Conflict between the public interest and specialized interests naturally emerge in the design and implementation of public policies. In any policymaking process, political and economic forces are at play in resolving the strategic interactions among various interests. In fact, the interaction between politics and economics is at the heart of public policy making. It is the essence of what was referred to as “political economy” by the founders of the economics profession before economics and political science became separated into two academic disciplines.

This book analyzes the links among political economics, governance structures, and the distribution of political power in economic policy making. The relationship between political power and economic policy is at play at all times in all places. As Bertrand Russell emphasized long ago, “The fundamental concept in social science is power in the same sense in which energy is the fundamental concept in physics.”

The resolution of conflicts is an essential ingredient in the setting of policy instruments. Some instruments can serve to increase the size of the economic pie by attempting to correct for market imperfections, lower transaction costs, effectively regulate externalities, or enhance productivity, while other policy instruments are redistributive, often resulting from the manipulation by powerful interests actively engaged in the pursuit of their own self-interest. The lens on political power provides the foundation for theoretically explaining and empirically quantifying the strategic interactions between the public and specialized interests that ultimately lead to settings on all types of policy instruments.