A set of controversial, free-market economic views have come to dominate our way of thinking.

Let’s travel back to 1947. 

It’s two years after the end of World War II, and economies across Europe are in ruin. In an international effort to stimulate growth, a policy of increased public spending is underway. Leading this movement is esteemed economist John Maynard Keynes. Keynes is convinced that public spending initiatives are the only way to get the economies of Europe back on track.

But a small, renegade group of economists, led by Friedrich Hayek, disagree. Hayek organizes a conference of this group on Mont Pèlerin, high in the Swiss Alps. While Hayek’s followers were in the minority back in 1947, it wouldn’t be too long before they rose to ascendancy.

The key message here is: A set of controversial, free-market economic views have come to dominate our way of thinking.

Some of those at Mont Pèlerin would go on to form the Chicago School of economics. At the heart of the Chicago School is the idea that governments and regulators should stay out of the economy as much as possible. The free market should decide where money is made and spent, not public officials. 

The school provided the theoretical backbone to Reaganomics and Thatcherism, which introduced radical free-market ideology to the US and UK respectively in the 1980s. Along with some other ideologically similar ideas, it’s been dominant ever since, and many see it as the only correct way of thinking about economics. But are they right? 

Well, let’s look at a couple of examples to see how such economic thinking works in the real world.

In 2007, the global economy came crashing down. Markets and banks nosedived, and countless people lost their jobs and livelihoods. But whose fault was it? A lot of people have blamed the financial regulators – pointing toward governments and lawmakers, rather than the banks themselves.

If you think about it, that’s like blaming the police for a burglary, which doesn’t really make sense. So why should it make sense when it comes to finance? Well, this is exactly the kind of thinking the Chicago school encourages.

Economic theory is also behind how we think about climate change. It’s common these days to adopt free-rider thinking – the belief that because our own contribution to change is so minimal, it’s not worth doing at all. This pessimistic worldview was granted economic legitimacy by American economist Mancur Olson in the 1960s. And it’s already helping to destroy our planet.

Free-rider thinking and Chicago School thinking are far from the objective truth. But many people think about the economy and society in this way. In the following blinks, you’ll find out why a lot of this thinking just doesn’t add up.