For 40 years in the United States, through Republican and Democratic administrations alike, a certain brand of economic thinking held pride of place. It was an economics of markets, governed by regulations as light as possible under a government of low expenditures, low taxes, balanced budgets, and private ownership of capital and land. In this understanding, control of inflation was the central task of the central bank and the pursuit of full and fair employment largely the province of education and job training in an otherwise liberalized “labor market.”
It is true that actual policies and institutions in the United States never corresponded to this ideal type. Taxes were cut, infrastructure was neglected, but military spending and social security kept the government big. Regulations were pared and then sporadically repaired. Many public services remained public and occasionally new ones, like Medicare Part D and the Affordable Care Act, were added. In crises, the nostrums of free-market nonintervention were quickly—though always temporarily—abandoned in a panicky moment of pragmatism.
