23 Things they don't tell you about Capitalism

In this essay, Chang tackles another major area of neoliberal thought, again highlighting the theme of Deconstructing Free-Market Economics Dogma. In a rare exception to the usual preference for government non-intervention in the economy, many neoliberal economists envision a role for government, albeit a narrowly defined one, in the administration of monetary policy. Milton Friedman, for instance, advocated expansion of the monetary supply by 4-5% from year to year. In the US, for example, the Federal Reserve can expand or contract the money supply, as well as raise or lower interest rates, to control the amount of money circulating in the economy, which in turn impacts the prices of goods and services.

Historically, neoliberal economists have targeted low inflation rates to encourage investment. Chang questions this singular focus on inflation, arguing that overall stability has not been served well by these policies. While his analysis is necessarily somewhat perfunctory, limited by the essay’s scope, Chang cites studies that provide more information about the potential causal relationship between monetary policy and financial instability.