The Economists’ Hour

The Economists’ Hour Plot Summary

Introduction

In the spring of 1979, a small group of economists gathered at the White House to advise President Jimmy Carter on combating inflation, which had reached alarming double-digit levels. Among them was Milton Friedman, a diminutive professor whose ideas about free markets had once been dismissed as extremist but were now gaining unprecedented influence. This scene marked a pivotal moment in what would become a four-decade experiment that transformed the global economy. For most of modern history, lawyers, politicians, and business leaders had made economic decisions based on tradition, intuition, and political considerations. But between the late 1960s and 2008, economists dramatically expanded their influence, reshaping policies around core principles of market efficiency. This transformation touched virtually every aspect of modern life. Central banks abandoned their focus on full employment to wage war against inflation. Governments dismantled regulatory frameworks that had governed industries for generations. Tax systems were restructured to prioritize economic growth over equality. Financial markets were liberated from constraints established during the Great Depression. The results were profound and contradictory: unprecedented prosperity for some, but also rising inequality, financial instability, and eventually a crisis of faith in the market-based solutions economists had championed. Through this remarkable historical journey, we witness not just a series of policy changes, but a fundamental shift in how societies balance the relationship between markets, government, and human welfare.

Chapter 1: The Monetarist Rebellion: Friedman's Challenge to Keynesianism (1969-1979)

By the late 1960s, a revolution was brewing in economic thought that would transform government policy worldwide. For decades after the Great Depression, most policymakers had embraced Keynesian economics, which held that governments should actively manage economies through spending and taxation to ensure full employment and stable growth. This approach had dominated policy circles since the 1940s, creating what economist Paul Samuelson called "the neoclassical synthesis" – a framework that justified significant government intervention in markets. The intellectual vanguard challenging this consensus was led by Milton Friedman, a professor at the University of Chicago with boundless enthusiasm for free markets. Unlike many brilliant academics who struggled to communicate with the public, Friedman was a natural salesman for his ideas. His core belief was simple yet radical: the marketplace was the best possible system of human organization, far superior to government intervention. "If you put the federal government in charge of the Sahara Desert," he famously quipped, "in five years there'd be a shortage of sand." Friedman's monetarist theory directly challenged Keynesian orthodoxy. While Keynesians focused on government spending to manage economic cycles, Friedman argued that inflation was "always and everywhere a monetary phenomenon" – caused by governments printing too much money. His 1967 presidential address to the American Economic Association introduced the concept of a "natural rate of unemployment," suggesting that attempts to push unemployment below this rate would only cause inflation. This speech initially received little attention, but events would soon vindicate Friedman's perspective. The turning point came in the 1970s, when the American economy experienced "stagflation" – the simultaneous occurrence of high inflation and high unemployment. This phenomenon confounded traditional Keynesian models but aligned with Friedman's predictions. As inflation reached double digits and unemployment soared, policymakers became increasingly receptive to monetarist ideas. Federal Reserve Chairman Arthur Burns, though trained as a Keynesian, began emphasizing monetary targets. Central banks in Germany and Switzerland adopted similar approaches, focusing on controlling the money supply rather than managing employment levels. Friedman's influence extended beyond monetary policy. His 1962 book "Capitalism and Freedom" argued for market solutions to numerous social problems, from education to healthcare. He successfully campaigned against military conscription, convincing President Nixon to end the draft in 1973 – replacing government coercion with market incentives. This victory reflected a broader shift in American attitudes, as people increasingly questioned whether government could solve society's problems. As Bob Dylan had sung, "the times they were a-changin'." The monetarist rebellion represented the opening salvo in what would become a comprehensive transformation of economic policy. By challenging the Keynesian consensus, Friedman and his colleagues at the University of Chicago laid the intellectual groundwork for prioritizing price stability over full employment, markets over government planning, and individual choice over collective action. Their ideas would soon move from academic journals to the center of policymaking, reshaping economies around the world in ways that continue to influence our lives today.

Chapter 2: Inflation Warriors: Central Banks Seize Control (1979-1984)

By 1979, the United States economy was in crisis. Inflation had reached 13.3 percent, unemployment remained stubbornly high, and consumer confidence was plummeting. The oil shocks of the 1970s had exposed the limitations of traditional Keynesian approaches to economic management. Into this breach stepped Paul Volcker, a towering figure at six feet seven inches who was appointed Federal Reserve chairman by President Jimmy Carter in August 1979. Volcker had been shaped by his education at Princeton, where Austrian émigrés traumatized by post-World War I hyperinflation had taught him to fear inflation above all else. When Carter interviewed him for the Fed chairmanship, Volcker was blunt: "You have to understand, if you appoint me, I favor a tighter policy than that fellow," he said, gesturing at the outgoing chairman. Volcker launched his war on inflation on October 6, 1979, in a dramatic Saturday evening news conference. The Federal Reserve would now focus on controlling the money supply rather than interest rates – a monetarist approach championed by Milton Friedman. "The basic message we tried to convey was simplicity itself," Volcker later said. "We meant to slay the inflationary dragon." The execution was brutal. Interest rates soared above 20 percent, the highest levels since the Civil War. Consumers stopped buying cars and appliances; construction projects halted; farmers couldn't afford to plant crops. Unemployment reached nearly 11 percent by 1982, the highest level since the Great Depression. The human cost of Volcker's approach was immense. Factory workers suffered most – unemployment in the auto industry reached 23 percent, and among steelworkers, it hit 29 percent. Auto dealers sent Volcker the keys to cars they couldn't sell. Home builders sent chunks of two-by-four wooden beams with notes asking where their children would live. A home builders' association in Kentucky published a wanted poster for Volcker, listing his crime as "Murder of the American Dream." Yet Volcker remained steadfast, telling a journalist, "You just have to tell yourself that somehow it's in the larger interest of the country – and even of these people – to get this straightened out." Ronald Reagan, elected president in 1981, provided crucial political cover for Volcker's monetary experiment. Despite the severe recession threatening his popularity, Reagan supported the Fed's approach. "We suffer from the longest and one of the worst sustained inflations in our national history," Reagan said in his inaugural address, listing this problem even before high taxes. His solution echoed Friedman: "Government is not the solution to our problem; government is the problem." By 1982, inflation had fallen dramatically, and Reagan began celebrating. "The long nightmare of runaway inflation is now behind us," he declared in January 1983. The Volcker revolution permanently shifted economic priorities worldwide. Before 1979, central banks had focused primarily on maintaining full employment, with price stability as a secondary goal. After Volcker, controlling inflation became the central objective of monetary policy – even at the cost of higher unemployment. This shift was institutionalized through legal changes that granted central banks greater independence from political pressure. New Zealand pioneered this approach in 1989 with legislation making price stability the central bank's sole mandate. The European Central Bank, established in 1998, was similarly designed with inflation control as its primary mission. The triumph of central bankers over inflation represented a profound transformation in economic governance. Unelected technocrats, largely insulated from democratic pressures, gained unprecedented authority over economic policy. Their success in taming inflation enhanced their prestige and expanded their influence. But this victory came at a significant cost – the median income of a full-time male worker in 1978, adjusted for inflation, was not matched or exceeded at any point in the next four decades. The inflation warriors had won their battle, but the war for shared prosperity remained unresolved.

Chapter 3: Tax Revolution: Supply-Side Economics Transforms Fiscal Policy (1980-1988)

In April 1971, at a gathering of economists in Bologna, Italy, University of Chicago economist Robert Mundell startled his colleagues by claiming he had a recipe to reduce both inflation and unemployment simultaneously. His main ingredient: a big tax cut. Most economists dismissed the idea, but within a decade, Mundell's "supply-side" theory would become a pillar of Republican economic policy and transform taxation in America and beyond. The supply-side revolution gained momentum through the efforts of Arthur Laffer, a cheerful economist who sketched his famous "Laffer curve" on a cocktail napkin during a 1974 dinner with Donald Rumsfeld and Dick Cheney. The curve illustrated the claim that tax rates could be so high that cutting them would actually increase government revenue by stimulating economic growth. Ronald Reagan embraced supply-side economics during his 1980 presidential campaign, promising that tax cuts would revitalize the American economy. After winning the election, he quickly delivered, signing the Economic Recovery Tax Act in August 1981 at his California ranch. "It was the greatest political win in half a century," Reagan wrote in his diary. The legislation slashed the top income tax rate from 70 percent to 50 percent, with further reductions to 28 percent following in the Tax Reform Act of 1986. These cuts represented a dramatic departure from the progressive taxation that had characterized American fiscal policy since the New Deal. During the mid-twentieth century, the government had used taxation as a corrective for economic inequality. By 1986, that redistributive function had been dramatically reduced. The intellectual justification for supply-side economics came from economists who argued that high tax rates discouraged work, saving, and investment. Jude Wanniski, an influential journalist at the Wall Street Journal, became the movement's enthusiastic promoter, writing that the economy was being "choked by taxes—asphyxiated." Martin Feldstein, a Harvard economist who served as chairman of Reagan's Council of Economic Advisers, provided academic credibility with studies suggesting high tax rates significantly distorted economic behavior. The supply-side perspective shifted the focus of economic policy from managing demand through government spending to creating conditions for increased supply through tax incentives. However, the tax cuts failed to deliver on many of their promises. The savings rate did not increase as predicted; in fact, it declined from 8 percent in 1980 to 4.2 percent in 1990. Investment as a share of GDP also fell during the 1980s. In a defining moment, U.S. Steel announced in November 1981 that it would use its tax windfall to buy Marathon Oil for $6.3 billion instead of upgrading its aging steel mills. When the dust settled at the end of the decade, the combination of recession and recovery produced average annual growth of 2.2 percent during the 1980s – slightly slower than the annual average for the 1970s, which supply-siders had criticized as a period of economic malaise. The failure of Reagan's tax cuts to generate sufficient growth forced the government to borrow money on the largest scale since World War II. Federal debt held by the public nearly tripled during Reagan's presidency, from $738 billion to $2.1 trillion. Some conservatives, including Milton Friedman, were not dismayed by this outcome. They had supported the tax cuts because they wanted to "starve the beast" – to force reductions in government spending by creating budget deficits. This strategy eventually bore fruit in the 1990s, when concerns about deficits led to significant cuts in government programs. The supply-side revolution permanently altered the politics of taxation in America and influenced tax policy globally. Margaret Thatcher's government in Britain slashed the top income tax rate from 83 percent to 40 percent. Even social democratic Sweden reduced its top rate from 87 percent to 51 percent by 1990. The idea that high tax rates harm economic performance became conventional wisdom across the political spectrum. While the extreme claims of supply-siders were not validated, their core insight – that tax policy affects economic behavior – became embedded in policy discussions worldwide, fundamentally changing how governments approach fiscal policy.

Chapter 4: Deregulation Unleashed: Markets Replace Government Control (1975-1992)

In the mid-1970s, the American economy operated under an extensive system of regulations that touched virtually every sector. The federal government controlled airline routes and ticket prices, set interest rates banks could pay on deposits, determined which trucks could drive on which highways carrying which products, and regulated everything from television broadcasting to telephone service. This regulatory regime had been built during the New Deal and expanded in subsequent decades, based on the assumption that unfettered markets would lead to destructive competition, monopolization, or both. By 1975, however, a new generation of economists was questioning whether these regulations actually served the public interest. The intellectual foundations for deregulation came from economists like George Stigler at the University of Chicago, whose research suggested that regulation often served industry interests rather than consumers. Stigler's "capture theory," which earned him the Nobel Prize in Economics in 1982, argued that regulatory agencies typically ended up protecting established companies from competition. This perspective gained traction as evidence mounted that regulated industries were often inefficient and resistant to innovation. Studies showed that unregulated intrastate airlines in California and Texas offered fares roughly half those of regulated interstate carriers flying similar distances. The deregulation movement gained powerful allies from across the political spectrum. Senator Edward Kennedy, a liberal Democrat, held hearings in 1975 that highlighted the costs of airline regulation to consumers. Ralph Nader, the consumer advocate, argued that economic regulation protected companies at the expense of the public. President Jimmy Carter, seeking to establish himself as a different kind of Democrat, embraced deregulation as a way to help Americans as consumers rather than as workers. This unusual coalition – progressive Democrats, consumer advocates, free-market economists, and business interests seeking new opportunities – created momentum for sweeping change. The pivotal figure in implementing airline deregulation was Alfred E. Kahn, an economist whom Carter appointed to head the Civil Aeronautics Board in 1977. Kahn was an eccentric who walked around his office in socks and held long hearings where he entertained himself by reeducating expert witnesses. He rejected the mystique of air travel, famously remarking, "To me they are all marginal costs with wings." Under his leadership, the CAB began authorizing discount fares and new routes, paving the way for legislation that fully deregulated the industry in 1978. Similar reforms followed in trucking (1980), railroads (1980), natural gas (1978), and telecommunications (1996). Deregulation largely delivered the benefits economists had predicted. The movement of goods became much cheaper: logistics as a share of the U.S. economy fell from 18 percent in 1979 to 7.4 percent in 2009. Average airline ticket prices on domestic flights fell by 45 percent in the quarter century following deregulation. Passenger volume soared from 275 million in 1978 to 743 million in 2007. Long-distance telephone calls, once a luxury, became affordable for ordinary households. In each case, removing regulatory barriers allowed new competitors to enter markets, driving down prices and spurring innovation. However, deregulation also transferred money from workers to consumers and shareholders. The earnings of the average U.S. truck driver fell by 20 percent in real terms between 1980 and 2017. The average flight attendant in 2017 made 31 percent less than in 1980. Meanwhile, executive compensation soared. Deregulation contributed to the broader trend of rising inequality that characterized the era. It also led to greater market concentration in many industries, as initial competition gave way to consolidation. By the early 2000s, four airlines controlled more than 80 percent of domestic air travel, raising questions about whether deregulation had ultimately replaced government monopolies with private ones. The deregulatory movement spread globally, with Britain under Margaret Thatcher privatizing state-owned companies and dismantling regulatory structures. Between 1979 and 1997, the share of British economic output produced by state-owned companies fell from 12 percent to 2 percent. Even the Labour Party surrendered, removing its long-standing commitment to public ownership from its platform in 1995. The triumph of deregulation represented a fundamental shift in the relationship between government and business – from viewing markets as requiring constant oversight to seeing them as self-regulating systems that perform best with minimal interference.

Chapter 5: Financial Liberation: Banking Without Boundaries (1980-2007)

In June 1970, a customer who deposited $5,000 at New York's Dollar Savings Bank could choose from a selection of thank-you gifts including a blender, a coffeemaker, or an iron. This curious practice existed because banks were not allowed to compete by offering higher interest rates on deposits – the government had maintained strict controls on the financial industry since the Great Depression. These regulations included limits on interest rates (Regulation Q), restrictions on interstate banking, and a firm separation between commercial banking and investment banking (the Glass-Steagall Act). The financial system was designed for stability rather than innovation, with banks serving as conservative intermediaries between savers and borrowers. The dismantling of this regulatory framework began in earnest in the early 1980s. As inflation soared in the late 1970s, the existing system became increasingly untenable. Banks were losing deposits to money market funds and other alternatives that offered higher returns. The Depository Institutions Deregulation and Monetary Control Act of 1980 began phasing out interest rate caps on bank deposits, while the Garn-St. Germain Act of 1982 allowed banks to offer adjustable-rate mortgages and expanded their lending powers. These changes were justified by economists who argued that financial regulation was preventing the efficient allocation of capital and limiting consumer choice. The intellectual foundation for financial deregulation came from economists who believed that efficient markets would regulate themselves better than government could. Eugene Fama's "efficient markets theory," developed at the University of Chicago in the 1960s, provided academic justification by suggesting that financial markets fully reflected all available information. This theory implied that sophisticated investors would identify and correct any mispricing, making government oversight unnecessary. Alan Greenspan, who became Federal Reserve chairman in 1987, embraced this perspective, arguing that market participants had strong incentives to monitor each other and prevent excessive risk-taking. Financial innovation accelerated as regulatory constraints fell away. Securitization – the practice of bundling loans into tradable securities – transformed banking from a "originate and hold" model to an "originate and distribute" approach. Derivatives markets expanded dramatically, with instruments like credit default swaps growing from nothing in the early 1990s to a $62 trillion market by 2007. These innovations were celebrated for distributing risk more efficiently throughout the financial system. When Brooksley Born, head of the Commodity Futures Trading Commission, proposed oversight of the derivatives market in 1998, she faced fierce resistance from Greenspan and Treasury Secretary Robert Rubin, who insisted markets would police themselves. The final major piece of financial deregulation came in 1999 with the repeal of the Glass-Steagall Act. The Gramm-Leach-Bliley Act, championed by former economics professor Phil Gramm, allowed the creation of financial supermarkets that could engage in both traditional banking and securities trading. Citigroup had already forced the issue by merging with Travelers Insurance in 1998, creating a financial conglomerate that violated existing law. Rather than requiring the companies to separate, Congress changed the law to accommodate the new business model. The legislation passed with broad bipartisan support, reflecting the consensus among economists that financial integration would enhance efficiency and stability. The result was an unprecedented expansion of the financial sector. Between 1980 and 2007, the financial industry's share of corporate profits in the United States rose from about 15 percent to over 40 percent. Banking became increasingly concentrated, with the largest institutions growing dramatically in size and complexity. Financial innovation flourished, creating new instruments that few fully understood. The system became more interconnected, with banks, insurance companies, and investment firms developing complex relationships that obscured underlying risks. The era of financial liberation produced both winners and losers. It created greater access to credit for many Americans and generated enormous wealth in the financial sector. But it also led to greater financial instability, culminating in the 2008 crisis when the house of cards collapsed. The faith that markets would police themselves proved misplaced, as institutions took on levels of risk that threatened the entire financial system. The period from 1980 to 2007 thus represents a grand experiment in financial deregulation – one that ultimately demonstrated the dangers of banking without boundaries.

Chapter 6: Global Experiments: From Chile to China (1973-2000)

In 1942, the United States sent a Princeton graduate named Albion Patterson to Paraguay as part of an effort to teach the secrets of prosperity to Latin America. This mission reflected a growing belief that American economic ideas could and should be exported around the world. Patterson's opportunity to implement this vision came in Chile, where he established a partnership with the University of Chicago to train Chilean economists in free-market principles. These "Chicago Boys," as they called themselves, returned to Chile with a radical vision for economic transformation that emphasized free trade, privatization, and monetary discipline. Initially, they found little audience for their ideas in a country pursuing state-led industrialization. But when Salvador Allende's socialist government collapsed amid economic chaos and a military coup in 1973, General Augusto Pinochet turned to the Chicago Boys to reshape Chile's economy. Under their guidance, Chile implemented what Milton Friedman called "shock therapy" – a rapid and comprehensive transition to market economics. The government slashed spending, eliminated price controls, opened markets to imports, privatized state enterprises, and reformed the pension system from government guarantees to individual investment accounts. The initial results were devastating – unemployment exceeded 20 percent, while industrial production collapsed. But by the early 1980s, Chile began experiencing what some called an "economic miracle," with growth rates averaging 7 percent annually between 1984 and 1998. The Chicago Boys' reforms made Chile a laboratory for free-market policies that would later be promoted throughout Latin America by institutions like the International Monetary Fund and World Bank. The Chilean experiment raised troubling questions about the relationship between economic freedom and political liberty. Friedman defended his involvement by arguing that free markets would eventually lead to free societies – a prediction partially vindicated when Chile returned to democracy in 1990 while maintaining much of its market-oriented economic framework. Critics countered that economists had provided intellectual cover for a brutal dictatorship responsible for thousands of deaths and disappearances. The Chilean case illustrated the moral complexities of economic reform, particularly when implemented without democratic consent. As the Cold War ended in the early 1990s, market-oriented reforms spread across the globe. The collapse of the Soviet Union seemed to validate free-market economics, prompting Francis Fukuyama to declare "the end of history" – the triumph of liberal democracy and capitalism as the final form of human government. Former communist countries in Eastern Europe and the former Soviet Union embarked on their own versions of shock therapy, guided by Western economists like Jeffrey Sachs. Poland, which implemented rapid reforms beginning in 1990, experienced initial pain but eventually achieved sustained growth. Russia, by contrast, saw its economy collapse as privatization created a class of oligarchs who acquired state assets at bargain prices while ordinary citizens suffered. China charted a different course. After Mao's death in 1976, Chinese leaders sought economic advice from various sources, including American economists. But they rejected the shock therapy approach, instead pursuing gradual market reforms while maintaining state control over key sectors. Deng Xiaoping described this approach as "crossing the river by feeling the stones." Agricultural communes were dismantled, special economic zones established for foreign investment, and private enterprise gradually permitted. The results were spectacular – China maintained average annual growth rates above 9 percent for three decades, lifting hundreds of millions of people out of poverty without the social disruption seen in Russia and other post-communist countries. The global export of economic ideology from 1973 to 2000 reveals both the power and limits of economic ideas. The Chicago model produced mixed results – success in some countries, disaster in others. Countries that adapted foreign economic ideas to local conditions and maintained policy flexibility generally fared better than those that applied ideological prescriptions rigidly. The period demonstrates that economic policies cannot be transplanted wholesale from one context to another, and that the most successful economies blend market mechanisms with appropriate government intervention. As economist Dani Rodrik observed, "Markets work best not when states stand aside, but when they actively support them."

Chapter 7: The Breaking Point: Market Fundamentalism Faces Crisis (2007-2008)

By 2007, faith in the self-regulating power of markets had reached its zenith. Alan Greenspan, who had chaired the Federal Reserve since 1987, embodied this philosophy. A disciple of Ayn Rand in his youth, Greenspan maintained a profound conviction that financial regulation was counterproductive because it encouraged a false sense of safety. "I was certainly not hired to implement regulatory policy that I thought was misguided," he later explained. This hands-off approach extended across the financial regulatory system, with agencies competing to reduce oversight rather than strengthen it. When the Federal Reserve received reports of predatory mortgage lending practices, officials showed little interest, saying they were concerned only if the broader economy was threatened. The housing market became the focal point of this regulatory neglect. Beginning in the late 1990s, mortgage lending standards deteriorated dramatically. Subprime loans – made to borrowers with poor credit histories – grew from 5 percent of mortgage originations in 1994 to 20 percent by 2006. Many of these loans featured adjustable rates that would reset to much higher levels after an initial "teaser" period. Others required no documentation of income or assets – so-called "liar loans." These practices were enabled by securitization, which allowed lenders to sell mortgages to investment banks, who packaged them into mortgage-backed securities and sold them to investors worldwide. This "originate to distribute" model removed the incentive for lenders to ensure borrowers could repay their loans. Meanwhile, the financial industry was creating increasingly complex instruments based on these mortgages. Collateralized debt obligations (CDOs) repackaged the riskiest portions of mortgage-backed securities into new securities that rating agencies inexplicably gave AAA ratings. Credit default swaps – essentially insurance policies against default – multiplied the risks. By 2007, the market for these derivatives had grown to $62 trillion, more than the value of the world's annual economic output. The mathematical models used to price these instruments assumed housing prices would never fall nationwide – an assumption that proved catastrophically wrong when the housing bubble burst in 2006. Iceland provided a microcosm of the global financial excess. This small island nation with just 300,000 people had embraced financial deregulation with particular enthusiasm. Between 1998 and 2008, Iceland's banking system grew from roughly the same size as its economy to nine times larger. The country's three main banks borrowed heavily on international markets to fund aggressive expansion, including the acquisition of foreign companies and real estate. When credit markets froze in 2008, these banks could not refinance their short-term debt. Their collapse in October 2008 was so complete that Prime Minister Geir Haarde went on television to report that the economy was being sucked into a maelstrom that could end in "national bankruptcy." The global financial crisis that began in 2007 and accelerated in 2008 represented the breaking point of market fundamentalism. The collapse of Lehman Brothers in September 2008 triggered a worldwide financial panic that required massive government intervention to prevent a complete economic meltdown. The Federal Reserve pumped trillions of dollars into the financial system, while the U.S. Treasury took ownership stakes in the largest banks – actions that would have been unthinkable just months earlier. The crisis spread beyond finance to the real economy, resulting in the deepest recession since the Great Depression. Unemployment in the United States reached 10 percent, while housing prices fell by more than 30 percent nationally. The crisis revealed the fatal flaws in the intellectual framework that had guided economic policy for decades. Markets had not efficiently priced risk; financial institutions had not acted in their long-term self-interest; and the invisible hand had not guided the economy toward stability. As Greenspan himself admitted in congressional testimony, "I found a flaw in the model that I perceived as the critical functioning structure that defines how the world works." The 2008 crisis thus marked not just a financial collapse but the intellectual bankruptcy of an economic doctrine that had dominated policy-making for more than three decades. The economists' hour had come to an end, leaving policymakers to grapple with its complex legacy.

Summary

The market revolution that transformed the global economy between 1969 and 2008 represented one of the most significant shifts in economic governance in modern history. What began as an intellectual rebellion against Keynesian orthodoxy evolved into a comprehensive restructuring of the relationship between markets, government, and society. Central banks prioritized price stability over full employment, governments dismantled regulatory frameworks that had governed industries for generations, tax systems were redesigned to emphasize growth over equality, and financial markets were liberated from constraints established during the Great Depression. This transformation delivered real benefits – lower inflation, reduced prices for consumers, greater economic dynamism, and unprecedented prosperity for some. But it also produced significant costs – rising inequality, financial instability, diminished worker power, and ultimately a crisis that shook the foundations of the global economy. The central lesson of this era is that markets, while powerful engines of prosperity, require appropriate governance to function effectively and equitably. The pendulum had swung too far toward market fundamentalism, creating systems that were efficient in the short term but ultimately unstable and socially divisive. Moving forward requires finding a better balance – harnessing the productive power of markets while ensuring their benefits are widely shared and their excesses effectively constrained. This means reconsidering the narrow focus on economic efficiency that characterized the economists' hour, and instead developing policies that integrate broader social values like stability, fairness, and sustainability. It also means recognizing that economic expertise, while valuable, must be balanced with democratic deliberation about the kind of society we wish to create. The market revolution transformed our world, but its limitations remind us that economics provides tools for analysis, not comprehensive answers to the fundamental questions of how we should live together.

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Binyamin Appelbaum

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