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Neoliberalism now and forever

Summary:
I was a neoliberal before it was cool (back in the 1970s)I was a neoliberal when it was cool (1984 – 2007)I was a neoliberal after it was no longer cool (in the 2010s)David Beckworth directed me to a study By Kevin Grier and Robin Grier that confirms my intuition, which is that cross-sectional evidence powerful supports the neoliberal agenda (even if results often seem disappointing from a time series perspective): Traditional policy reforms of the type embodied in the Washington Consensus have been out of academic fashion for decades. However, we are not aware of a paper that convincingly rejects the efficacy of these reforms. In this paper, we define generalized reform as a discrete, sustained jump in an index of economic freedom, whose components map well onto the

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I was a neoliberal before it was cool (back in the 1970s)

I was a neoliberal when it was cool (1984 – 2007)

I was a neoliberal after it was no longer cool (in the 2010s)

David Beckworth directed me to a study By Kevin Grier and Robin Grier that confirms my intuition, which is that cross-sectional evidence powerful supports the neoliberal agenda (even if results often seem disappointing from a time series perspective):

Traditional policy reforms of the type embodied in the Washington Consensus have been out of academic fashion for decades. However, we are not aware of a paper that convincingly rejects the efficacy of these reforms. In this paper, we define generalized reform as a discrete, sustained jump in an index of economic freedom, whose components map well onto the points of the old consensus. We identify 49 cases of generalized reform in our dataset that spans 141 countries from 1970 to 2015. The average treatment effect associated with these reforms is positive, sizeable, and significant over 5- and 10- year windows. The result is robust to different thresholds for defining reform and different estimation methods. We argue that the policy reform baby was prematurely thrown out with the neoliberal bathwater.

Update: Commenter TBarron found another recent example.

David also directed me to a twitter thread that discusses the fact that labor’s share of income has been fairly stable over long periods, another point I’ve frequently made. (The real problem is growing wage inequality.)

PS. It’s also good to see Josh Hendrickson and Brian Albrecht carrying on the tradition of good old Chicago-style price theory. Check out their new newsletter.

We are entering an authoritarian, nationalistic, socialistic dark age, and we need to keep the flame of neoliberalism burning for when the madness passes.

PS. When I point out all the awful things Trump says and does, my commenters accuse me of peddling fake news. Now Woodward has it all on tape. What will the commenters say now?


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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