Category: Economics

Over the past couple of months, I have been working on an essay entitled “Financial Crises and the Politics of Adjustment and Reform.” It is slated to appear in the forthcoming Research Handbook for International Monetary Relations, edited by two members of the IPE@UNC team. The working draft is now available (PDF).

In lieu of the abstract, which is just descriptive, here an excerpt from the conclusion which characterizes the main lessons that I have drawn from this exercise.

There just are not enough country-year observations available for cross-national regressions that investigate the complex, conditional, and endogenous relationships that characterize financial crisis politics. It is striking, in this regard, to observe that most of the standard references on financial crises and post-crisis politics and policy—in economics as well as in political science—are primarily qualitative in orientation (e.g. Gourevitch 1986; Eichengreen 1992; Haggard 2000b; Kindleberger 2000). The same is true of the most important new contributions to understanding the Global Financial Crisis and its political consequences (e.g. Bermeo and Pontusson 2012; Kahler and Lake 2013; Streeck and Schafer 2013). These are works which cannot, by design, test causal claims across time and space. They do, however, combine theory, history, contextual understanding, and frequently statistical data as well to make bounded inferences about the political effects of financial crises, recognizing the inherent complexity and indeterminacy of crisis situations. The result is less a comprehensive and progressive research program where findings build upon one another, and more an increasingly rich understanding of how and when financial crises affect politics.

In a post about 15 months ago about microfoundations in political science, I observed that the term “microfoundations” has no rigorous definition in political science—and moreover, to the extent that a common understanding of microfoundations in political science exists, it is completely different from how economists use the term.

…when political scientists say microfoundations, they often don’t really mean microfoundations. They mean something like individual level data, or careful research designs, or causal mechanisms. They almost certainly don’t mean microfoundations in the sense that economists use the term.

I have always thought that that post should have generated more interest. And in a short new essay (under review and not currently available for public commentary; email me for a copy) I try to make the point a bit more rigorously. But on to today’s post: I have come across what I believe is the first and only formal definition of “microfoundations” by a political scientist writing in a political science journal. Let me quote directly:

A “microfoundation” for a statistical specification is a formal model of the behavior of the political actors under study. The model might emerge from decision theory, game theory, or some other formalism. Then the statistical setup is derived mathematically from the model, with no further ad hoc adjustments.

This is from Chris Achen‘s essay “Toward a New Political Methodology” in the Annual Review of Political Science, 2002 (ungated PDF).

I post this not to endorse this specific definition of microfoundations—after all, these are microfoundations of statistical models, not social phenomena—but rather to highlight two things. First, this definition makes clear that microfoundations are at root theoretical assumptions, not claims that can or should be tested from individual data. Second, Achen’s definition parallels how macroeconomists use the term “microfoundations.”

Once again, this should raise more questions of just what the microfoundational turn in contemporary political science actually means.