The neoliberal model driving United States economic policy since the 1970s has failed and needs to be replaced. Market Humanism is the best option. It is a ‘full stack’ framework that starts with a moral grounding, uses a coherent and connected body of validated behavioral science and economic data, and then generates policy proposals.
A brief historical review:
After The Great Depression, the United States adopted what some economists called modern liberalism (as opposed to classical liberalism which focuses on unregulated markets, private property, and individual choice), an approach centered on:
- a proactive federal government managing the economy through taxation, public spending, and fiscal policy to tame market extremes and prevent major depressions;
- supporting organized labor to ensure good wages and stable employment and thereby strengthen the middle class;
- maintaining a social safety net (Social Security, Medicare, Medicaid, unemployment insurance) to protect citizens from systemic economic instability;
- regulated capitalism (market regulation) to preserve private enterprise and fair markets, guarantee banking security and lending fairness while curbing monopolies and protecting consumers;
- fixed international exchange rates to support global trade and limit current manipulation and wild currency shifts.
This approach was dramatically successful (though not for everyone) and the United States enjoyed the longest and largest stretch of economic growth and prosperity in its history. In the setting of post World War 2 prosperity, liberalism began to emphasize social issues: racism, segregation, Civil Rights, Women’s Rights, the War on Poverty, and the environment. Conservative opposition to liberalism’s economic policies had always existed behind the scenes, but the increased visibility and empowerment of previously marginalized groups was threatening to those had long been the default - and systemically favored - majority. (An example of relative deprivation theory.) The wealthy and their allies in the business world were unhappy at the constraints of modern liberalism, which they saw as barriers to profit making.
It is in this setting that the neoliberal consensus (political theory) and neoliberalism (that accompanying set of economic policies) arose in the 1970s. Although they came to dominate United States politics and policy under the Republican administration of Reagan, they became the norm also for the Democratic Party. (Both Clinton and Obama largely accepted the neoliberal framework. Biden argued for and attempted supporting workers and the middle class but was unable to make substantive changes in the overall operating system of the economy.) During the 50 years of our neoliberal experiment, we have experienced the following:
- soaring inequality as the neoliberal wealth pump massively widened the gap between the top and bottom;
- lower growth in employment and GDP;
- constraints on creativity and innovation: since the sole purpose of the economy and corporations is to efficiently produce wealth (Milton Friedman in 1970), neoliberalism only fosters innovation that results in profit, not innovation that results in other benefits;
- corporate concentration and the growth in size and influence of monopolies;
- anti-labor and anti-union policies with stagnating wages and increased job insecurity;
- offshoring of jobs in pursuit of increased corporate profits through cheap labor;
- privatization of previously public goods like education, which benefitted the wealthy but immigrated the poor;
- a weakened safety net at the same time the profit-driven economy was increasing the need for a safety net, often demanded in the interest of ‘austerity’;
- undermining public health as market (profit) driven health care left millions uninsured and underinsured and turned healthcare into a commodity rather than a service;
- some notable figures include: Friedrich Hayek, Milton Friedman, Ludwig von Mises, and James M. Buchanan, Margaret Thatcher, Ronald Reagan, and Alan Greenspan.
Fortunately, there is an alternative: market humanism.
Market Humanism, the Cliff Notes version:
Market humanism is a new economic paradigm based on several decades of economic research and data, knowledge from the growing science of human behavior and decision making, focused on middle-out rather than trickle-down benefits, and founded on the core principle that the purpose of an economy is not profits but human thriving. Market humanism asks not merely, “Is the economy growing?” but “Who is benefiting, what kinds of lives are being made possible, and what human purposes does the economy serve?” Some core concepts are:
- The purpose of the economy should be to improve human lives, not generate wealth. (A rising GDP does not necessarily mean that people are healthier, more secure, freer, or better able to live meaningful lives.)
- Markets are tools we create and can manage, not natural forces that follow some set of natural laws.
- Markets can be designed to encourage innovation, coordinate complex human activity, and solve human problems. Market outcomes depend partly on who has bargaining power, political influence, ownership, and control over economic rules.
- Markets should be judges by how well they solve human problems in a way that improves human lives, not by how much wealth they generate.
- People are not abstract rational actors motivated overwhelming by self-interest and profit (Homo economicus) but are complex social creatures dependent on cooperation and motivated also by fairness, trust, dignity, empathy (Homo sapiens).
- Governments and markets should function as partners should function to serve public rather than private purposes.
- Democracy and civil society cannot survive the extreme inequality and concentrated economic (and therefore political) power that neoliberalism creates. (If you are not sure about this, remember the game of Monopoly. If you play long enough, eventually one person inevitably owns or controls everything on the board. EVERYTHING.)
Several items of interest addressed my market humanism but not neoliberalism:
- Economies are not closed systems in Pareto equilibrium (where if someone gains, someone must lose) but dynamic ecosystems that grow and adapt.
- Humans are inherently cooperative social species rather than competitive combatants.
- GDP (or other wealth metrics) have value but not valence: they show the SIZE of an economic change but not the benefit. For example, a company that makes a product that causes cancer and generates $1B in profit and a company that makes a product that prevents or cures cancer and generates $1B in profit contribute equally to GDP - but not to human well being.
- Economics focuses very heavily on trade, but the overwhelming majority of human economic activity is in production, not trade.
Do you want to know more about market humanism?
Eric Beinhocker and Nick Hanauer, “Market Humanism: A New Paradigm for a New Era”
The clearest single introduction. It explains the framework through four major shifts: from self-interest to cooperation, equilibrium to evolutionary complexity, growth to human flourishing, and supposedly “free” markets to markets shaped by institutions and power. This is the best place to begin.
Eric Beinhocker and Nick Hanauer, Markets Built for Humans: Creating an Economy for People, Planet and Democracy
A shorter, accessible briefing designed for policymakers, journalists, advocates, and general readers. It introduces market humanism as an alternative to both neoliberal orthodoxy and economically destructive populism.
Oxford Martin School lecture, “Market Humanism: Towards a New Paradigm for the Economy and Economics”
A recorded lecture and discussion in which Beinhocker and Hanauer explain how findings from economics, behavioral science, anthropology, political science, and complexity science fit together.
Beinhocker and Hanauer, “The Economic Experiment That Upended Reality”
Uses minimum-wage research as a concrete example of how evidence can overturn the assumptions of conventional neoliberal economics. It is especially useful for readers who prefer an applied case rather than an abstract overview.
Anne Kim, “Can Capitalism Be Saved?”—interview with Beinhocker and Hanauer
A conversational introduction emphasizing the distinction between maximizing economic efficiency and promoting human flourishing. It may be easier for newcomers than a lengthy theoretical essay.
Background reading:
(I used ChatGPT to generate a list of books about the major concepts that comprise market humanism. Note: I have not read these books.)
- Elinor Ostrom, Governing the Commons
Shows how communities can develop cooperative institutions to manage shared resources without relying exclusively on either private markets or centralized government. - Amartya Sen, Development as Freedom
Provides a highly readable argument that prosperity should be evaluated by people’s real capabilities—their health, freedom, security, education, and ability to participate in society—rather than income or GDP alone. - Eric Beinhocker, The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics
Supplies much of the complexity-economics foundation. It presents the economy as an evolving, adaptive system rather than a machine that naturally settles into equilibrium. - Mariana Mazzucato, The Value of Everything
Examines the difference between creating genuine social value and extracting income through market power, financial manipulation, or control of scarce assets. - Mariana Mazzucato, Mission Economy
Argues that governments can actively organize public and private capabilities around major social goals rather than merely correcting occasional market failures. - Dani Rodrik, Economics Rules
A concise explanation of what economic models can and cannot tell us. Rodrik emphasizes that different circumstances require different institutions rather than one universal free-market formula. - Daron Acemoglu and Simon Johnson, Power and Progress
Examines how technology’s benefits depend on political power, institutional choices, and the direction society gives innovation—not on technological change alone. - Karl Polanyi, The Great Transformation
The classic argument that markets are embedded in social and political institutions. Polanyi disputes the idea that a self-regulating market exists separately from society. - Elizabeth Anderson, Private Government
Explores the often-unacknowledged power employers exercise over workers and asks what democracy and freedom should mean inside economic institutions. - Martha Nussbaum, Creating Capabilities
A brief and accessible account of the capabilities approach: the idea that public policy should focus on what people are genuinely able to do and become. - Michael Sandel, What Money Can’t Buy
Discusses the moral limits of markets and the consequences of allowing market values to govern spheres such as education, health, citizenship, and civic life. - Kate Raworth, Doughnut Economics
Presents an economy as successful when it meets human needs while respecting ecological limits, rather than when it simply maximizes production and consumption.