Reading Quiggin's wonderful Zombie Economics: How Dead Ideas Still Walk among Us, I'm left with a similar warm feeling of self-righteousness I get reading Krugman, but at the same time a sense of frustration. The frustration comes from the absence of any clear idea of the politics of all this: how, in a democracy, can such clearly disfunctional and regressive ideas still prosper, even when it is clear they are failing the vast majority of the electorate?
Obviously, it is hardly Quiggin's job to explain the politics: that should be down to us. What can political science offer? Well, for me the direction must be in reviving that old-fashioned approach to the study of politics that sees it as the study of collective action, of institutions, and which seeks to explain institutions in terms of genuinely political variables, rather than reducing them to aggregates of individual maximizing decisions. Here I can self-interestedly cite political parties as key intermediaries between social interests and political institutions. Why did political parties buy into the zombie ideas Quiggin dissects when there should have been obvious gains for any politician that could offer something better?
A couple of ideas occur to me. First, that democracy has been associated historically, in the classic modernization formulation, with the emergence of a large middle class and lower inequality (which sustains power-sharing, as in Boix's game theoretic account). On this reading, we could suggest that increased inequality also undermines democratic institutions in such a way as to reinforce the hierarchical and oppressive dimension of market capitalism. This would be a social-structural explanation for the success of regressive ideas.
Next, the parties literature documents a secular decline in the organizational strength and mobilization capacity of political parties. This limits the ability of elected politicians to mobilize resources to challenge free-wheeling capital. In this sense, there is a problem with the organizational infrastructure necessary to sustain economic interventionism, so that parties give up on non-zombie ideas. This is a modified resource mobilization theory.
Finally, social and cultural changes may affect the degree to which people can be convinced of policy ideas which are probably in their interests, but simply do not resonate (or maybe even dissonate). Individualization makes people reluctant to throw in their lot with others, and therefore resistant to social democratic ideas, even when all the evidence suggests that for most people these ideas are obviously in their interests. The metaphor that comes to mind is the angry driver in the traffic jam, railing against the other drivers rather than thinking of a collective solution that would get everyone to work on time at a fraction of the cost. This would be normative-culturalist (false consciousness?) explanation of the success of zombie ideas - they may be wrong, but they should be right.
As an after-thought, all of this offers a hint about the weird anti-science trends we're seeing these days, especially in the United States. Man-made global warming may be right, but to believe in it, for most people, is a leap of faith, involving trust in institutions (universities, the scientific professions, the government). If the patterns identified above are a problem for economic ideas, then why shouldn't they be a problem for other theories about how the world works? Bachmann's campaign against the HPV vaccine is probably no different in its essence than trickle-down economics or any of the other zombie ideas which are almost certainly wrong, yet politically enjoy the gift of eternal life.