Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 194: The Limits of Pragmatism in Institutional Change

Nils Karlson ()
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Nils Karlson: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: Modern politics in Western democracies is to a large extent characterized by political pragmatism, a position where feasible, incremental, and more or less technocratic improvements of the status quo are advocated. While such a position has some advantages, i.e. safeguarding against false ideologies and bad radical reforms as well as more populist policies, this paper argues that there are limits to pragmatism in “welfare-enhancing” institutional change. Pragmatism cannot deal with situations where a whole interpretative framework needs to be changed in order to achieve beneficial institutional change. The status quo may be highly inefficient and still cannot be improved by marginal adjustments due to outdated or false mental frameworks, special interests and institutional lock-in. In such situations an ideological shift may be a prerequisite for higher efficiency and welfare. A position that may combine the strengths in each of the perspectives may be called “principled pragmatism”.

Keywords: ideology; pragmatism; reform; institutional change

JEL-codes: H12; H50; H70

18 pages, November 12, 2012

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