Economic Models and Policy Advice: Theory Choice or Moral Choice?

Abstract

The ArgumentThis paper examines the interaction between economic models and policy advice through a case study of the U.K. government's Panel of Independent Forecasters. The Panel, which met for the first time in February 1993, was part of the government's response to the policy vacuum created by its departure from the European Exchange Rate Mechanism. The paper focuses on the policy recommendations made by the Panel and their foundation in economic models. It is argued that, because of their ambiguity, economic models do not provide an “objective” basis for policy making. Rather, they provide a level epistemological basis for debating the various social, political, and moral theories that can be used to frame economic policy. The paper concludes that although economic models often serve to depoliticize economic issues, they also have the potential to do exactly the opposite — namely, repoliticize them by connecting economics to wider social and moral debates.