The mobility of economists and the diffusion of policy ideas: The influence of economics on national policies

Economic policies are innovations that have important effects on countries and their social welfare. Far from being simply technical in nature, such policies are often ideological innovations. This paper examines three economic policy innovations (privatization, central bank independence, and pension reform) and shows how the diffusion of these policies depended not only upon the mobility of American-trained Ph.D. economists to adopting countries, but also the state of agreement among economists on the value of these policy innovations. By estimating hazard models for adoption times, the effects of mobility and policy agreement are shown to explain the adoption patterns. The implications of this analysis are to treat the creation and diffusion of economic policies as innovations that are subject to trial and error revision as well as to the changing consensus within an academic community.

► A statistical analysis of the adoption of privatization and central bank independence by national governments indicates that the presence of American-trained Ph.D. economists have a significant influence on the decision to implement these policies.
► However, the timing of the adoption suggests that adoption is sensitive to the technical debate within economic communities and the degree of consensus regarding the efficacy of these programs. These results are triangulated with a study on pension fund reform to show that other actors, e.g. the World Bank, may matter and prevail even though economists may disagree.
► The discovery of an economic idea and the introduction of an economic policy parallels the distinction between invention and innovation in the technology literature. Economic ideas become policy innovations upon their adoption as policy programs, but often as much for their ideological content as for their technical merits.
► Contrary to many opinions on economists and their influence, the results of this paper suggest that economics, like most epistemic academic communities, is marked by debate that can reverse the earlier consensus, with effects of this debate echoed in the adoption decisions by political actors.