**Plc,Planrning, 'and' Research**

**and Growth**

Neoclassical political economy provides compelling theory in response to the question, "Why should reasonable men adopt public policies that harm the societies they govem?" Microeconomic assumptions about individual self-interest are applied to the political claims of citizens, to the actions of politicians and policymakers, to the behavior of bureaucrats, and even to the actions of states more genmrally. Citizens, politicians, bureaucrats, and states purposely use the authority of the state to aistort economic interactions to their own benefit. In doing so, they are behaving in a way that is politically rational, however irrational the economic results may be for society. The solution is to lirpit government; less politics makes better economics, or so the argument goes.

Grindle argues that this perspective on politics misrepresents the dynamics of policymaking in developing countries and is seriously limited in its ability to explain how policy changes come about or how policies are chosen that lead to socially beneficial outcomes.

She indicates that society-centric models of political economy adopted from the U.S. experience are not relevant for most developing countries. State-centric adaptations come somewhat closer to the reality of how public policy is formulated and implemented there. But even state-centric applications do not address the dynamics of policymaking and implementation in developing countries and are therefore unable to explain policy changes or wise policy choices.

Grindle argues that these are critical weaknesses of neoclassical political economy, and they present policy analysts with a challenge: can alternative models of politics be conceptualized that address issues of change, predict the content of change, and maintain a role for those who seek both politically and economically viable solutions to the major problems facing developing countries in the decades ahead?

She recommends an altemative approach to political economy that does not treat politius as a negative factor in policy choic She emphasizes understanding the preferences and perceptions of policy elites, the circumstances that surround the emergence of policy issues, the concems of decision makers, and the factors that affect the implementation and sustainability of policy change. In such an altemative, politics consists of efforts at problem solving through bargaining and the use of political resources in the context of great uncertainty.

Economic and political logic are i-ot always at loggerheads and there often exists a space in which citizens, public officials, and analysts can maneuver to achieve policy choices that are both politically and economically wise. It is worthwhile to attempt to model this space and to use such models to help craft policy advice.

This paper is a product of the Macroeconomic Adjustment and Growth Division, Country Economics Department. Copies are available free from the World Bank, 1818 H Street NW, Washington DC 20433. Please contact Raquel Luz, room NI1-057, extension 61588 (67 pages).

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