Yes, ideas matter. In economics, they matter a lot.
Three key economics ideas have shaped academic debates and national policies about economics for the past 240 years. Communism was the latecomer: Karl Marx wrote The Communist Manifesto in 1848 and Das Kapital in 1867, and his ideas took their place in the triumvirate in the 20th Century. Meanwhile, Scotsman Adam Smith articulated capitalistic economics in The Wealth of Nations (1776), which subsequently split into two key versions.
The first was championed by the Fabian Society, formed in London in 1884 in part as a counter to the growing interest in Marxism. The Fabians’ ranks included H. G. Wells and George Bernard Shaw, and their agenda was democratic socialism, which became Europe’s dominant model. The Fabians advocated nationalized industry, centralized banking, and social welfare through “state-protected trade unionism and other state interventions such as social security and unemployment insurance. And [they] did so by claiming that capitalism worsens inequality and exploitation, that it is rife with robber barons and virtueless inheritors.” A History of the Mont Pelerin Society (1996), The Foundation for Economic Education.
The second major version of capitalism got its most significant boost in 1947 when Austrian-British economist and philosopher F. A. Hayek invited a group of intellectuals to meet in Mont Pèlerin, Switzerland to chart the Western world’s recovery from WWII, and specifically to counter Marxism and Keynesian economics. The group became known as the Mount Pelerin Society. Its original gathering included luminaries such as Hayek, Karl Popper, and Lionel Robbins of the London School of Economics, and Milton Friedman and George Stigler of the University of Chicago. The MPS agenda came to be known as neoliberalism, and advocated private enterprise and limits on government regulation of the kind that — despite the word “liberalism” in its label — have become associated with conservative politics.
Thus the lines between economic ideas were drawn, and debates among them persist to this day. Of the three, Communism’s Soviet version tanked in the late 80’s. but persists in China, albeit in vastly altered form. Meanwhile allegiances to the competing schools of capitalism are today more polarized than ever.
But do any of these models support current realities? A whole new generation of economists don’t think so, and believe it’s time policy-makers heeded some advice articulated by John Maynard Keynes:
Harvard Law professor Lawrence Lessig wrote this in The Future of Ideas: The Fate of the Commons in a Connected World (2001):
“A time is marked not so much by ideas argued about as by ideas that are taken for granted. The character of an era hangs upon what needs no defense. Power runs with ideas that only the crazy would draw into doubt. The “taken for granted” is the test of sanity, “what everyone knows” is the line between us and them.
“This means that sometimes a society gets stuck. Sometimes these unquestioned ideas interfere, as the cost of questioning becomes too great. In these times, the hardest task for social or political activists is to find a way to get people to wonder again about what we all believe is true. The challenge is to sow doubt.”
Psychologist Scott Barry Kaufman and journalist Carolyn Gregoire expressed a similar sentiment in Wired To Create (2015):
“While experience is an important aspect of excellence in any creative discipline, one risk of being a seasoned pro is that we become so entrenched in our own point of view that we have trouble seeing other solutions. Experts may have trouble being flexible and adapting to change because they are so highly accustomed to seeing things in a particular way. For this reason, the newcomers to a field are sometimes the ones who come up with the ideas that truly innovate and shift paradigms.”
In the coming posts, we’ll examine some of today’s paradigm-shifting economic ideas and their impact on the contemporary working world.
 For another excellent review of this history lesson, see The Mont Pèlerin Society: The ultimate neoliberal Trojan horse (2012), The Daily Knell.