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The Political Business Cycle

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Do incumbent politicians use their power and influence to get re-elected? Is this a "valid" use of political power? How does this impact business firms? Please discuss these questions.

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Solution Summary

This question explores the political economy and ethical implications that must be considered when incumbents utilize their status to retain power, discussing how this impacts the broader economy and society.

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Yes, incumbent politicians use their power and influence to get re-elected. This is a truism of politics. Of course, the extent differs across countries, but in general there have been studies that show the "political business cycle" and how politicians influence economic cycles (early work from Barro and Alesina tried to model this, how the median voter would react to bursts of inflation that might raise employment).

For being "valid," this all depends upon how you define what the political system does. In most political systems, even liberal democracies, the explicit goal of politics is ...

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