Economic Rationalism

Economic rationalism is an Australian term in discussion of microeconomic policy, applicable to the economic policy of many governments around the world, in particular during the 1980s and 1990s.

Economic rationalists tend to favour deregulation, a free market economy, privatisation of state-owned industries, lower direct taxation and higher indirect taxation, and a reduction of the size of the welfare state. Near-equivalents include Thatcherism (UK), Rogernomics (NZ), and the Washington Consensus. To a large extent the term merely means economic liberalism, also called neoliberalism. However, the term was also used to describe advocates of market-orientated reform within the Australian Labor Party, whose position was closer to what has become known as the 'Third Way'.

The origins of the term are unclear. It seems likely that it arose independently in Australia, and was derived from the phrase "economically rational", used as a favorable description of market-orientated economic policies. Its first appearances in print were in the early 1970s, under the Whitlam government, and it was almost invariably used in a favorable sense until the late 1980s.

The now dominant negative use came into widespread use during the 1990 recession, and was popularised by a best-selling book Economic Rationalism in Canberra by Michael Pusey.