Diane Coyle — Not all economists are neoliberal, honest

It was because of a tweet linking to her LSE lectures that I decided to read Wendy Brown’s Undoing the Demos: Neoliberalism’s Stealth Revolution. My relationship with the concept of neoliberalism is an uneasy one, in that I don’t really know what it means. Often, radical writers use it to mean ‘most of economics’ – Philip Mirowski’s Never Let A Serious Crisis Go to Waste is a good example of this – making an exception only for certain Marxist or otherwise unimpeachably heterodox economists.…

However, Brown goes on to list all the neoliberal economists who include Milton Friedman, Friedrich Hayek, Gary Becker – but also Joseph Stiglitz. Wait – Joe Stiglitz in the same camp as Becker?! Barack Obama also gets labelled as neoliberal, along with Reagan and Bush. So this is back to vacuous.

Neoliberalism is a political theory that advocates for economic liberalism as superior to political and social liberalism because efficiency. It is based on Hayek's The Use of Knowledge in Society, which argues that modern economies are too complex for central planning and therefore the economic decisions should be left to market forces. Since most political choices involve funding, this implies that policy should be in accordance with economic liberalism, that is, employing neoclassical or Austrian economics rather than Keynesian.

This biases policy toward the right, toward ownership and organization, and away from the left, and workers, who comprise the majority of the population. Under neoliberalism, policy is set in accordance with the wishes of business and capital rather than the welfare of the people as a whole, assuming that the market allocates scarce resources most efficiently and produces the most effective result possible in integrating growth, employment, and price stability. The economic purpose of government is to establish institutional arrangements that favor this of organizational principal of allowing market forces.

The ideal of neoliberalism is to replace the welfare state with a market state as much as possible. The extreme right of the neoliberal spectrum would make the substitution complete, where the left spectrum would be less rigid. For example, Hayek accommodated some social insurance.

As Bill Mitchell has often observed, most people living in capitalist environments today have "neoliberal tendencies" because it is in the water, that is, there is a strong cultural and institutional bias operative now through education, media and political discourse. As generally rule, economists that identify themselves as neoclassical, which includes many that also identify as Keynesian, have neoliberal tendencies. (It was Paul Samuelson that synthesized Keynesian and neoclassical economics.)

The result is that almost all "conventional" economists are neoliberal to some extent. The only economists that are not are heterodox. Being orthodox implies have enough neoliberal tendencies to pass muster. This the reason that the conventional economists of the left, such as Krugman and Stiglitz, are sometimes included with neoliberals.

The Enlightened Economist
Not all economists are neoliberal, honest
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation