Economic rationalism

Economic rationalism is an Australian term often used in the discussion of macroeconomic policy, applicable to the economic policy of many governments around the world, in particular during the 1980s and 1990s.

Economic rationalists tend to favour neoliberal policies: deregulation, a free market economy, privatisation of state-owned industries, lower direct taxation and higher indirect taxation, and a reduction of the size of the welfare state. Near-equivalents include Thatcherism (UK), Rogernomics (NZ), and the Washington Consensus. To a large extent the term merely means economic liberalism, also called neoliberalism. However, the term was also used to describe advocates of market-oriented reform within the Australian Labor Party, whose position was closer to what has become known as the 'Third Way'.

As it is a phrase used by Max Weber in The Protestant Ethic and the Spirit of Capitalism the highest likelihood is the term was drawn from there and its modern denotations can all be accommodated within Weber's usage. Its recent usage arose independently in Australia, and was derived from the phrase "economically rational", used as a favorable description of market-oriented economic policies. Its first appearances in print were in the early 1970s, under the Whitlam government, and it was almost invariably used in a favorable sense until the late 1980s.

The now dominant negative use came into widespread use during the 1990 recession, and was popularised by a best-selling book Economic Rationalism in Canberra by Michael Pusey.

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