Econ 101 is underrated

A powerful, flexible paradigm for understanding the world

A recent Jennifer Harris essay explicating and defending the “post-neoliberal” worldview helped me to understand what this debate is about in a slightly different way. Harris, drawing on Thomas Kuhn, says that “societies dwell within intellectual constraints” that she calls “paradigms” and that “the power of these ideas rests in how they become so taken for granted that they persist for long periods without challenge.” She also says that “these narratives are rarely right or wrong in a normative sense” but rather they “arise because they help solve pressing contemporaneous problems” and then perhaps fade away when new circumstances arise in which they perform less well.

On this understanding, neoliberalism is a paradigm that arose from the oil crisis years and that Harris thinks failed because it is “unable to solve problems such as lagging growth and accelerating climate change” and perhaps most of all, because it “not only hastened the rise of a peer adversary—China—but also left the United States highly dependent on Chinese wares.”

What I like about this is that unlike her earlier definition of neoliberalism as a “growth-at-all-costs approach to economic and social policy,” the new essay describes things that really did happen. The US-China economic relationship became much more important to both countries, but the relative balance of power shifted in China’s favor, and the premise that economic integration would lead to domestic Chinese political liberalization proved false. Neoliberalism did not solve climate change. And while the inflationary crisis of the 1970s was overcome, the pre-1973 rate of economic growth was only restored for about 10 years in the late-1990s and early-2000s.

I don’t really agree with Harris’s characterization of the neoliberal paradigm. She says the view was that “the markets knew best,” while I would emphasize the rise of anti-market policies in crucial areas like land use. I think a strong belief in “local control” was an important part of this paradigm, as was the belief that state action itself had to be highly regulated. I also continue to think it’s slightly perverse that progressives often ignore the fact that the entire environmental movement is a phenomenon of the neoliberal period, and neither its strengths nor its weaknesses are characterized by a totalizing belief in markets.

But those quibbles aside, the line of thinking explored in Harris’s essay helps me explain more clearly my objection to “post-neoliberalism.”

My objection is not rooted in a desire to defend everything that was a bipartisan consensus in the 1980s and 1990s, so much as an insistence on the relevance and value of what you might call Econ 101 thinking. That is to say, the basic schematic ideas you’d find in an introductory economics textbook or college class (or in my case AP Econ in high school), ideas that don’t require much in the way of math or details. Life is, of course, more complicated than this, and Econ 101 cannot answer a lot of specific questions about elasticities and other questions of interest. But I think that it is nonetheless a flexible and powerful paradigm that sheds much-needed light on important questions, and plays a crucial role in structuring and disciplining policy analysis.

And what worries me about “post-neoliberalism” is that it casts this toolkit aside in a way that makes it harder rather than easier to solve the problems of slow growth, competition with China, and climate change.

What is Econ 101?