Policy inertia through educational elites

Some economists speak sometimes a language that is even difficult to comprehend by other economists. This happens in particular when they draw from other social sciences. An expert in this is Gilles Saint-Paul, whose major research agenda is to understand why France has chosen not to adhere to free market principles despite repeated evidence it could do better with less government intervention.

In his latest piece, he suggests that there is very strong institutional inertia that is fed by the institution itself. I see two major points in his discourse. The first is that there is an educational elite that is biased in some way and makes it thus impossible for the general public to really understand what is going on, "learn the parameters of the model." And in France this elite is anti free market. The second is that because policy choices are consistently made with a government intervention bias, people never have the opportunity to learn how good free markets actually are.

Saint-Paul certainly has a point with cultural elites being very influential in France. Where else can philosophers become TV stars? It is also true that this elite lives in some sort of utopia where the world can be perfected by intervention (and unlimited budgets). This borders sometimes on the naïveté elementary school kids display when they feel they solved the Darfur problem by writing a letter to the President (my kid did). It is also true that the French are repeatedly shown the problems of free capitalism, like in the US. And the exact reverse happens in the US, where free markets are taught and thought to be perfect, and any government intervention is evil.

Not that free markets or government control are perfect, but, as so often, there is a middle ground. And with Sarkozy, the French are getting more of a taste of free markets. And on the other side of the pond, Obama is putting options on the table that should alleviate some of the ill effects of free markets. Maybe we are now seeing this inertia crumbling.