Exceptional proff only 2

Whither Are We Bound? New Insights on American

Economic Policymaking

Komla D. Dzigbede

This article reviews recent scholarship in American economic policymaking. It focuses on scholarly

work from 2012 to 2015 and considers three main streams of research. The first concerns how, amidst

the lingering effects of the Great Recession, monetary and fiscal policy variables interplay to affect

policy outcomes such as employment and income. The second stream relates to the politics of

regulation and spans several aspects of regulatory governance such as enforcement and compliance,

regulatory arbitrage in financial markets, and the role of U.S. regulatory regime structures as

standards of best practice in global contexts. The third stream of research focuses on the dynamics of

institutional relationships in the policy process and explores how policy narratives influence policy

outcomes, how the media engages and alters political attention, and how interest groups and lobbyists

shape policy decisions. The final section provides directions for future research and assesses the extent

to which these frontier issues in economic research could shape American economic policymaking

going forward.

KEY WORDS: economic policy, institutional dynamics, policy process, regulatory governance

Introduction

Recessions come and go but their effects may linger on and affect economic out-

comes in subsequent years.1 As the U.S. economy continues to grapple with the

residual effects of the Great Recession, scholarship in American economic policy-

making has moved beyond mere postmortem analyses of what caused the economic

downturn (e.g., Stiglitz, 2010; Palley, 2011) and whether policy responses to the crisis

were adequate or justified (e.g., Blinder & Zandi, 2010) to ex-ante discussions of the

mix of policy responses that can contain present and future stresses in the economy

(e.g., Dosi, Fagiolo, Napoletano, Roventini, & Treibich, 2015) and improve economic

welfare. How monetary and fiscal policies should interact to moderate booms and

busts in economic cycles over time has been at the forefront of scholarly discussions.

Regulatory governance is another area of renewed interest among researchers.

Over the years, regulation in U.S. policymaking contexts has received both support

and skepticism. Supporters of regulation have argued that tighter regulatory

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The Policy Studies Journal, Vol. 44, No. S1, 2016

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schemes are required to correct the welfare costs of inefficiencies in the market sys-

tem while skeptics have emphasized how regulatory schemes constrain the level of

competition in the private sector and limit economic growth processes (Vocino,

2003). More recent research has been motivated by the failure of regulatory systems

to effectively counter the range of systemic risks that culminated in the Great Reces-

sion. Scholars have explored the subject of regulatory governance from perspectives

such as regulatory arbitrage (Kroszner & Strahan, 2011) and regulatory policy uncer-

tainty (Nodari, 2014). Also, following the introduction of a range of regulatory initia-

tives during and after the Great Recession, questions remain on the extent to which

emergent perspectives on regulatory governance in the United States serve as stand-

ards of best practice and shape regulatory reform approaches in other countries.

Much research exists on the role of institutions in the policy process. Different

theories and frameworks have explained how institutions support incremental poli-

cymaking (Lindblom, 1959; Schulman, 1975), provide the venues for punctuated pol-

icy changes (Baumgartner & Jones, 1993), and determine the extent to which

members of advocacy coalition groups can have access to policymaking venues and

shape policymaking (Sabatier & Jenkins-Smith, 1988). Indeed, institutions are central

to economic policymaking because they define the rules, norms, and strategies

within which actors make routine policy choices and major constitutional decisions

that affect policy outcomes (Cram, 2005; North, 1990; Ostrom, 2009). Recent research

has built on the theoretical foundation of earlier scholars to investigate further the

dynamics of institutional relationships in the policy process. Scholars have probed

how policy narratives influence policy outcomes, how the media engages and alters

political attention, and how interest groups and lobbyists shape policy decisions.

This article examines recent scholarship in American economic policymaking. It

reviews research on monetary and fiscal policymaking, regulatory governance, and

institutional dynamics in the policymaking process. Studies published in the years

spanning 2012 and 2015 are the main focus of the article. References to earlier studies

provide background and context to the discussion. I ask the following question:

what new insights emerge from the current state of research on American economic

policymaking, and how will these affect policymaking going forward? In the next

sections, I examine research on how monetary-fiscal policy interactions affect eco-

nomic outcomes, review studies on regulatory governance, discuss new insights on

institutional dynamics in the policy process, and outline ways in which these new

insights could shape American economic policymaking in the years ahead.

Monetary-Fiscal Interactions in Economic Policymaking

Renewed focus on the optimal combination of monetary and fiscal policies that

promote economic welfare can be traced to perceived failure of economic policy to

prevent the systemic risks that eventually led to the Great Recession. Scholars have

noted that monetary and fiscal policies became more discretionary and less predict-

able in the years leading up to and during the recession. Monetary policymaking

deviated from its rule-based path as the Federal Reserve held interest rates unusually

low in the years preceding the Recession (Taylor, 2014). The Federal Reserve’s

Dzigbede: American Economic Policymaking S15

deviation from the monetary policy reaction function was in response to deflationary

pressures in the economy. However, rather than bolster economic activity, the

change in stance spurred severe risk-taking, resulted in a housing sector bust, and

brought immense losses to financial institutions (Bordo & Landon-Lane, 2013) which

depressed economic growth and employment further (Taylor, 2014). In the same

vein, fiscal policy during the recession years served to provide a short-term boost to

the economy, instead of promoting a sustained recovery consistent with the size of

government spending in this period (Cogan, Cwik, Taylor, & Wieland, 2010).

Contemporary research on monetary-fiscal policy interaction has emphasized

timing and sequencing as well as market agents’ beliefs and expectations as essential

elements that shape interactions between monetary and fiscal policies to influence

economic welfare. In regard to timing and sequencing, the literature identifies three

potential causes of conflict: first, monetary and fiscal authorities might each react

strongly to a negative economic shock and the combined impact of their policies

may be excessive, resulting in overheating of the economy; second, both authorities

might delay their response to a shock in anticipation of the other authority reacting

to the shock and this would deepen the economic contraction; and third, the timing

mismatch between monetary austerity and fiscal stimulus might result in high rates

of volatility in inflation and output thereby constraining welfare improvement

(Libich & Nguyen, 2015). Judging from the contemporary literature, a desirable

sequence for monetary-fiscal policy interactions is one that promotes fiscal leader-

ship, wherein fiscal policy is determined before monetary policy to achieve both

inflation conservatism and fiscal discipline (Adam & Billi, 2014), or a timing

sequence that allows fiscal policy to accommodate and support changes in monetary

policy over an extended time span (Bianchi & Ilut, 2014).

Market agents’ beliefs and expectations determine whether monetary and fiscal

policies can interact in a manner that results in economic welfare improvement.

Agents’ expectations tend to be less supportive of economic policy if monetary and

fiscal authorities’ interactions generate conflicts and cause suboptimal macroeco-

nomic outcomes. Loss of credibility among market agents weakens the degree to

which policies can be anchored in market expectations and sets off a vicious circle

that worsens macroeconomic outcomes (Libich & Nguyen, 2015). Bianchi (2012) and

Melosi and Bianchi (2013) tested the role of agents’ beliefs across changing

monetary-fiscal policy interaction regimes (active monetary policy combined with

passive fiscal policy; active fiscal policy combined with passive monetary policy; and

active monetary policy combined with passive fiscal policy) in the United States.

Bianchi (2012) found that agents alter their expectations depending on the credibility

of economic policymakers’ responses over time—”decades of lack of fiscal discipline

can easily discourage agents about the possibility of a prompt return to a virtuous

regime, resulting in dramatic changes in the propagation of the shocks through the

economy” (p. 172) Building transparency and accountability into monetary-fiscal

interactions is one way policymakers can guide market agents to connect short-term

policy responses with longer-term economic goals, stabilize agents’ expectations, and

enhance credibility of economic policy (Bernanke, 2014; Florio & Gobbi, 2015).

S16 Policy Studies Journal, 44:S1

Under unconstrained conditions of timing and sequencing, and where policy

credibility helps to anchor market expectations, an appropriate mix of monetary and

fiscal policy is one that combines counter-cyclical fiscal policy with monetary policy

targeting employment. This form of interaction between monetary and fiscal policy

is appropriate for stabilizing the economy during times of economic distress, and its

effects on stabilization become sharper as the level of income inequality increases

(Dosi et al., 2015).

Additionally, central bank independence deepens policy credibility and

improves economic outcomes. This traditional view of the role of central bank inde-

pendence is widely accepted among economists and political scientists (Franzese,

1999) although more recent discussions of the subject (e.g., Fernandez-Albertos, 2015;

Hanretty & Koop, 2012) emphasize the distinction between formal and actual inde-

pendence and note how formal structures that do not translate into actual independ-

ence can alter the effectiveness of the monetary-fiscal policy mix.

Overall, the academic literature is in agreement that monetary or fiscal policy

alone cannot generate the desired linkages in the economy to maximize welfare. On

the monetary policy side, policymakers’ ability to control interest rates is viewed

among scholars as largely exaggerated (Thornton, 2014) and their policy responses

in times of high unemployment and weak economic recovery have been regarded as

markedly passive (Romer & Romer, 2013) with limited effects on welfare. At the fis-

cal policy front, recent evidence has shown that fiscal policy has lost, somewhat, its

capacity to stimulate economic output (Pereira & Lopes, 2014), has only small

impacts on consumption and investments (Peren Arin, Koray, & Spagnolo, 2015),

and can only boost employment when it combines with monetary authorities to pur-

sue a sustainable bond-financed deficit-reduction strategy (Yakita, 2014). Especially

during epochs of severe economic disturbance, which might require unconventional

monetary policy (Gertler & Karadi, 2011; Gertler & Kiyotaki, 2015) and nontrivial

deviations from rule-based fiscal paths, the need for optimal combinations of mone-

tary and fiscal policy to enhance employment and income conditions of citizens can-

not be overemphasized.

Regulatory Governance

Scholars have noted how the failure of regulatory governance systems contrib-

uted to the propagation of systemic risks in financial markets, resulting in the Great

Recession (Levine, 2012). In the aftermath of the recession, the regulatory governance

landscape has witnessed a series of modifications aimed at correcting the ills of the

past and averting future systemic stresses. The Dodd-Frank Wall Street Reform and

Consumer Protection Act of 2010 increased the power of financial sector regulatory

authorities with a view to deepening oversight and minimizing the gaps in regula-

tion. Appropriately, recent studies have refocused on the theme of regulatory gover-

nance and explored a variety of topics, including enforcement and compliance,

regulatory arbitrage, regulatory policy uncertainty, and global governance.

Enforcement of regulations is a critical element in regulatory governance as it

allows for early detection and sanctioning of noncompliant behaviors in the

Dzigbede: American Economic Policymaking S17

economic system (Etienne, 2015). Recent studies have described how political factors

influence enforcement of regulations. Regulatory agencies, whether at the national or

subnational government levels, yield to ideological preferences of their political prin-

cipals and choose which statutes to implement depending on which party is in con-

trol of political institutions (Acs, 2015). Also, the greater the degree of independence

of a regulatory agency, the more likely it is that appointment of agency leadership

will favor individuals that hold the same ideological preferences as the appointing

political principals (Ennser-Jedenastik, 2015). Furthermore, politics remains a crucial

factor in effective regulatory enforcement within and across different tiers of govern-

ment (Gerber & Teske, 2000) as exemplified in state and local governments’ resist-

ance toward federal government regulations and unfunded mandates (Vocino,

2003).

Nevertheless, a threshold may exist beyond which sets of regulatory rules and

their enforcement may yield suboptimal outcomes. An example is the Dodd Frank

Act, which proposed many new rules—numbering more than two hundred—in

addition to various directives for modifying existing regulations (Coates, 2015). Rule

changes proposed in the Act created regulatory policy uncertainty among market

agents and, as Nodari (2014) showed, such uncertainty (measured as a news-based

index that mimics the reaction of credit spreads to regulatory shocks) can have nega-

tive impacts on the real economy.

Compliance, like enforcement, is an important element in regulatory effective-

ness. Regulatory governance embraces a large and diverse audience that includes

clientele groups, policy experts, and ordinary citizens. Therefore, regulatory effec-

tiveness depends not only on regulatory agencies’ enforcement of rules and proce-

dures but also on audience members’ (or market agents’) behaviors toward

agencies—these behaviors effectuate compliance and are a function of audiences’

beliefs about whether agencies can perform tasks effectively (Carpenter, 2010).

A rich literature exists on the features of policy tools that motivate compliance.

Schneider and Ingram (1990), for example, discuss how incentives (pay-offs in the

form of inducements, charges, or sanctions), capacity-building instruments (informa-

tion that enables individuals or groups to make decisions or undertake activities),

and symbolic and hortatory tools (capitalize on people’s beliefs and values or deci-

sion heuristics) all help to explain why target populations react the way they do to

different (regulatory) policy initiatives. In state and local government bond market

contexts, the discourse on compliance has focused on which types of information

disclosure requirements—mandatory versus voluntary—are more effective in bol-

stering market agents’ compliance with regulatory structures (Coffee, 1984; May,

2005). Recent evidence (e.g., Friewald, Jankowitsch, and Subrahmanyam, 2012)

seems to favor voluntary disclosure arrangements.

Regulatory agencies are constantly challenged to keep governance apace with

current trends as markets become increasingly complex and sophisticated financial

instruments proliferate. Amidst these dynamic market conditions, regulatory arbi-

trage remains a potential danger—institutions might attempt to limit the burden of

regulation by engaging in new forms of transactions that are in the “shadows” of

regulatory oversight, “where risks may slowly accumulate like dead wood ready to

S18 Policy Studies Journal, 44:S1

ignite the next wildfire” (Kroszner & Strahan, 2011, p. 243). Strengthening the micro-

structure of governance systems within stable macroeconomic environments will

ensure that regulatory governance remains well functioning and relevant.

Discussions of how U.S. regulatory structures serve as standards of best practice

in other countries are framed around notions of regulatory reform and policy diffu-

sion. Modern regulatory reform began in the United States in the 1970s and, ever

since, has stretched beyond its initial concentration on transportation and public util-

ity sectors to a wider range of sectors and domains (e.g., financial services, health

care, energy, environmental preservation, consumer protection, etc.) and across

national boundaries to other developed nations and developing countries

(Armstrong, Cowan, & Vickers, 1994). Diffusion of regulatory governance standards

across national boundaries has varied greatly in the extent to which new interna-

tional procedures are adopted and embedded within local structures due to tensions

with administrative, institutional, and political conditions in adopting-country sys-

tems (Dubash & Morgan, 2012; Jordana, Levi-Faur, & i Mar�ın, 2011; Thatcher, 2002).

Among developing countries, international financial institutions continue to

exert enormous influence in adoption of best-practice standards (Dubash & Morgan,

2012). These international institutions often bundle reform recommendations with

development assistance facilities. More research is needed to understand the extent

to which regulatory reforms championed by international institutions, and condi-

tioned on best-practice standards in the United States and other developed nations,

fit developing country contexts and deliver desired economic outcomes. At any rate,

Andrews (2012) has shown that the extent to which best practice fits, and is relevant

to, an adopting country’s context determines the extent to which the practice is suc-

cessful in fixing local regulatory lapses.

Institutional Dynamics in the Policy Process

Sabatier (2007) described the policy process as the manner in which myriad

actors conceptualize and present problems needing solutions to government, and the

ways in which governmental institutions formulate alternatives and select policy sol-

utions that are implemented, evaluated, and revised. Institutional actors (e.g., the

president, administrative agencies, legislatures at different tiers of government, and

the courts) as well as noninstitutional actors (e.g., parties, interest groups, political

consultants, think tanks, and the media) play key roles in the policy process (Cahn,

2013). Policy process theories have described different ways in which actors interact

within defined institutional spaces to influence public-policy outcomes.

Within the institutional analysis and development (IAD) theoretic framework,

institutions determine the incentives confronting individual actors and influence

their behavior (Ostrom, 2009). Interactions among actors are at three levels: opera-

tional tier, where actors interact amidst available incentives to generate outcomes;

policy tier, where decision makers repeatedly make policy decisions amidst con-

straints prescribed by collective choice rules to influence outcomes; and constitu-

tional tier, where some actors define eligibility rules and make decisions regarding

who can participate in policymaking. Since interactions among actors are governed

Dzigbede: American Economic Policymaking S19

by well-defined rules and norms, the policymaking process generally favors preser-

vation of the system, until some actors set out to change obsolete institutions and

rules, with the goal of achieving improved policy outcomes (Petridou, 2014).

The punctuated equilibrium theory (PET) hypothesizes that political processes

comprise long periods of stability but occasionally they produce large-scale devia-

tions from past trends (True, Jones, & Baumgartner, 2007). The theory “centers on

the collective allocation of attention to disparate aspects of the policy process and

how shifts in attention can spawn large changes in policymaking” (Jones &

Baumgartner, 2012, p. 17). Modest changes occur when noninstitutional actors (indi-

viduals and interest groups) discuss issues in subsystems (communities of experts)

because parallel or simultaneous processing of many issues limits the extent to

which a small set of issues can gain political attention at the macro-political level

(Congress and the presidency). On the contrary, a major change occurs when an

issue gains enough momentum in the subsystem, many actors from other institu-

tional venues become involved in the issue, parallel processing of the issue at the

subsystem level breaks down, and the issue gains attention of serial decision-making

actors at macro-political institutions (Schlager, 2007). Thus, institutions prescribe the

venues at which individuals and interest groups interact with policymakers and

define what strategies for gaining the attention of policymakers are acceptable.

In the advocacy coalition framework (ACF), interest groups with shared beliefs

interact and form coalitions within the policy subsystem to influence policy (Sabatier

& Jenkins-Smith, 1993). Institutional arrangements circumscribe the extent of open-

ness of the political system within which coalitions operate, determine the degree of

consensus needed in the subsystem for policy change, and define the institutional

position and resources available to coalitions for influencing policy (Sabatier & Wei-

ble, 2007). Policy change occurs when internal competitive forces (e.g., political-

interest and self-interest) within the policy subsystem, or external shocks to the sys-

tem, challenge the policy core beliefs of coalitions and cause the status quo to be

unacceptable, making coalitions receptive to change (Petridou, 2014).

Policy process theories and framework, such as the IAD, PET, and ACF dis-

cussed above, provide insights on the institutional environment within which U.S.

economic policymaking takes place. They highlight the myriad actors involved in

economic policymaking, roles different actors play in policymaking, actors’ strategic

location within institutional spaces to gain access to economic policymakers, and the

mechanisms by which convergence or divergence of actors’ economic policy prefer-

ences occur within and across different actor-groups. These theories, together with

minor modifications to them over time, deepen understanding of contemporary eco-

nomic policy issues, such as institutional conflict and gridlock between Congress

and the presidency in macroeconomic policymaking (Edwards & Wayne, 2013), judi-

cial influence over congressional economic policymaking at the state government

level (Marks, 2015), and the groundswell of interest group activity that culminated in

consumer protection legislation across the nation (Sherraden & Grinstein-Weis,

2015).

Understanding of institutional interactions in policymaking has deepened due to

new insights on how the media engages and alters political attention, and the ways

S20 Policy Studies Journal, 44:S1

in which interest groups, lobbyists, and narratives shape policy decisions. The media

is often described as an agent of change (Donnelly & Hogan, 2012). New media tech-

nologies and information-sharing platforms have enhanced the opportunities for

political communication and altered how publics engage with government in the

policy process (Wasko, 2014). Studies on the role of the media in today’s digital age

find that citizens learn extensively from the media about the performance and integ-

rity of political institutions and the information they acquire becomes a critical factor

for trust formation and political participation in the policy process (Camaj, 2014).

Additionally, the extent to which the media engages the attention of citizens and

causes them to participate in the policy process is mediated by citizens’ emotional

reactions to major actors—e.g., presidential candidates—in the policy process (Nam-

koong, Fung, & Scheufele, 2012) and the extent to which they find media information

to be relevant to their individual and group interests—a case of selective exposure to

politics (Bolsen & Leeper, 2013).

Studies have also compared traditional and nontraditional forms of media

engagement of the public. Compared with traditional or off-line mass media forms

(e.g., newspapers), internet usage among citizens reduces the degree of trust they

have in government and limits the level of their compliance in government policy

spheres; however, this negative effect of the internet can be counteracted by govern-

ment’s engagement with citizens through e-government platforms (Im, Cho, Porum-

bescu, & Park, 2014). Further, studies show that attention to online news during

electoral campaigns predicts interest in the campaign above and beyond that of

newspaper and television attention (Lovejoy, Riffe, & Cheng, 2012). In addition,

social media, more so than traditional media forms, are a strong force for engaging

grassroots support for political parties and their policies. For example, Eom, Puliga,

Smailović, Mozetič, and Caldarelli (2015) assessed the number of tweets of a political

party as a measure of collective attention to the party and found that tweet volume

predicts election outcomes to an extent.

Overall, the manner in which the media engages political attention in the policy

process is a good predictor of issue importance and issue knowledge and affects citi-

zens’ public-policy preferences (Hyun & Moon, 2014). In U.S. economic policymak-

ing contexts, Rose and Baumgartner (2013) have shown how media framing of the

subject of poverty has shifted over the years from discussion of the structural causes

of poverty and inequality to portrayal of the poor as taking advantage of the eco-

nomic system and depiction of social welfare programs as perpetuating a depend-

ency syndrome. They note that government economic policy followed the new shift

in media framing of the poor.

Similar to media framing of economic policy issues, interest group activity,

and lobbying draw attention to issues across multiple economic policy domains

and shape policy decisions. Interest groups pursue the interests of their members

using tactics such as electioneering, lobbying, and litigating. Lobbyists pursue

the agenda of interest groups they represent by locating at different institutional

venues within the policy process, and use their resources, strategic location

within branches of government, and access to policymakers to influence policy

decisions.

Dzigbede: American Economic Policymaking S21

Recent scholarship on interest group and lobbyists’ interactions in the policy pro-

cess have shed more light on interest group mobilization, lobbyists’ agenda develop-

ment, and resource endowment. Policy regime shifts (such as the dominance of

homeland security issues during the years immediately following the September 11,

2001 attacks) cause rapid, but temporary, shifts in the focus of well-organized inter-

est groups, and new interest groups—previously dormant—mobilize soon after the

new policy regime becomes entrenched (LaPira, 2014). Additionally, lobbyists repre-

senting different interest groups may have overlapping agendas, creating opportuni-

ties for information sharing, which can lower search and information costs

associated with a policy issue (Scott, 2013). Furthermore, interest groups’ financial

resources seem to have minimal impacts on their ability to influence policy, even

though resource endowment is linked to specific lobbying strategies that may yield

results for the interest group (McKay, 2012).

Emergence of the narrative policy framework (NPF) in the contemporary lit-

erature on policy process highlights the increasing emphasis on narratives and

their influence on policy. Narratives are stories or scenarios that simplify and

clarify policy situations (Roe, 1992). They are transmitted through policy net-

works and communities. Earlier studies have demonstrated that narratives serve

the interests of policy experts who sustain them (Leach & Mearns, 1996) and that

such stories prescribe policy solutions that may not be applicable in particular

situations. Still, policy narratives play an important role in the policy process

because they are embedded in institutional structures and rest in cultural and

historical antecedents. Shanahan, Jones, McBeth, and Lane (2013) used the NPF

to assess an environmental policy issue (proposal to install wind turbines off the

coast of Massachusetts). Their work lays the groundwork for future studies seek-

ing to understand the extent to which policy narratives influence economic pol-

icy outcomes.

Policy Implications and Directions for Future Research

This review of recent scholarship in U.S. economic policymaking focused on

three themes—macroeconomic policy interactions, regulatory governance, and insti-

tutional dynamics in policymaking. The literature offers new insights on the mix of

monetary and fiscal policies that can enhance welfare and shows economic condi-

tions that are necessary for maximal benefits. Contemporary thought on the subject

supports policy mixes that combine counter-cyclical fiscal policy with monetary pol-

icy targeting economic growth and employment creation, within an environment of

macroeconomic policy credibility. Going forward, macroeconomic decision makers

will be confronted with the task of deepening transparency and accountability of

monetary and fiscal policy processes. Transparency and accountability are essential

for anchoring policies further in market expectations, especially during periods of

economic recovery when expectations are rebounding.

On the subject of regulatory governance, new insights on arbitrage and policy

uncertainty offer a glimpse into the shortcomings of financial market innovation and

multiple regulatory changes. Whether there are still lapses within the current

S22 Policy Studies Journal, 44:S1

regulatory governance framework that permit rent-seeking behavior and arbitrage

opportunities remains to be seen. One way to ensure success is for regulatory agen-

cies in various markets and at different levels of government to create new opportu-

nities for coordination and partnerships. This will encourage compliance and help to

eliminate the potential for fuzzy jurisdictional areas that spark arbitrage behaviors.

Too, growing concern about the many changes in the U.S. regulatory governance

system in recent times has led to calls for the use of cost-benefit analytic tools in

determining whether proposed changes to the system are justified prior to their

implementation (Coates, 2015). On this issue, though, there is still no consensus

among scholars, especially due to the nonquantifiable nature of some regulatory gov-

ernance outcomes.

Recent scholarly exposition on the foundational theories of the policy process

and institutional dynamics inherent in the process shed more light on the influence

of different actors in policymaking. In particular, the expanding role of the media in

engaging public attention portends remarkable innovations in the way economic pol-

icy decisions evolve among issue publics, going forward. The effect of these changes

in such economic policymaking arenas as defense, energy, and climate change are

relevant subjects for further research.

Overall, recent scholarship in American economic policymaking presents

new insights but raises more questions for future research: How should an

appropriate combination of monetary and fiscal policies evolve along different

phases of the business cycle over the long term to ensure maximal welfare out-

comes across generations? What roles do stability or transience of institutions

play in regulatory effectiveness and long-term macroeconomic success? How is

the changing face of the media reshaping the character of citizens’ interactions

with economic policymakers within and across institutional venues, and to what

extent are these new forms of engagement relevant in macroeconomic policy

choices? As the United States continues to recover from the impacts of the Great

Recession, an economic policymaking agenda that draws lessons from the lapses

of past regimes to inform long-term strategies will deliver the greatest good for

present and future generations.

Komla D. Dzigbede is a Carolyn M. Young doctoral fellow in public policy at the

Georgia State University. Previously, he worked as an economist in the research

and financial stability departments of the Central Bank of Ghana. His research

interests span public finance, state and local government financial management,

and international development.

Note

1. The National Bureau of Economic Research (NBER) describes a recession as “a period of falling eco- nomic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales” (NBER, 2010, p. 1). The Great Recession, according to the NBER, lasted 18 months, beginning in December 2007 and end- ing in June 2009. It is the longest recession since World War II.

Dzigbede: American Economic Policymaking S23

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