A Note on the Debate over 'Economic Rationalism' in Australia: An Application of Albert Hirschman's Rhetoric of Reaction

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Abstract: Applies Albert Hirschman's 'rhetoric of reaction' to the post-1980 controversy over 'economic rationalism', that is, the applicability of mainstream economic logic to the reform of the Australian economy. Argues that this sheds light not only on the nature of economic policy in Australia but also on the explanatory power of the Hirschman taxonomy.

1 Introduction

This note seeks to examine the debate surrounding 'economic rationalism' in Australia in the 1990s from the perspective of McCloskey's (1983) 'rhetorical persuasion' as a means of discourse in economics. More specifically, we apply Hirschman's (1991) 'rhetoric of reaction' taxonomy to the controversy over applicability of economic logic to the reform of the Australian economy which occurred from the early 1980s onwards. The note thus represents an exercise in the contemporary history of economics with special reference to a very recent Australian debate. The Hirschmanian pattern of rhetoric is adopted for two main reasons. Firstly, it provides a useful organisational tool for examining the debate over economic rationalism in Australia. And, secondly, the Hirschman typology furnishes an alternative analytical approach to the existing literature on economic rationalism as perhaps best exemplified by John Quiggin's (1996) Great Expectations and William Coleman's and Alf Hagger's (2001) Exasperating Calculators. In particular, Exasperating Calculators adopts amusing adversarial 'for' and 'against' metaphors to capture the flavour of the debate, including 'the destroyers', 'the public's prosecutors', 'hits', and so forth. Our method of constituting the debate places this gladiatorial arrangement in a formal theory of polemical discourse in the social sciences.

We apply the Hirschman typology to the 'reactionary' arguments presented by opponents of the economic reform policies supported by economic rationalism as well as to the counter 'progressive' arguments marshalled by the economic rationalist advocates of reformist policies. We argue that this methodology sheds light not only on the nature of the debate over economic rationalism in Australia, but also on the explanatory and organisational power of the Hirschman taxonomy in examining real-world debates over economic reform.

The term economic rationalism has been traced back in its English usage to at least as far back as Max Weber's (1904-05, 1930) The Protestant Ethic and the Spirit of Capitalism and R.H. Tawney's (1926, 1938) Religion and the Rise of Capitalism. However, Michael Schneider (1998, p. 48) argues that it first appeared in Australian policy debates in an editorial in the National Times on 27 August 1973 in the context of a government plan to expand the Australian Industries Development Corporation. But its widespread and pejorative Australian employment seems to stem from Michael Pusey's influential Economic Rationalism in Canberra (Coleman and Hagger 2001, pp. 7-11). A difficulty in dealing with the debate over economic rationalism derives from determining the precise definition of the expression. For example, in their examination of both the popular and professional literature, Coleman and Hagger (2001, p. 37) conclude that 'the term "economic rationalism" has no generally accepted meaning' and the subsequent debate occurred within a 'definitional gap' (p. 148). Nevertheless, for our present purposes we shall take economic rationalism to imply a belief in the efficacy of market forces and the need for limited government in the face of market failure and government failure.

2 The Rhetoric of Reaction

Beginning with his seminal paper in 1983 Journal of Economic Literature, Donald McCloskey sought to persuade the economics profession that economic argumentation and theorising may be characterised as rhetorical persuasion. In his Knowledge and Persuasion in Economics, McCloskey (1994, p. xiii) distinguished between the Platonic and Aristotelian definitions of 'rhetoric', with the former 'mere flattery and cosmetics' and the latter 'all the available means of (uncoerced) persuasion'. …