Where Economics Went Wrong: Chicago's Abandonment of Classical Liberalism

Princeton University Press
Free sample

How modern economics abandoned classical liberalism and lost its way

Milton Friedman once predicted that advances in scientific economics would resolve debates about whether raising the minimum wage is good policy. Decades later, Friedman’s prediction has not come true. In Where Economics Went Wrong, David Colander and Craig Freedman argue that it never will. Why? Because economic policy, when done correctly, is an art and a craft. It is not, and cannot be, a science. The authors explain why classical liberal economists understood this essential difference, why modern economists abandoned it, and why now is the time for the profession to return to its classical liberal roots.

Carefully distinguishing policy from science and theory, classical liberal economists emphasized values and context, treating economic policy analysis as a moral science where a dialogue of sensibilities and judgments allowed for the same scientific basis to arrive at a variety of policy recommendations. Using the University of Chicago—one of the last bastions of classical liberal economics—as a case study, Colander and Freedman examine how both the MIT and Chicago variants of modern economics eschewed classical liberalism in their attempt to make economic policy analysis a science. By examining the way in which the discipline managed to lose its bearings, the authors delve into such issues as the development of welfare economics in relation to economic science, alternative voices within the Chicago School, and exactly how Friedman got it wrong.

Contending that the division between science and prescription needs to be restored, Where Economics Went Wrong makes the case for a more nuanced and self-aware policy analysis by economists.

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About the author

David Colander is Distinguished College Professor at Middlebury College. His many books include The Making of an Economist, Redux and Complexity and the Art of Public Policy (both Princeton). Craig Freedman is the author of Chicago Fundamentalism and In Search of the Two-Handed Economist.
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Additional Information

Publisher
Princeton University Press
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Published on
Nov 27, 2018
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Pages
288
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ISBN
9780691184050
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Language
English
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Genres
Business & Economics / Economic History
Business & Economics / Economics / General
Business & Economics / Economics / Theory
Business & Economics / Labor
Political Science / Public Policy / Social Services & Welfare
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This content is DRM protected.
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In the graveyard of economic ideology, dead ideas still stalk the land.

The recent financial crisis laid bare many of the assumptions behind market liberalism--the theory that market-based solutions are always best, regardless of the problem. For decades, their advocates dominated mainstream economics, and their influence created a system where an unthinking faith in markets led many to view speculative investments as fundamentally safe. The crisis seemed to have killed off these ideas, but they still live on in the minds of many--members of the public, commentators, politicians, economists, and even those charged with cleaning up the mess. In Zombie Economics, John Quiggin explains how these dead ideas still walk among us--and why we must find a way to kill them once and for all if we are to avoid an even bigger financial crisis in the future.



Zombie Economics takes the reader through the origins, consequences, and implosion of a system of ideas whose time has come and gone. These beliefs--that deregulation had conquered the financial cycle, that markets were always the best judge of value, that policies designed to benefit the rich made everyone better off--brought us to the brink of disaster once before, and their persistent hold on many threatens to do so again. Because these ideas will never die unless there is an alternative, Zombie Economics also looks ahead at what could replace market liberalism, arguing that a simple return to traditional Keynesian economics and the politics of the welfare state will not be enough--either to kill dead ideas, or prevent future crises.


In a new chapter, Quiggin brings the book up to date with a discussion of the re-emergence of pre-Keynesian ideas about austerity and balanced budgets as a response to recession.

Economists seem to be everywhere in the media these days. But what exactly do today's economists do? What and how are they taught? Updating David Colander and Arjo Klamer's classic The Making of an Economist, this book shows what is happening in elite U.S. economics Ph.D. programs. By examining these programs, Colander gives a view of cutting-edge economics--and a glimpse at its likely future. And by comparing economics education today to the findings of the original book, the new book shows how much--and in what ways--the field has changed over the past two decades. The original book led to a reexamination of graduate education by the profession, and has been essential reading for prospective graduate students. Like its predecessor, The Making of an Economist, Redux is likely to provoke discussion within economics and beyond.

The book includes new interviews with students at Harvard, Princeton, Stanford, MIT, Chicago, and Columbia. In these conversations, the students--the next generation of elite economists--colorfully and frankly describe what they think of their field and what graduate economics education is really like. The book concludes with reflections by Colander, Klamer, and Robert Solow.


This inside look at the making of economists will interest anyone who wants to better understand the economics profession. An indispensible tool for anyone thinking about graduate education in economics, this edition is complete with colorful interviews and predictions about the future of cutting-edge economics.

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