Does theory influence policy? A quantitative analysis of interrelationship between academic discourse and economic policy in international trade

The Journal of the New Economic Association. 2025. No. 4(69). P. 207–231.

A.V. Galeev, Galeeva E. A., Zhokhov M. M.

This paper addresses the mutual influence between economic theory and policy in international trade employing interdisciplinary methodology, integrating Natural Language Processing (NLP) and econometric analysis. We test whether the relationship between economic theory and economic policy can be characterised by either “economics as art” approach (where theory serves the role of an auxiliary tool to the policy) or by “scientistic” approach (where economic policy is interpreted as the practical application of theory). We firstly characterise the academic discourse in terms of adherence to either protectionism or economic liberalism with NLP algorithms. Our analysis reveals the formation of a dominant liberal consensus in academia regardless of journal quality adjustments. Secondly, we estimate Vector Autoregression (VAR) and Vector Error Correction (VEC) models to analyse the dynamic relationship between academic discourse, trade policies, and economic activity (measured by trade volume). At the global level, we identify a complex, bidirectional relationship: academic discourse helps predict policy and trade in the short-run, while in the long-run, policy and economic activity help predict the discourse. This refutes the “scientistic” interpretation of direct theoretical influence in favour of “economics as art” approach. Similar analysis of Russian data provides deeper understanding of the relationship between theory and policy at the country level. On the one hand, Russian academic discourse aligns with global liberal trends and tends to study the economic environment rather than have a direct influence on it. On the other hand, Russian policy-makers are driven by distinct political objectives, pursuing protectionist policies despite a more liberal global academic discourse. These results indicate the absence of the “scientistic” approach in Russia.

Keywords: international trade, economic policy, liberalism, protectionism, academic discourse