Chapter4_Neoclassical to failure(Bis2)

Chapter4_Neoclassical to failure(Bis2) - Chapter 4: The...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 4: The Neoclassical Answer to Failure 1979: Shift to more right wing conservative governments in West o This led to rolling back the state and freeing up the market Neoclassical theory began influencing 3 rd world policy o It was seen to offer practical solutions The Neoclassical Tradition Fundamental assumption: people are self interested and in pursuing goals will act rationally efficiently Neoclassical theorists: o Believed individuals pursuing own self interests = innovation o Against gov. regulation, taxation to redistribute wealth (ie welfare) which reduces incentive to innovate Cardinal Rule : Less State is better Friedman and Contemporary Neoclassical theory Monetary policy = good Gov’s should tighten $ supply during high inflation and loosen $ supply during recession so gov could regulate demand and maintain economic growth Classical Liberalism: Stressed individualism Believed that people should be left with max. freedom Classical Liberalism gave way to Modern Liberalism which said: o Due to historical inequalities state needed to level playing field o This led to Neoclassical Liberalism which said: Reducing state would improve the state because there would be less corruption The Neoclassical Diagnosis of the Third World’s illness 3 rd world states were very involved in economy due to the belief that rural people weren’t making rational/self interested decisions o Bauer proved they were rational/self interested OECD published study saying ISI had done more harm than good for 3 rd world
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Chapter4_Neoclassical to failure(Bis2) - Chapter 4: The...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online