Torben Iversen and David Soskice - Harvard University.pdfVIP

Annu. Rev. Polit. Sci. 2006. 9:425–53 doi: 10.1146/annurev.polisci.9.072004.085858 c Copyright 2006 by Annual Reviews. All rights reserved First published online as a Review in Advance on Mar. 1, 2006 NEW MACROECONOMICS AND POLITICAL SCIENCE Torben Iversen1 and David Soskice2 1Department of Government, Harvard University, Cambridge, Massachusetts 02138; email: iversen@ 2Department of Political Science, Duke University, Durham, North Carolina 27708; email: soskice@ Key Words economic policy, political business cycles, unemployment, inflation, democratic governments ■ Abstract We review the use of macroeconomics in political science over the past 40 years. The field has been dominated by new classical theory, which leaves little room for economic policy and focuses attention on what democratic governments can do wrong in the short term. The resulting literatures on political business cycles and central bank independence are large and sophisticated, but they fail, we argue, to account for most of the observed variance in economic policies and outcomes. In the past decade, mainstream macroeconomics has moved away from new classical approaches toward New Keynesian theories with greater scope for macroeconomic policy. These new approaches, with little impact so far in political science, are reviewed and their implications drawn out. Instead of explaining short-sighted government behavior in an economy with little scope for economic policy, the key question for political science