Why Waste a Good Crisis? Making an Economic Policy Revolution
Five years on from the onset of the present economic crisis one might expect a policy revolution to be underway. Certainly, that was the result of the crisis set off by the financial crash of 1929, and of the difficult years of the 1970s. Yet so far those hoping for such a revolution continue to wait in vain. In this paper I consider why no paradigm shift has occurred this time around. I begin by discussing Peter A. Hall’s influential 1993 article in Comparative Politics, in which he developed a theoretical model to explain such paradigm shifts. I then apply a refined version of that model to a reconsideration of these two earlier instances of paradigm change. In both cases, the analysis reveals a more complex picture than that allowed for by Hall. These were processes that elapsed over long periods, were contingent in the sense that paradigm shift was the product of several shocks, not one only, and more evolutionary than is often recognised.
Looking at the present crisis, the article emphasises the rapid evolution of the model after 2008 and the attainment of equilibrium, albeit at a sub-optimal level. It concludes by observing that, in both economic and policy terms, there may still be a long way to go before the crisis is resolved, with significant opportunities for new ideas to gain traction.
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