Thinking about Thinking about Comparative Political Economy: From Macro to Micro and Back

DOI10.1177/0032329218796197
Published date01 March 2019
Date01 March 2019
Subject MatterArticles
https://doi.org/10.1177/0032329218796197
Politics & Society
2019, Vol. 47(1) 23 –54
© The Author(s) 2018
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DOI: 10.1177/0032329218796197
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Article
Thinking about Thinking
about Comparative Political
Economy: From Macro to
Micro and Back
Herman Mark Schwartz
University of Virginia
Bent Sofus Tranøy
Inland Norway University of Applied Sciences and Kristiania University College
Abstract
How and why did comparative political economy (CPE) lose sight of the sources
of growing macroeconomic and political instability, a problem that encompassed
a growing financial bubble and then a crash in the housing market, a period of
sluggish growth that plausibly constitutes secular stagnation, and a crisis of political
legitimacy manifesting itself in the rise of antisystem “populist” parties? A gradual
shift in CPE’s research agenda from macroeconomic to microeconomic concerns,
and from demand-side to supply-side explanations, diminished its ability to
analyze adequately the central economic and political problems of the past twenty
years. This article traces CPE’s evolution through successive “supermodels” that
constituted its core research foci. To understand the current crisis, CPE needs to
revisit and update its original roots in Keynes, macroeconomics, and the demand
side. This shift is already happening at the margins, as CPE scholars struggle to
understand the current crisis.
Keywords
comparative political economy, inflation, corporatism, developmental state, capitalism
Corresponding Author:
Herman Mark Schwartz, Politics Department, University of Virginia, PO Box 400787, Charlottesville, VA
22901-4787, USA.
Email: schwartz@virginia.edu
796197PASXXX10.1177/0032329218796197Politics & SocietySchwartz and Tranøy
research-article2018
24 Politics & Society 47(1)
Scientific analysis is not simply a logically consistent process that starts with some primitive
notions and then adds to the stock in some straight-line fashion. It is not simply progressive
discovery of some objective reality—as is, for example, discovery in the basin of the Congo.
Rather it is an incessant struggle with creations of our own and our predecessors’ minds and
it “progresses,” if at all, in a criss-cross fashion, not as logic, but as the impact of new ideas
or observations or needs, and also as the bents and temperaments of new men, dictate.
—Joseph Schumpeter1
How and why did comparative political economy (CPE) lose sight of the sources of the
growing macroeconomic and political instability marking the past two decades, an insta-
bility that encompassed a growing financial bubble and then a crash in the housing mar-
ket, sluggish growth that plausibly constitutes secular stagnation, and a crisis of political
legitimacy manifesting itself in the rise of antisystem “populist” parties? We argue that
CPE reflected and reacted to changes in the economy by generating a series of economic
governance “supermodels”—stylized accounts of what CPE argued were the optimal
institutional forms and policies for economic governance. Those models typically arose,
like the owl of Minerva, just as their real-world referent reached the dusk of its optimal
performance. The subsequent deterioration of a given supermodel’s performance then
set a series of critiques in motion. Thus, CPE as a body of knowledge traveled down a
quasi-Kuhnian path, in which efforts to account for anomalies generated new research
fields with scope conditions that excluded older knowledge. Over the past five decades,
this loss of knowledge gradually diminished CPE’s ability to analyze adequately the
central economic and political problems that emerged during the past two decades.
First, CPE’s core analytic models gradually shifted from a predominant focus on
how macrosocial actors tamed the “violence of the market” to a focus on the emer-
gence of stable institutional equilibria through the market.2 Second, CPE lost sight of
the role of emotion and legitimacy in politics, as its core point of entry shifted from the
legitimacy of state policies that structured income distribution and the rate of growth
and toward transaction-cost-based analyses of how actors efficiently coordinated
exchanges. Finally, CPE’s attention shifted from a predominantly macro-oriented,
demand-side focus, which included a keen understanding of the fallacy of composition
in the creation of demand, toward a predominantly supply-side focus largely ignoring
the sources of demand. All these shifts were a matter of degree rather than absolute
losses. Indeed, one point of stability was a continuing focus on manufacturing in
CPE’s core models even as other sectors became more important for value creation
and capture in the economy. A second point of stability was a continued focus on
national economies even as globalization, for lack of a better word, occurred, magnify-
ing the fallacies of composition around disinflation and export success. But these
shifts and their related loss of knowledge—which paralleled the economics disci-
pline—gradually blinded CPE to macro-level mechanisms and legitimacy concerns.
CPE’s eventual focus on institutional stability blinded it to the broader instability aris-
ing from flagging demand, volatile and globally integrated housing finance markets,
and declining social legitimacy. These evident failures—CPE’s inability to produce
timely advice about stabilizing the economy—have produced a return to some of the
concerns Andrew Shonfield first raised at the dawn of modern CPE.
Schwartz and Tranøy 25
These three shifts occurred as both continuous and discrete processes. The discrete
changes are best seen in the succession of national institutional configurations that CPE
identified as ideal models or, as we will call them, supermodels, for economic gover-
nance. Here we focus on American Fordism, Swedish and German corporatism, Japanese
developmental statism, and the two complementary worlds of liberal and coordinated
market economies in varieties of capitalism (VoC). Each was briefly the fashionable insti-
tutional supermodel. Each displaced the prior model, albeit with some overlap, although
the transition out of VoC remains unclear. Each supermodel linked specific institutional
configurations to specific desirable economic outcomes. In that sense, each supermodel
was both a normative ideal and an idealized model—a goal to be pursued and a stylized
model for explaining how things worked, or did not work, in modern economies.
Why did CPE lose sight of growing macroeconomic and political instability? First,
something like Kuhnian science occurred.3 As the real world changed, political econo-
mists sought to explain anomalies in their understanding of that world. This process of
addressing anomalies produced new knowledge. Yet, as Kuhn argues, all new
approaches involve some loss of old knowledge. The analytic shift from legitimacy to
transaction costs and from the demand side to the supply side drove the gradual loss of
established knowledge about Keynes’s fallacy of composition4 and about the social
purpose of the economy. The fallacy of composition and a sense of the social and
moral underpinnings for the economy were critical components of CPE in the 1950s
and 1960s. As S.M. Amadae has shown, one factor driving the shifts we identify stem
from a shift in public funding toward approaches that shaped knowledge in directions
that accelerated these losses.5 Restoring lost components requires new models. CPE
scholars confronting the current crisis are already generating some provisional shifts
back toward the demand side and the macroeconomy.
Conceptually, none of these shifts qualifies as a full-fledged Kuhnian paradigm
shift. A scholar of the sociology of science might correctly say that CPE by itself is the
right level of abstraction at which to apply the paradigm label. Authoritative reviews
of CPE treat it as a paradigm with three different analytic approaches.6 On this view,
the shifts between supermodels look like intraparadigmatic change. However, in the
shift from one supermodel to the next, scholars converged on a set of questions, used
shared assumptions to answer those questions, and then gradually shifted to a new set
of questions, assumptions, and answers to deal with accumulating anomalies. In
important respects, this pattern reflects the kind of social construction and evolution of
knowledge that Kuhn analyzed, albeit at a lower level of abstraction. So we will use
Kuhn metaphorically to capture the academic process in which the CPE community
shifted from one supermodel to another.7
Second, in the nonacademic world, supermodels are part of larger debates informing
political positions in struggles over public policy. Space limits prevent a full consider-
ation of the degree to which these ideas generate endogenous sources of decay in that
model.8 Actors in the political economy strive to imitate whatever is the socially accepted
best practice for policy and behavior. They do so by emulating the shared understanding
of those policies and behaviors, which may well be only partially accurate explanations.
In each supermodel’s real-world referent, initial success rested on the presence of some

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