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Hard Heads, Soft Hearts: Tough-Minded Economics for a Just Society. By Alan S. Blinder. New York: Addison-Wesley. Inc., 1987. Pp. xi. 236. $17.95.
Professor Blinder has written a book that will be widely read and enjoyed. His lucid writing makes complex economic arguments understandable to a broad audience, and his thesis is one that will be embraced almost universally. The thesis is that enormous potential exists for improving economic policy by marrying the hard-headed economic approach to soft-hearted social objectives. Unfortunately, such a marriage requires overcoming certain perversities in the political process, perversities of which Blinder seems to be fully aware. There are reasons for believing, however, that the political perversities discussed by Blinder are worse than he realizes. And because of these perversities, the laudable attempt to use government to realize soft-hearted objectives may systematically result in policies that are both soft-headed and hard-hearted.
As is clearly explained by Blinder, economic policy tends to be both less efficient and less fair than it could be because "economic calculus and political calculus are profoundly different." The reason for this difference has become widely understood as a result of the public choice revolution within economics. Relatively small groups with a concentrated interest can organize for the purpose of exerting political influence more effectively than can large groups with diverse interests. This implies that political decisions are more responsive to the narrow concerns of special interests than to the broad concerns of the general public. The result is economic policy that leaves much to be desired in terms of both hard-headed efficiency and soft-hearted fairness.
Blinder illustrates the tendency for economic policy to go wrong, and the potential for significant policy improvements, by considering macro policy (in two chapters), foreign trade policy, and environmental policy (in one chapter each). Blinder is convinced that government is far more capable of managing the macro economy, improving efficiency through trade policy, and...