Important. Demonstrates the need for a return to political economy" to right the balance, which has swung too far in the direction of economic liberalism.
The problem is that the assumptions on which economic liberalism is based are ideological and not empirical, seeming to contradict what actually happens institutionally especially in democratic societies regarding "public goods." Economic liberalism assumes that public goods are only needed as a result of "market failure," so the solution is not to provide public goods but rather to correct the underlying market failure by allowing "free market" to work it magic through liberating natural "market forces" from government interference.
"Socialism" as managed fiscal policy is the target. Neoliberalism want to limit the role of government in economics to monetary policy set by a politically independent central bank. For neoliberals the government's fiscal position should be dictated by "expansionary fiscal austerity" and "sound money," instead of the fiscal stance targeting welfare and distributed prosperity, e.g., through a full employment policy and the provision of public goods by using the power of the government as currency issuer as needed. Thus the preference for rules and the rejection of discretion as interference.
Real-World Economics Review Blog
What happened to the public economy in economics?
June Sekera
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