We need Neo-Neoliberalism

The principles of Econ 101 are the solution, not the problem

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As Eminem himself said, “everybody, just follow me, 'Cause we need a little controversy, 'Cause it feels so empty without me.” I’m back from a 3-year hiatus. The game felt too empty without me. So welcome back to Rational Exuberance— another potentially controversial corner on the internet.

There’s a lot to talk about. A lot has happened. I won’t go too in depth on this post—but I do want to offer my broad-strokes takes on what I’m seeing.

Populism forges on across the world. America has started to kneecap its own economy. There is a House bill proposing to blow up the deficit. Housing is still painfully expensive.

I’m convinced we need a return to neoliberalism. Actually, return is a bit of a misnomer. I’ve become more convinced that we need neoliberalism because we never really tried it.

Think about it—congestion pricing, a classic econ 101 issue. Every econ textbook has been promoting this for the last 40 years. Did the ‘neoliberal USA’ of Regan and Clinton adopt this? Of course not. The US’s first implementation of congestion pricing just happened in Manhattan five months ago. It only took 40 or so years.

How about the welfare state? Did the US totally gut the welfare state because of Milton Friedman? The evidence doesn’t necessarily point to that conclusion.

Climate change? Carbon taxes is the neoliberal proposition. Ultimately, it never got tried.

And as we look at the genuine economic problems of our day, neoliberalism seems to have little to do with the cause, but potentially everything to do with the solution.

Just a few examples—housing. Housing costs are the single biggest economic challenge facing the average person in the developed world today. The litany of veto points allows rent-seeking localities to inhibit development and impose crushing regulations to halt housing production. The housing crisis is fundamentally a regulatory issue, with specific deregulation being critical to the solution.

Healthcare? Still exorbitantly expensive. Restrictions on medical schools, hospital development, and medical licensing make services artificially expensive. The same goes for other forms of occupational licensing—and to the university system. With the rising cost of childcare, we see a similar pattern.

Local veto points have allowed NIMBYs to cripple the rollout of green technologies and major infrastructure projects.

Tariffs are kneecapping American manufacturers by driving up input costs and stifling investment.

The demographic pyramid will force America to open its borders to more legal immigration—or at least a rotational worker program—in order to prevent the complete bankruptcy of the state (that is, of course, assuming AI doesn’t replace most jobs in the next few years).

A lot of the bread-and-butter issues facing the average American are self-inflicted wounds. We need pragmatic, limited governance that gets out of the way and lets America build.

That said, we do need to update some of our neoliberal priors on state intervention. In critical industries like battery and chip technologies, we need public-private partnerships to foster competitiveness and safeguard national security.

At the same time, America faces cultural questions that neoliberalism alone won’t solve. I can admit that I don’t have all the answers to those questions. But those focused on cultural revitalization also need to grapple with the fact that you still need an economic policy. And “bringing back the factories” and “keeping out immigrants,” apart from being economically problematic, don’t seem likely to achieve those well-intentioned goals.

To quote Eminem again:

“Nobody wants to see Marshall no more.”

He was referring to Marshall Mathers. I’m referring to Alfred Marshall. But either way, we’re witnessing a broad shift away from Econ 101 principles, free markets, and the very fundamentals that could help us overcome today’s challenges. We abandon these principles at our peril.