profound insight, that confrontation with contrary evidence may actually augment and sharpen the conviction and enthusiasm of a true believer, was explained as a response to the cognitive dissonance evoked by a disconfirmation of strongly held beliefs. The thesis that humans are more rationalizing than rational has spawned a huge literature, but one that gets little respect in economics.25 Cognitive dissonance and the responses it provokes venture well beyond the literature in the philosophy of science that travels under the rubric of Duhem’s Thesis, in that the former plumbs response mechanisms to emotional chagrin, whereas the latter sketches the myriad ways in which auxiliary hypotheses may be evoked in order to blunt the threat of disconfirmation. Duhem’s Thesis states that there are an infinite number of auxiliary hypotheses that may be invoked to explain why an empirical event did not actually impugn the target doctrine at risk: instead, uncontrolled factors intervened. Philosophy of science revels the ways in which it may be rational to discount contrary evidence; but the social psychology of cognitive dissonance reveals just how elastic the concept of rationality can be in social life.
Leon Festinger and his colleagues illustrated these lessons in his first book (When Prophecy Fails) by reporting the vicissitudes of a group of Midwesterners they called “The Seekers,” who conceived and developed a belief that they would be rescued by flying saucers on a specific date in 1954, prior to a great flood coming to engulf Lake City (a pseudonym). Festinger documents in great detail the hour-by-hour reactions of the Seekers as the date of their rescue came and passed with no spaceships arriving and no flood welling up to swallow Lake City. At first, the Seekers withdrew from representatives of the press seeking to upbraid them for their failed prophecies, but soon reversed their stance, welcoming all opportunities to expound and elaborate upon their (revised and expanded) faith. A minority of their group did fall away; but Festinger notes they had tended to be lukewarm peripheral members of the group before the crisis. Predominantly, the Seekers never renounced their challenged doctrines, as reported by Festinger. At least in the short run, the ringleaders tended to redouble their proselytizing, so long as they were able to maintain interaction with a coterie of fellow covenanters.
In a manner of speaking, the legacy of renunciation of philosophy and methodology in graduate education led much of the orthodox economics profession, and many of the denizens of the neoliberal world of think tanks and media outlets, to behave from 2008 onward in ways rather similar to the Seekers. The parallels between the Seekers and the contemporary economics profession, on the one hand, and the Neoliberal Thought Collective, on the other, are, of course, not exact. The Seekers were disappointed when their world didn’t come to an end; economists and neoliberals were convinced their Great Moderation and neoliberal triumph would last forever, and were disappointed when it did appear to come to an end. The stipulated turning point never arrived for the Seekers, while the unsuspected turning point got the drop on the economists. The Seekers garnered no external support for their doctrines, indeed, quitting their jobs and contracts prior to their fated day; the economists, and more clearly, the Neoliberal Thought Collective, persisted in being richly rewarded by many constituencies for remaining stalwart in their beliefs. The public press was never friendly toward the Seekers; it turned on the economists only with the financial collapse. (There are now plentiful signs it has been reverting to its older slavish adoration, however.) But nonetheless, the shape of the reactions to cognitive dissonance turned out to be amazingly similar. The crisis, which at first blush might seem to have refuted almost everything that the NTC and the economic orthodoxy stood for, was in the fullness of time more often than not trumpeted from both the left and the right as reinforcing their adherence to, respectively, neoclassical economic theory or the neoliberal tradition.
In the last few years, there may have opened up a divergence between the explicit behavior of professional economists and that of other groups who may have displayed some allegiance to neoliberal doctrines. This distinction, insisted upon in chapter 1, now begins to bite. The difference comes with the economists readily accepting that they do share some common doctrines and intellectual orientations. Their PhD from a ranked institution does double duty as a membership card; few of them spend any time doubting whether “economics” as a body of doctrine exists. Thus it will prove relatively straightforward to demonstrate that they have not revised their erstwhile doctrines dating from before the crisis. But the denizens of the think tank planisphere and journalists and political actors in these contentious times may not subscribe so intently or openly to a fixed, discrete set of doctrines in quite the same unself-conscious manner. (Indeed, chapter 6 will propose a stratified spectrum of crisis response under neoliberalism.) Consequently, demonstration of the fundamental premise of cognitive dissonance theory—that people don’t shift allegiances in the throes of contravening evidence—will require more elaborate documentation for the neoliberals. Once again, the imperative to treat both groups separately will prove clarifying.
Does Neoliberalism Really Exist?
The really fascinating battles in intellectual history tend to occur when some group or movement goes on the offensive and asserts that Something Big really doesn’t actually exist. A short list of blasts from the past would include: the earth-centered universe, God, the Philosopher’s Stone, atoms, the vacuum, the divine right of kings, perpetual motion machines, evolution, a formally complete axiomatic system, aether, global warming, society, and human consciousness. As chapter 1 noted, we have just passed through a period when a substantial cadre were insisting that orthodox neoclassical economics didn’t exist. Nothing gets the blood roiling like the assertion that we have been arguing over nothing. Whatever the eventual outcome, these negations are the flash points that tend to force thought out of its complacent ruts and tend to mark periods of lush proliferation of theoretical and empirical innovation. I would like to explore the possibility that we might approach the concept “neoliberalism” with the same appreciation. In order to accomplish this, a certain modicum of intellectual history is indispensable.
We elect to start with the manifest phenomenon that most people whom outsiders would identify as neoliberals would reject the label outright, and indeed, deny the position exists as a coherent doctrine. For them, it is just another swearword bandied about by their opponents, rather like “fascism” or “equality.” Some go further, adopting the nominalist position that if “we” refuse to call ourselves neoliberal, then no one else has the right to do so, either. More recently, one can find certain authors on the left advocating that the doctrine is so ephemeral and diffuse that it displays insufficient quiddity for analysis.
The nominalist position can be rapidly dispensed with. As my collaborators and I have insisted elsewhere, the people associated with the doctrine did call themselves “neo-liberals” for a brief period lasting from the 1930s to the early 1950s, but then they abruptly stopped the practice.26 In the early phases, various figures such as Alexander Rüstow vied for bragging rights in coining the term.27 Others simply acknowledged its currency. To give one pertinent example from many, Milton Friedman wrote in the Norwegian journal Farmand in 1951:
A new ideology . . . must give high priority to real and efficient limitation of the state’s ability to, in detail, intervene in the activities of the individual. At the same time, it is absolutely clear that there are positive functions allotted the state. The doctrine that, on and off, has been called neoliberalism and that has developed, more or less simultaneously in many parts of the world . . . is precisely such a doctrine . . . But instead of the 19th century understanding that laissez-faire is the means to achieve this goal, neoliberalism proposes that competition will lead the way.28
Friedman was still flirting with something like the label as late as 1961, in an early draft of what later became Capitalism and Freedom:
This use of the term liberalism in these two quite different senses renders it difficult to have a convenient label for the principles I shall be talking about. I shall resolve these difficulties by using the word liberalism in its original sense. Liberalism of what I have called the 20th century variety has by now become orthodox and indeed reactionary. Consequently, the views I shall present might equally be entitled, under current conditions, the “new liberalism,” a more attractive designation than “nineteenth century liberalism.”
In another historical phenomenon that I feel has not received sufficient attention, soon after many of the neoliberals