Power and the Ascendance of New Economic Policy Ideas: Lessons from the 1980s Crisis in Israel

Abstract

Recent explanations of transformations of macroeconomic policy under crisis conditions spotlight the intrinsic properties of ideas and the persuasiveness with which they are marketed. Bridging the divide between power and discourse approaches, this article reveals the causal role played by the power resources of expert ideational entrepreneurs, conditional on the political conjuncture in which they operate. The authors exploit a fortuitous natural experiment from the early 1980s, when the Israeli economy spiraled into hyperinflation. Two similar proposals for economic stabilization and reform were offered by different teams of economists, less than two years apart. While the government rejected the dollarization plan, its authorization of the stabilization plan inaugurated a new political-economic regime. This case, in which similar programs were advocated by different ideational entrepreneurs in a largely stable institutional and economic context, makes it possible to pinpoint why radically new ideas succeed or fail. Previously underutilized analytical tools are employed to conceptualize the power of idea carriers, at both the individual and the group level.