Chapter
Are There Clear Goals and Optimal Choices for Policy?
Does the Economy Regulate Itself, or Does It Need Guidance?
Structure, Outcomes, and Instruments
What Motivates Public Officials?
The Values and Wisdom of Voters
Accountability and Independence
The Meaning of Politics and the Political
Images of the Democratic Process
The Democratic Process as Optimizing
The Democratic Process as Pathological
The Liberal Interpretation of Voting
How and Why the United States Is a Democracy
The Argument of this book
2 Macroeconomic Theories and Their Political Implications
Political Economics and Economic Theory: Three Questions
Does the Economy Regulate Itself?
What Role Does the Theory Imply for Public Officials?
What Are the Risks of Mismanagement due to Political Incentives?
The Theory of Economic Policy
Introducing the Time-Consistency Problem
Real Business Cycles and New Keynesian Economics
Animal Spirits and Behavioral Economics
The Politics of Macroeconomic Theory
Part Two Models of Macroeconomic Politics in a Democracy
3 Models of Accountability and Opportunism: The Electoral Cycle
Passive Voters and Casually Opportunistic Politicians
Passive Voters and Maximizing Opportunistic Politicians
Sophisticated Citizens as Economic Agents and as Voters
Rational Expectations Models of Political Manipulation: Raising the Question of Competence
The Possibility That Cycles Might Be Induced by Private Behavior
A Brief Look at Some Empirical Evidence
4 Models of Choice: Partisanship
From Electoral Cycle to Partisanship
Sources of Partisan Differences
A Basic Model: Party Differences on a Stable Menu of Choices
The Issue of Compatibility with Economic Theory
Strategic Considerations and the Need for a Theory of Change
Party Differences in a World without a Stable Phillips Curve
The Idea of a Natural Rate of Unemployment
A Welfare Function for a Natural Rate World
Partisan Differences in a Natural Rate World
Uncertainty and “Characteristic Mistakes”
The Electoral Cycle as an Artifact of Republicans Following Democratic “Mistakes”
Studies of Partisanship Embedded in Models of the Economy
Conditional Partisanship and Secondary Partisanship
Party Differences as Secondary Consequences
Reversibility and Limiting the Choices of Successors
Dimensions of Choice in a World of Asymmetric Information
Costs of Democracy in Partisan Models
Congruence between Partisan Alternatives and Economic Institutions
5 Unintended Consequences, Moral Hazard, and Time-Consistency
Democratic Institutions and Fiscal Problems before the Financial Crisis
Electoral Politics and Deficit Spending
Democratic Institutions and Processes and the Emergence of the Financial Crisis
Democracy and Financial Crises in General
Moral Hazard and Democracy
Housing Policy in the United States: Unintended Consequences of Good Intentions
Links to Democratic Institutions
The Failure to See Danger Signs Is Human Nature
Democratic Institutions and Processes and the Response to the Financial Crisis
The Time-Consistency Problem
Reforms That Would Minimize Vulnerability to Comparable Crises in the Future
Part Three The Sources and Authority of Macroeconomic Goals
6 The Authority of Macroeconomic Goals
Official Definitions of National Goals
Goals as Understood in Economic Analysis: Outcomes
Income, Output, and Consumption Growth
Inflation and Price Stability
High, Very High, and Hyperinflation
Goals as Understood in Economic Analysis: Intermediate Targets
The Nature of Goals in a System of Democratic Accountability
7 Voters, Elections, Accountability, and Choice
The Heavy Burden of the Simple Act of Voting
Retrospective and Prospective Voting
Evidence of Retrospective Judgments
More Refined Inferences of Voter Preferences
Inferring Incentives for Manipulation by Vote-Motivated Politicians
“Reagan Proved That Deficits Don’t Matter” (for Elections)
Party Identity and Policy Voting
Retrospective Voting and Innovation in Economic Policy
Campaigns, Incentives, and Accountability
Part Four Institutions and Processes
8 Rules, Discretion, and Accountability in the Monetary Policy Process
Rules, Discretion, and Stabilization Policy
Institutions and Issues in Monetary Policy
The Backing of the Currency
The Existence of Central Banks
A Lender of Last Resort Function
The Independence and Decision Procedures of Central Banks
The Motivations of Monetary Authorities
The Targets of Monetary Policy
The Federal Reserve System
Informal Institutions: Patterns of Discretionary Monetary Policy Making
Volcker’s Monetary Targeting
9 Rules, Discretion, and Accountability in the Fiscal Policy Process
Discretion, Automatic Policy, and Rules in the Policy Process
Procedural “Justice” and Legitimation by Process
Can the Means Justify the Ends?
Constitutional Institutions of Fiscal Policy
The Separation of Powers and Countercyclical Fiscal Programs
Divided Government and Deficits
The Constitutional Status of the Income Tax
Discretion, Rules, and Accountability
Constitutional Budget Rules
Legislated Institutions of Fiscal Policy
Institutions of Centralization and Coordination
Entitlements and Indexation
Institutions of Precommitment
Informal Institutions: Patterns of Discretionary Fiscal Policy Making
Historically Defined Regimes
Characterizing Fiscal Policy since the New Deal
Econometric Studies of Budgeting Regimes
Accountability, Rules, Discretion, and the Political Process
10 The Costs and Risks of Democracy
Democratic Politics and Economic Method
Costs, Risks, and Pathologies
Institutional Alternatives
Economic Politics in the United States
：The Costs and Risks of Democracy
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