Economic rationalism is an Australian term often used in the discussion of

macroeconomic Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, an ...

policy, applicable to the economic policy of many governments around the world, in particular during the 1980s and 1990s. Economic rationalists tend to favour

economically liberal Economic liberalism is a political and economic ideology that supports a market economy based on individualism and private property in the means of production. Adam Smith is considered one of the primary initial writers on economic liberalism, ...

policies:

deregulation Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...

, a

free market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers are ...

privatisation Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...

of state-owned industries, lower

direct taxation Although the actual definitions vary between jurisdictions, in general, a direct tax or income tax is a tax imposed upon a person or property as distinct from a tax imposed upon a transaction, which is described as an indirect tax. There is a dis ...

and higher

indirect taxation An indirect tax (such as sales tax, per unit tax, value added tax (VAT), or goods and services tax (GST), excise, consumption tax, tariff) is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indi ...

, and a reduction of the size of the

welfare state A welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equitabl ...

. Near-equivalents include

Rogernomics In February 1985, journalists at the ''New Zealand Listener'' coined the term Rogernomics, a portmanteau of "Roger" and "economics" (by analogy with " Reaganomics"), to describe the neoliberal economic policies followed by Roger Douglas. Douglas ...

(NZ),

Thatcherism Thatcherism is a form of British conservative ideology named after Conservative Party leader Margaret Thatcher that relates to not just her political platform and particular policies but also her personal character and general style of mana ...

(UK) and

Reaganomics Reaganomics (; a portmanteau of ''Reagan'' and ''economics'' attributed to Paul Harvey), or Reaganism, refers to the neoliberal economic policies promoted by U.S. President Ronald Reagan during the 1980s. These policies are commonly associa ...

(US). However, the term was also used to describe advocates of market-oriented reform within the

Australian Labor Party The Australian Labor Party (ALP), also simply known as Labor, is the major centre-left political party in Australia, one of two major parties in Australian politics, along with the centre-right Liberal Party of Australia. The party forms th ...

, whose position was closer to what has become known as the '

Third Way The Third Way is a centrist political position that attempts to reconcile right-wing and left-wing politics by advocating a varying synthesis of centre-right economic policies with centre-left social policies. The Third Way was born from a ...

'. As it is a phrase used by the sociologist

Max Weber Maximilian Karl Emil Weber (; ; 21 April 186414 June 1920) was a German sociologist, historian, jurist and political economist, who is regarded as among the most important theorists of the development of modern Western society. His ideas prof ...

in ''

The Protestant Ethic and the Spirit of Capitalism ''The Protestant Ethic and the Spirit of Capitalism'' (german: Die protestantische Ethik und der Geist des Kapitalismus) is a book written by Max Weber, a German sociologist, economist, and politician. Begun as a series of essays, the original ...

'' the highest likelihood is the term was drawn from there and its modern denotations can all be accommodated within Weber's usage. Its recent usage arose independently in Australia, and was derived from the phrase "economically rational", used as a favourable description of market-oriented economic policies. Its first appearances in print were in the early 1970s, under the Whitlam government, and it was almost invariably used in a favourable sense until the late 1980s. The now dominant negative use came into widespread use during the 1990 recession; it was popularised by a best-selling book ''Economic Rationalism in Canberra'' by Michael Pusey.{{Cn, date=March 2022

Criticism

The term "economic rationalism" is commonly used in criticism of

free-market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any o ...

economic policies as amoral or asocial. In this context, it may be summarised as "the view that commercial activity... represents a sphere of activity in which moral considerations, beyond the rule of business probity dictated by

enlightened self-interest Enlightened self-interest is a philosophy in ethics which states that persons who act to further the interests of others (or the interests of the group or groups to which they belong), ultimately serve their own self-interest. It has often been ...

, have no role to play" (Quiggin 1997). The well-known statement of Margaret Thatcher, "There is no such thing as society. There are individuals, and there are families," is often quoted in that context, but the interpretation of that statement is disputed.

Support

Supporters of economic rationalism have presented two kinds of responses to criticisms such as those quoted above. Some have denied that such criticisms are accurate and claim that the term refers only to rational policy formulation based on sound economic analysis, and it does not preclude government intervention aimed at correcting

market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indiv ...

, income redistribution etc. Others have accepted the accuracy of the description but have argued that the adoption of radical free-market policies is both inevitable and desirable. Another statement by Thatcher, "

there is no alternative "There is no alternative" (TINA) is a slogan strongly associated with the policies and persona of the Conservative British prime minister Margaret Thatcher. In a speech to the Conservative Women's Conference on 21 May 1980, Thatcher appealed ...

", is frequently cited in that context.

References

Economic rationalism
by

John Quiggin John Quiggin (born 29 March 1956) is an Australian economist, a professor at the University of Queensland. He was formerly an Australian Research Council Laureate Fellow and Federation Fellow and a member of the board of the Climate Change Aut ...

, Professor of Economics, James Cook University, Published as: Quiggin, J. (1997), 'Economic rationalism', Crossings, 2(1), 3-12. #http://www.publicbookshelf.com/public_html/Outline_of_Great_Books_Volume_I/economicr_cca.html #http://michaelpusey.com.au/ #

Macroeconomic policy

Criticism

Support

See also

References