Laying Chicago Economics to Rest
From breakthroughs in behavioral economics to mounting evidence in the real world, there is good reason to think that the economic orthodoxy of the past 50 years now has one foot in the grave. The question is whether the mainstream economics profession has gotten the memo.
CAMBRIDGE – September 2023 marks two important milestones in the history of economics – the 50th anniversary of the event that led to the rise of the “Chicago School of Economics” and the 15th anniversary of the one that precipitated its fall.
Half a century ago, the “Chicago Boys” embarked on an experiment in Augusto Pinochet’s post-coup Chile that would become the dominant economic-policy framework of our time, introducing a raft of radical measures inspired by the ideas of Milton Friedman and the rest of the Chicago School.
These ideas – born of an absolute faith in markets and an equally absolute suspicion of government – went on to rule the economics discipline and, more importantly, economic policymaking for the next 35 years. Not until the collapse of Lehman Brothers in September 2008, soon followed by the global financial crisis, did the Chicago School’s ascendancy end.