Ideas and Economic Crises

_On Matthias Matthijs’ Ideas and Economic Crises in Britain from Attlee to Blair_

Under what circumstances, according to Matthijs, are real paradigm shifts in economic policymaking more likely to happen?

As should be the case, social science has begun to adopt terminology and otherwise learn from the life sciences. In recent years ‘isomorphic mimicry’, a term pulled from evolutionary biology, has become a vogue descriptor of countries that adopt the tangible institutional entrapments of other more successful countries (a cheap way of ‘getting to Denmark,’ a term from Francis Fukuyama). Similarly, Matthijs, in his book ‘Ideas and Economic Crises in Britain from Attlee to Blair (1945-2005), pulls from evolutionary science in labelling his theory of institutional change ‘punctuated evolution.’ In evolutionary science, an ongoing debate exists between those who believe in gradual phylogenetic evolution and those who believe in bursts of rapid, punctuated equilibrium changes (this debate has been whimsically framed as ‘evolution by creeps vs evolution by jerks’). Analogously, Matthijs, in adapting this terminology to social scientific analysis of institutions, attempts to synthesize the historical and ideational forms of institutional evolution. The result is a theoretical framework incorporating and blending the slow and steady concepts of path dependency and institutional lock in with analysis of critical junctures occasioned by crises and their concomitant ideational influences.

Matthijs’ book contains six propositions that provide a systematic framework with which to anticipate and understand crises and paradigmatic institutional changes to economic policy. In short, and put all together, Matthijs anticipates paradigm shifts in economic policy making when three boxes are checked: 1) a major crisis occurs, 2) policy entrepreneurs are ready and active, and 3) those entrepreneurs are armed with a convincing, and sellable, ideational narrative. But, as Matthijs acknowledges, crises are rare and institutions are generally characterized by a slower form of path dependent evolution. Indeed, in evolutionary science, this gradualism has generally been accepted as the normative case. Yet, as also with evolutionary sciences, when a calamity such as a sudden drought strikes, you quickly see who has been swimming naked (to borrow a phrase), as the least fit / robust creatures are quickly pared away and a radical, punctuated equilibrium is reached. So too with institutions. Crises lay bare the deficiencies that rack our man-made edifices and provide opportunity for an entrepreneur to sell the public on a new idea for institutional change. If successful, the policy entrepreneur could achieve a rapid change in the institutional set-up: a punctuated evolution. Here too, though, Matthijs ingratiates the punctuated view of evolution with the gradualist view, insofar as he believes that ideational change, at first rapid, can itself become gradual, path-dependent, and self-reinforcing. At least until the next crisis lays bare the contradictions and inherent problems with that new idea.

One of the undergirding aspects of crisis narration is the idea that a crisis is itself largely a social construction. Indeed, as many people’s lived experience can attest, it is often not apparent when we are in a crisis. And while some may feel we are in a crisis, others may not, or may have disparate feelings about the degree and scope of the crisis. Policy entrepreneurs thus play a crucial role in creating the first order belief that there is in fact a crisis. Take the current American election cycle. Donald Trump rode to power via a rhetorical stance that painted America as a country in crisis, at risk of losing its greatness. This narrative sold well to particular subgroups in the US (laid off manufacturers in the rust belt, for example), and not so well to others (coastal elites, for example). Similarly, there is a case to be made that Blair’s New Labor consensus, formed after the Thatcher and Major neoliberal revolution in Britain, not only failed to craft a compelling crisis narrative, but perhaps more fundamentally failed to convince people that there was in fact a crisis worth responding to (or, perhaps, the more tepid reality of the situation constrained the crisis narrative).

One of the great ironies of scholarship, as Matthjis points out, is that although scholars are liable to spend years thinking up abstract concepts, theories, and ideas, they all-too-often fail to investigate how those ideas fair empirically. This lacuna may give rise to their inability to appreciate the concrete role of ideational influence in institutional change. Contrary to the view that competition in the public arena of free speech discourse is liable to see the ‘best’ or ‘better’ idea ultimately garner influence, Matthijs wisely acknowledges that the ideas that become most influential may not be those that are objectively most correct, but rather those that have been packaged the best, or even those that just happened to be sold at the right place and at the right time (the rise of Donald Trump and the increasing salience of Russian disinformation efforts in the US has made this point abundantly clear as of late). Of course ideas cannot be wholly disconnected from reality, they must pass a ‘smell test,’ but beyond this policy entrepreneurs have substantial leeway to market and sell their ideas, and those who understand human nature and the science of marketing may fare the best. And, importantly, when a skilled entrepreneur encounters a major crisis, he or she may be capable of enacting major institutional change in a way that is not possible during non-crisis periods. When everything is smooth sailing, why would anyone want to change course? But if wild waves start rocking your boat, someone tells you a massive storm is imminent, and promises that if you mutiny against the captain, change course and tack to starboard you’ll all be back to smooth sailing in no time, you might just listen.

In arriving at his updated institutionalist framework, Matthijs adroitly characterizes the strengths and weaknesses of the other two major theoretical schools on institutional change. Structuralist or materialist thought, which places institutional change within the broader context of global changes, inadequately fails to account for the lack of convergence amongst countries economic policies, while coalition / interest group analysis, which analyzes the evolving balance of power of competing groups, suffers from deficient incorporation of agency and a failure to explicate how groups ultimately come about knowing what their interests are. Institutionalist thought, meanwhile, “tends to focus on the policymaking process rather than on structural pressures, exogenous shocks, or alliance formation.” In this way, it too often fails to account for the rapid, paradigmatic change that we have occasionally seen throughout history (the French Revolution, the Russian Revolution, etc.). But by marrying the historical and ideational schools of institutionalist thought, Matthijs profits from the broad explanatory power of institutionalist ideas, while using his punctuated evolution theory (and the idea of crisis narration) to fill in institutionalist deficiencies in explaining rapid and radical changes.