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What can Okun teach Polanyi?: efficiency, regulation and equality in the OECD

Hopkin, Jonathan and Blyth, Mark (2011) What can Okun teach Polanyi?: efficiency, regulation and equality in the OECD. Review of International Political Economy, 19 (1). pp. 1-33. ISSN 0969-2290

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Abstract

Arthur Okun famously argued that “effciency is bought at the cost of inequalities in income and wealth”. Okun's trade-off represents the antithesis to Karl Polanyi's view of the relationship that the more embedded markets are in society, the better the social and economic outcomes they produce. This paper refines both these views. We argue that not all forms of market embeddedness are created equal, and that the relationship between equality and efficiency can be both positive and negative. We show this by examining how different ways of embedding economic activity in society through market regulation produce different combinations of efficiency and equality. We identify empirically three broad patterns: market liberal regulatory frameworks that promote competitive markets without decommodifying institutions; embedded liberal regulations that allow markets to work efficiently, but within the framework of decommodification and equality; and embedded illiberalism, where regulations hinder markets in favor of powerful social groups and where decommodification undermines both efficiency and equality. Okun's trade-off emerges as a special case limited to the English-speaking democracies: other OECD countries tend to exhibit either efficiency and equality together, or inefficiency and inequality together. These findings suggest a corrective to both nave market liberal views of the incompatibility of efficiency and equality, but also to the more sophisticated Varieties of Capitalism framework, which pays insufficient attention to the ways in which markets can be embedded in stable but apparently dysfunctional institutional arrangements.

Item Type: Article
Official URL: http://www.tandf.co.uk/journals/titles/09692290.as...
Additional Information: © 2011 Taylor & Francis
Library of Congress subject classification: H Social Sciences > HB Economic Theory
J Political Science > JA Political science (General)
Journal of Economic Literature Classification System: B - Schools of Economic Thought and Methodology > B3 - History of Thought: Individuals > B30 - General
Sets: Departments > Government
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 13 Jan 2012 12:15
URL: http://eprints.lse.ac.uk/41443/

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