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Neoconservatism, Monetarism, and Modern Mainstream Economics
Let\’s start with the term neoconservatism. As a layman, what do you imagine from this term? First, neoconservatism is an economic trend that can be divided into three major streams. The first stream is monetarism, which will also be discussed below. The second stream is rational expectations theory, and the third is supply-side economics. All of these trends share common characteristics. All of these currents share a common feature: they seek free competition and as little government intervention in the economy as possible. Thus, monetarism is another stream of the neoconservative trend
. The main representative of monetarism is the American economist Milton Friedman. He is also the most talked about in economics departments and elsewhere. Friedman emphasizes the importance of individual freedom in economics and politics. This trend calls for free competition, which is naturally linked to personal and professional freedom. It also calls for as little state intervention in the economy as possible, as already mentioned. An important part of monetarism is the quantitative theory of money. The most important idea of this theory is the balance between the supply of and demand for money.
The last one I will discuss is “modern mainstream economics.” This direction of economics (and thought) combines the previous two economic orientations. Specifically, it is neoclassical economics and the teachings of J.M. Keynes, or Keynesianism.
Thus, several theories from one direction combined with several theories from another direction form an independent system. According to modern thinking, economic policy should always be a combination of different theoretical approaches. Thus, a fundamental rule is put into practice. It is, simply understood, to adapt interventions in the economy according to current economic developments. In other words, Keynesian theory should be used in times of crisis or recession, while neoclassical theory should be used in times of economic growth.
What do you think of the idea that economic policy should always be a combination of different theoretical approaches?