Monetary and exchange rate policies are among the most important areas of government regulation of the economy, but scholars have only recently begun to study the political determinants of these policies. Given that episodes of monetary instability over the past several decades, particularly in the developing world, have frequently been blamed on flawed policies, a better understanding of these determinants is a key concern for scholars and policymakers. This dissertation argues that conventional theories that emphasize interest group politics or electoral incentives are insufficient to account for variations across countries and over time in these policy outcomes. Instead, it is argued that the dynamics of competition among economic experts are a crucial determinant of policies. Drawing on recent developments in science and technology studies and sociological field theory, a framework is developed for analyzing processes of competition and learning among experts. This framework is applied to changes in monetary and exchange rate policy in Mexico and Argentina since the early 1980?s. Data include interviews with key informants, archival evidence, and a new database consisting of observations of the educational background and career trajectories of high-ranking officials in the central banks and finance ministries of these two countries. This study will inform recent debates in the science and technology studies literature about the nature of expertise and its relation to democracy and the role of economic science in shaping the economy. Findings will also be used to draw conclusions about the quality of expert advice and the design of monetary institutions.
At a time of severe economic strain caused by the recent global financial crisis, an urgent task for the social sciences is a better understanding of the public policies which may permit governments to anticipate, avoid and take action to mitigate financial and monetary turmoil. In most contemporary societies, these tasks of economic analysis and policy decision-making are delegated in large part to specialized government agencies such as central banks and finance departments. The contribution of these policy organizations relies, to a significant degree, on a staff of highly trained bureaucrats, often with a graduate education and research background in economics. For example, economists such as current Federal Reserve chairman Ben Bernanke have an important role in shaping current monetary and financial policies in the United States. As a result, the economics profession has come to play an increasing prominent public role in contemporary democracies. The growing public role of economic experts raises several natural questions. First, how much influence do such experts in fact have relative to other political forces, such as elected politicians and lobbyists? Second, does the current state of economic knowledge provide the tools necessary to anticipate, avoid and mitigate crises? Does current economic knowledge rest on a firm scientific basis? Third, what is the best way to incorporate economic knowledge into the policy process, and can current institutional arrangements be improved upon? Many social scientists (including economists), journalists and other public figures have posed these questions in recent years. In order to address these questions, this research has studied two countries with a history of monetary and financial turmoil, Mexico and Argentina, since 1982. Both countries experienced severe economic stress during this period, including inflation in the 1980s and financial crises in the 1990s and early 2000s. During the last decade, Mexico has enjoyed relative monetary and financial stability (but low economic growth), while Argentina has isolated itself from the global financial system and experienced increasing inflation (while paradoxically seeing relatively fast economic growth). Thus, comparison of these two countries reveals both similarities and contrasts that provides a valuable source of historical data. In particular, because financial crises are relatively rare events, studying the crises in these two countries provides an important lens with which to understand current events. While data analysis and preparation of publications is still underway, the research has resulted in two major findings to date. First, in both countries, professional economists played a major role in shaping monetary and financial policies, but the way in which experts engaged in public policy was significantly different in the two countries. In Mexico, economists within the government were able to maintain a consensus over policies, even when this consensus turned out to be mistaken – as it appears to have been prior to the country’s financial crisis in 1994. In contrast, in Argentine government economists frequently conflicted over policy decisions. Using new data sources and techniques for analyzing social network data, this research demonstrates how these different patterns originate in the social structure of the national fields of economic policy expertise, which are in turn explained by the institutions and mechanisms used by governments to recruit economic experts. Second, the research shows how the discipline of monetary economics has evolved over the past several decades, revealing the frequent changes and apparent fashions in the prevailing wisdom within the discipline. For example, during the 1990s many economists advocated the adoption of firmly fixed exchange rate regimes – such as existed in Argentina – but support fell for such arrangements following the many financial crises of the 1990s. In this way, this research reveals that while the discipline of economics does offer important knowledge about monetary and financial issues, it has not yet reached a robust scientific consensus on all issues.
