The Policy Consensus Ruling European Political Economy: The Political Attractions of Discredited Economics

Since the Great Recession in 2008 academic economics has come under heavy criticism. But a straightforward alternative is not in sight either. We analyse in this article how the major flaws of applied economics are the mirror image of its attractions to policymakers, mainstream political parties and reform-minded administrations. We first assess what the consensus until recently has been and how it could have been implicated in the crisis. Secondly, we argue, following Hall, that the policy consensus continues to persist because it is politically attractive. The article ends with observations of how the management of the Euro area crisis still shows the attractiveness of the consensus.

Introduce greater pluralism in advisory bodies on economic policy to include civil society organizations, such as trade unions, and consumer organizations as well as academic disciplines other than economics.
Review compensation policy for representatives on advisory committees to create a level playing field for experts from civil society organizations and independent consultants with financial sector lobbyists.
Support and back up critical voices in the financial industry and in regulatory bodies against those who defend regulatory neglect and the privilege of rent-seeking for the financial industry.