Economic Policy Becomes a Science
Economic Policy Becomes a Science
The Rise of Welfare Economics, and the Chicago Alternative
This chapter explores Chicago's interaction with the mainstream of economics that conditioned its emergence. The catalyst to the postwar change was the mainstream adoption of welfare economics, which drew policy implications directly from economic theory. Composing a new approach, it directly specified what the “optimal” policy should be. This measure of decisiveness was in stark contrast to Classical Liberal methodology. For a Classical Liberal economist, policy did not follow directly from scientific economic theory. Instead, economic science and theory provided a useful tool that shed light on policy problems, but, on its own, had no immediate policy implications. These consequences could only be determined once one considered all the issues, not just a subset covered by economic theory. As a result, policy had to be deliberately separated from science.
Keywords: economics, welfare economics, Chicago, economic theory, Classical Liberal methodology, economic science, policy problems, science
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