Comment on ‘The Politics of the Political Business Cycle’

In a thought-provoking paper, Schultz develops an idea first put forward in a number of papers by Frey and Schneider and argues that governments will have less incentive to manipulate the economy when they lead in the polls. This helps to explain why electoral cycles have been so hard to detect. As other authors have observed, the best evidence suggests that electoral cycles (in output or instruments) are weak and irregular. Kenneth A Schultz ‘The Politics of the Political Business Cycle’, British Journal of Political Science, 25 (1995), 79–99. For example, Bruno Frey and Friedrich Schneider, ‘A Politico-Economic Model of the United Kingdom’, Economic Journal, 88 (1978), 243–53. Frey and Schneider were subjected to a severe critique at the time: see Alec Chrystal and James Alt, ‘Public Sector Behaviour: The Status of the Political Business Cycle’, in David Currie, Robert Nobay and David Peel, eds, Macroeconomic Analysis (London: Croom Helm, 1981). Alberto Alesina, ‘Macroeconomic policy in a Two-Party System as a Repeated Game’ Quarterly Journal of Economics, 102 (1987), 651–78; Alberto Alesina ‘Macroeconomics and Politics’, NBER Macroeconomics Annual (Cambridge, Mass: MIT Press, 1988); Alberto Alesina ‘Evaluating Rational Partisan Business Cycle Theory: A Response’, Economics and Politics, 5 (1990), 1–30; Alberto Alesina, G. Cohen and N. Roubini, ‘Electoral Business Cycles in Industrial Democracies’, European Journal of Political Economy, 9 (1993) 1–23; Stephen Sheffrin, ‘Evaluating Rational Partisan Business Cycle Theory’. Economics and Politics, 1 (1989) 239–60.