A theory of economic policy lock-in and lock-out via hysteresis: rethinking economists’ approach to economic policy
Year: 2017
Type: article
Abstract: This paper uses hysteresis to develop the concept of policy lock-in and lock-out. Policy changes may near-irrevocably change the economy’s structure, thereby changing the distribution of wealth, income and power. That may lock-in policy by changing the political equilibrium. Exit costs that block policy reversals also cause lock-in. Conventional thinking treats policy as a dial which is adjusted according to the economy’s state. Policy lock-in questions the dial formulation and raises new issues for optimal policy design. It also offers insights into economic and political crisis theory. Policy lock-in is illustrated with examples that include tax policy, government spending, the euro, globalization, and the neoliberal policy experiment.
Source: Economics
Author: Thomas Palley
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $1,187
OpenAlex ID: W2589533059