In the Boston Review, Dani Rodrik discusses neoliberalism and argues that
mainstream economics shades too easily into ideology, constraining the choices that we appear to have and providing cookie-cutter solutions.
Rodrik emphasizes that sound economics implies context specific policy recommendations.
And therein lies the central conceit, and the fatal flaw, of neoliberalism: the belief that first-order economic principles map onto a unique set of policies, approximated by a Thatcher–Reagan-style agenda.
But he also stresses that the
principles [of economics] are not entirely content free. China, and indeed all countries that managed to develop rapidly, demonstrate their utility once they are properly adapted to local context. Conversely, too many economies have been driven to ruin courtesy of political leaders who chose to violate them.
In Rodrik’s view
[e]conomists tend to be very good at making maps, but not good enough at choosing the one most suited to the task at hand.
I have argued elsewhere that the main job of economists is to create maps, not to choose among them. See also the earlier post on Ariel Rubinstein’s excellent discussion of Rodrik’s recent book.
In the Washington Post, James Hohmann reports that U.S. President-elect Donald Trump and his candidate for secretary of state, Rex Tillerson, share an affection for Ayn Rand’s “objectivist” philosophy. Trump
identifies with Howard Roark, the main character in [Rand’s] “The Fountainhead”
while Tillerson prefers “Atlas Shrugged” which I reviewed here. Other prospective members of the new administration also hold objectivist views while Stephen Bannon rejects “unenlightened capitalism” a la Ayn Rand.
Chicagonomics, a new book by Lanny Ebenstein, describes the evolution of the Chicago school. The book is reviewed by Tyler Cowen in a blog post and by the Economist. From the latter review:
Before the 1940s, Chicago’s professors were much closer to the liberalism of British political economists such as Adam Smith, Jeremy Bentham and John Stuart Mill than the libertarianism of Hayek and Friedman in the 1980s and early 1990s. Mr Ebenstein looks at the ideas of scholars such as Jacob Viner and Frank Knight, and concludes that while they favoured individual freedom, their policy prescriptions did not exclude government action. Both perceived Smith as justifying the state intervening in the economy at times, such as with the provision of infrastructure, education for the young and the funding of arts, culture and science.
By the 1940s, the use of redistribution to ensure that everyone had a basic standard of living was accepted by most Chicago economists. For instance, Henry Simons, when he worked at Chicago between 1939 and 1946, set out how redistribution, by diffusing economic power in a society, was necessary in a free society. Even Hayek, in his libertarian polemic of 1944, “The Road to Serfdom”, supported the use of environmental regulation and state-run social-insurance systems.
After they retired Hayek and Friedman became deeply libertarian. Mr Ebenstein says “the virtual neoanarchism that both preached” later on placed them “outside the classical liberal tradition”. Hayek argued that citizens should have the right to have their taxes refunded if they did not consume government services and Friedman railed “against government at almost any time”. Both enjoyed being in the limelight, even though their views did not fit with their earlier scholarly work. Mr Ebenstein bemoans the current popular perception of the Chicago school, as well as conservatives’ embrace of it, as based on these more extreme later utterances.