Activism & Policy

• Protests are done (to increase utility) because of recognition, altruism, warm-glow feeling of giving or avoidance of guilt
• Politics has largely been ignored in economic analysis for 3 main reasons: efficient policy gets people elected so politicians always maximise welfare, even if welfare isn’t maximised politics is a random unsystematic factor where people can make mistakes, and “good economics is good politics”. (Acemoglu & Robinson, 2013)
• Systematic forces can turn good economics into bad politics, failing to achieve economic prosperity. There is a conflict between the two as political equilibrium relies on market failure. (Acemoglu & Robinson, 2013)
• Two-period model - the first period has a “window of policy opportunity” and in the second period, policies are determined through the political equilibrium. (Acemoglu & Robinson, 2013)
• Policy choices in the first period often strengthen some groups and weaken others, affecting the political equilibrium in the second period, even if there were no ulterior motives in doing so.
• A first-period policy of income redistribution to reduce inequality by reducing the power of unions so that unionised workers and non-unionised workers earn similar wages is implemented. In the second period, the balance of power tilts towards large employers, rather than workers, causing market failure and a political equilibrium that lies with big firms rather than ordinary workers.
• In Russia, a first-period policy of privatisation to increase economic efficiency was seen as desirable in the 1990s. Yeltsin brought about market-oriented reform but the redistribution of public sector services into private hands only led to the rise of the oligarchs.
• Following Russia's privatisation policies, the second period saw worsening economic circumstances as the privatised institutions sought to make profits for the oligarchs, politicising them and ultimately leading to the rise and maintenance of Putin’s authoritarian regime. Inequality rose significantly and no meaningful economic reform was implemented since.