94 Chapter 4: Po litical Econo my
importance of these foundational social units in Asia, as elsewhere) during a period
THINKING
COMPARATIVELY
KEY METHODOLOGICAL TOOLS
Formulating
Hypotheses
Formulanng a hypothesis is one
of the most important steps in
comparatiVe analysis.. Usually, analysts
generate hypothe<es deductively
from a theory. This means teasing
out specific and testable clalms
that logically follow from the theory
and that can be judged in relation
to empirKal eVidence. Sometimes.
though. analysts proceed inductively.
This means thinking about how a
theory could potentialty account for
observable features of a case or set of
cases. But the method of formulating
a hypothesis ts less important than the
rigor of efforts to test that hypothesis..
of rapid industrialization after World War I J.2 1 Similarly, international "learnjng"
can flow from successful experiments in lower-income developing countries; it is
not simply a matter of the poor countries learrung from the rich. A recent example
is seen in the experiences with so-called conrutional cash transfers in Latin
America, whlch are cash payouts to citizens (often low-income citizens) that are
conrutional on the citizen undertahlng cert:Un actions. In B razil, a program known
as Bolsa Familia provides cas.h to low- income Brazilians as long as they keep their
ch ildren in school and up-to -date on vaccinations. Such policies have also flour-
ished in Mexko, among other countries. In addition to some evidence of poverty
reduction, initial experiences with these programs have generated policy interest
in other countries across Latin America and in other regions of the world as well
that have considered "learnjng" from existing programs.
As is the case with many theories, this one about international learnjng effects
can be combined with other theories ruscussed in thls chapter. For instance, the
rapid emergence of welfare states in Asia in recent years may be linked to the rise
of industrial capitalism in that region, or it may be a response to the mobilization
of important political actors mn Asia, or changing notions of citizenshlp in that patt
of the world.The emphasis is not on one theory to the exclusjon of others but on
learnjng how each !1Ught contribute to our overall understanding of the emergence
of the variety of welfare state programs observed around the world today.
Welfare States in the Nordic Countries:
What Can We Learn and How?
D r many social scientists, the goal of a research project is to test a hypothesis
r and, using evidence (often from case sturues), to reach a conclusion. Ideally, that
conclusjon will help inform more general theories about the way the world works.
However, not every good piece of research will result in a clean test of a hypothesis.
In many instances, good research will delve into the partkular experience of a case
study, noting factors that seem relevant in understanding that case. This process may
generate a hypothesis for future use rather than be a full hypothesjs test itself.
I n formulating hypotheses about causadon, it is important to keep your focus
on the evidence f rom the cases you exam ine. As an example, let's consider what
we !1Ught learn f rom investigadng Nordic countries such as D enmark, Norway,
and Sweden. The welfare state is reasonably large and sophlsticated in these
countries. We will consider how to move from that basic empirical observation
toward hypothesis generation, hypothesis testing, and theory building. Let's say
you read Esping- Andersen's account (see the "Insights" box on 7hree Worlds of
Welfare Capitalism) and focus on Sweden. You learn that Sweden has a relatively
robust welfare state of the "social democratic" variety; according to existing theory,
thls is due to the nature of class coalitions at certrun key moments in the country's
hjstory. Consider a few options for how one !1Ught develop a research project from
thls observation, and thlnk about whlch ones add the most value.
 Welfare States in the Nordic Countries: What Can We Learn and How? 95

O ption 1: You ruscover that a different country Esping-Andersen didn't THINKING

consider (say, Finland) has a robust welfare state that seems consistent with the
COMPARATIVELY
"Scandinavian" model. You consider the author's argument ("class coalitions help
explain welfare states") and seek evidence to test the hypothesis about the role of
class coalitions on this new case of Finland.
O ption 2: You study further on Sweden, reading the entiretyofEsping-Andersen's
analysis. You follow the footnotes and bibliographic resources. Through this
considerable work, you discover ample confirming evidence for the author's
argument. You then declare that you have rigorously tested Esping-Andersen's
hypothesis using the Swedish case.
O ption 3: You ruscover that another country (say, Brazil) has a growing welfare state,
but you notice that a major factor in its creation seems to be a desire to promote
rapid economic growth. You treat this as a hypothesis that could be tested in Sweden
(and other countries) to rival Esping-Andersen's "class coalitions" hypothesis.
Do any of these options make more or less sense to you as a research agenda?
Each may be a good learning exercise. Certainly option 1 sounds like a good
opportunity to use a case study to examine a hypothesis you have drawn from the
academic literature. Now look at option 2 more carefully, and see what is limited
about it. Are you really "testing the hypothesis"? It sounds as if you generated
a hypothesis based on the case of Sweden and then proceeded to test that
hypothesis using the case of ... Sweden. You are really using the same evidence
to replicate the analysis that Esping-Andersen did. (To be sure, being able to
"replicate" existing studies is important, but option 2 is quite different from rigor-
ously testing a hypothesis or examining a case afresh using new evidence.) To
contribute toward building a theory of the causes of the welfare state, it might be
more helpful to see if hypotheses generated from the Swerush case work in other
cases (option 1). Conversely, you might see if hypotheses generated from other
cases can help explain the Swerush case. This latter possibility leads us to option
3-a good and promising avenue for research. By Eooking at Brazil, you might
discover a new factor that seemed to contribute to welfare state development in
that country. 1his in turn might help in re-examining or rethinking the original
Swedish case, which could help build a better theory of the welfare state overall.
Let's look at option 3 a bit more. Ask yourself, would it be fair to say you "tested
the hypothesis" that the desire to promote economic growth leads to the growth
of the welfare state, using Brazil as your case? Not really. This is the same logic
behind what limits option 2: you can't really say you are testing a hypothesis using
the same evidence from which the hypothesis is generated. If one case study leads
you to a certain argument, that can generate a hypothesis for testing on future
cases. That is different from a true hypothesis test in which you make a preruction
before knowing the empirical realities of the case.
We want to emphasize here that generating hypotheses can itself be a contri-
bution to the advancement of political science. That is, not every contribution in
the ruscipline takes the form of a hypothesis test or theory building; it is sometimes
useful to make empirical observations that generate hypotheses for futute testing
(perhaps helping us redefine our terms as well). One or more well-done case
sturues that generate hypotheses for future testing can represent an important
contribution and step forward.
96 Chapter 4: Political Economy
Chapter Summary
Concepts
Key concepts and measures from political economy include
gross domestic product (GOP). gross national income
(GNI). inequality and the GINI coefficient. employment,
unemployment, underemployment, inflation, deflation.
hyperinflation, and fiscal measures.
Types
There are two major contrasting perspectives on how
political economy works: one that emphasizes the impor-
tance of free markets, and one that emphasizes the actions
and powers of states in promoting economic growth. Many
scholars argue that both markets and well-coordinated
state action are the keys to political economic success.
Thinking It Through
1. Consider the various political economy indicatots offered in
the "Types· section of the chapter. Do you think some of these
are more relevant than others? If you were ·ranking· countries'
political economies, which of these would take precedence
for you in evaluating how countries are performing? Noting
that GOP per capita and GOP growth are the most commonly
used indica tots. are there any reasons to argue for an alternative
indicator, on economic, political, or motal grounds?
2. One of the central debates in political economy and devel-
opment (as seen in chapter S) is about the relative roles of the
•market" and the "state" in promoting growth and economic
performance. Which of those arguments is the more intuitive to
you? What evidence supports that argument, and what evidence
have you seen that challenges it?
3. Test the theories of the establishment of welfare states against
your knowledge of U.S. history. Which theory best explains the
States perform a number of key functions in the economy,
including but not limited to economic management,
investment in education and health, and welfare state
provision.
Causes and Effects
Three main theories of the rise of welfare states emphasize
(a) cultural changes, (b) industrial capitalism. and (c) mobili-
zation and political action.
Thinking Comparatively
We considered the Nordic welfare state model in thinking
about how to develop a research agenda.
development of the welfare state in the United States, and why?
What, if any, are the special features of welfare state development
in the United States that need to be explained. and how well can
each theory address these features?
4 . Some argue that the welfare state is now in crisis. What would
each of the theories of the welfare state's emergence suggest
about the likelihood of the survival of welfare states?
5. Given that welfare state functions became common in advanced
industrial societies in the middle of the twentieth century, do
you think that these functions ought to be incorporated into the
concept of strong states? In other words, can a contemporary
state be strong without performing welfare state functions, or
does failure to provide welfare benefits make a state relatively
weak by definition?
• The mJ/uory border berween Nonh ond Sourh Koreo. These rwo coumries vory morkedly in rhelr po/tltcol. economic. ond social development. Why
m.ghrrhts be so>