Attempts to reform health care in the United States have always been met with profound skepticism by the average American. While in many European countries, public health care is viewed preferably or – at the least – less ominously, Americans view government intervention in developing health care programs as an affront to their freedoms. The greater the government intervention, the greater the compromise of the economic liberalism that made America become the most prosperous nation in history. Opposing government intervention in economic liberalism has become a cornerstone argument defending “traditional American values” which espouses the virtues of free enterprise and the breakdown of protectionist barriers on the macro and micro levels of the marketplace. Neoclassical economists argued that individuals were inherently rational in that their goal is always to maximize their utility and minimize their losses. To opponents of government intervention in the market,
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“The Great Depression, like most other periods of severe unemployment,” wrote American economist Milton Friedman, “was produced by government mismanagement rather than by any inherent instability of the private economy.” Friedman’s early career was defined by his support of the Keynesian principles that embraced large-scale government intervention through spending in order to stimulate a depressive economy. The Keynesian Revolution enjoyed success in the aftermath of the Great Depression and World War II where governments around the world circulated money into their economies by investing in rebuilding infrastructure and boosting employment. As the economic growth the world enjoyed from the Keynesian fiscal policies melted into an environment of stagflation of the 1970s (which involves low growth and high inflation), Friedman began to investigate the flaws in the Keynesian philosophy of dealing with economics. His epiphany set the groundwork for the development of a new branch of neoclassical economics: monetarism. “The difficulty lies not in the new ideas, but in escaping from the old ones,” wrote British economist John Maynard Keynes in his 1935 text The General Theory of Employment, Interest and Money. “As these old ideas ramify, for those brought up as most of us have been, into every corner of our minds.” Keynes was a maverick economist. The popular school of economic thought in the early 20th century stressed the importance of the micro level and private sector of economics in influencing the public and macro level institutions of the economy. The popular thought was that because humans were rational in their pursuit to maximize their commodities and satisfaction, the free market would remain efficient and operate properly because it offered the best opportunity for individuals to create an economy that could insure maximum utility. In the wake of an economic collapse during the Great Depression, John Keynes launched what would be known as an economic “Keynesian Revolution” that stressed the importance of the mixed economy: one that valued the neoclassical importance of the micro level, with the need for accountability and stability protected by the macro level. The story of the rise of Keynesian economics is fascinating. From the late 19th century onwards, neoclassical economics theory dominated the mainstream discourse of macro and microeconomics. Under the assumption that humans are rationale and their decisions are rooted in efforts to maximize the utility of their purchasing power, neoclassical economics theory stressed the importance of microeconomics influence on macro level markets. Heavily reliant on mathematical models and statistics, neoclassical economics theory asserted that a free market and a focus on individualistic methodology offered reliable foundations by which to navigate and forecast maximum utility in a marketplace. Yet, neoclassical economists’ belief in the fixed behaviors of individuals desire to maximize profit in their daily life has felt increased scrutiny as the global economy has shown itself to be more The creators of neoclassical economics differentiated from other schools of economics in their understanding of what determines the utility of a commodity in the market. At the height of the Industrial Revolution, the market place was understood in terms of classical economic theory. In his text The Wealth of Nations, Adam Smith explained that the labour theory of value ruled that the value of a product was linked to the “the toil and trouble of acquiring it.” The value of an item was determined by the costs and effort invested in producing it. As the intensification of industrialization started settling down, a new breed of economists began to interpret what influenced value from a different perspective. Neoclassical economists started moving away from classical economists views of the market from the macro-level, and diverted more attention to the micro-level. For the creators of neoclassical economics, the most important determiner of utility of a product was not in any concrete value in and of itself, but value was mainly determined by consumer’s own perception. |
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