costs” as fleeting; they should not.
  • Trade example:
  • David Ricardo taught over 200 years ago that the free-trade equilibrium is better for society as a whole than the equilibrium with trade protection.
  • Adjustment to the superior free-trade equilibrium may be lengthy and painful: job losses, reduced incomes for some, decimated communities.
  • Politicians live in the real world of ever-present transition costs and may not be in office long enough to enjoy equilibrium benefits.
  • Recommendation:
  • Economists should spend a lot more time and effort thinking about transition costs and how to mitigate them, and think more about what happens before steady-state effects arrive.
• Second suggestion — pay more attention to fairness as well as efficiency:
  • In politics, perceived fairness almost always trumps efficiency; politicos understand that, which helps explain manifest inefficiencies in policy.
  • Economists traditionally prioritize efficiency because greater efficiency enlarges the economic pie.
  • Recommendation:
  • Temper the worship of efficiency with more respect for political feasibility, which often hinges on perceived fairness.
  • Example: Debates over the tax code are dominated by fairness considerations rather than economists’ theory of optimal taxation, contributing to current tax complexity.
• Practical stance for economists interested in policy:
  • Don’t abandon efficiency; but be prepared to “nibble at the edges” below the political headline level to reduce inefficiencies.
  • Accept that in practice one may need to settle for the theory of the third or fourth best.

Key takeaways

• The gap between economic reasoning and political logic is structural and persistent, but not insurmountable.
• Effective strategies include:
  • For politicos: exploit the 12–18 month policy window in a presidency to align economic benefits with electoral timelines.
  • For economists: focus on transition costs, mitigation strategies, and perceived fairness to improve political feasibility of sound policies.
• Practical policymaking requires balancing efficiency with fairness and realistic time horizons.

Alan Blinder, "Worlds Apart", F&D Magazine.

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