rodrik184_SUSAN WALSHPOOLAFP via Getty Images_jerome SUSAN WALSH/POOL/AFP via Getty Images

Beware Economists Bearing Policy Paradigms

US President Joe Biden's administration has embarked on a bold and long-overdue departure from the economic policy orthodoxy that has prevailed in the US and much of the West since the 1980s. But those who are seeking a new economic paradigm should be careful what they wish for.

CAMBRIDGE – Neoliberalism is dead. Or perhaps it remains very much alive. Pundits have been calling it both ways these days. But either way, it is hard to deny that something new is afoot in the world of economic policy.

US President Joe Biden has called for a vast expansion of government spending on social programs, infrastructure, and the transition to a green economy. He wants to use government procurement to rebuild domestic supply chains and bring manufacturing jobs back to the United States. His Treasury Secretary, Janet Yellen, is pushing for a globally coordinated increase in corporate taxes. Jerome Powell, Chair of the Federal Reserve, traditionally the most hawkish arm of government on price stability, is playing down inflation fears and lending his support to fiscal expansion.

All of these policy changes represent a sharp departure from the conventional wisdom in Washington. Do they also augur a new economic policy paradigm?