Intellectual entrepreneurs and U.S. International monetary policy change in the early 1970s

Abstract

ABSTRACT This study analyzes U.S. international monetary policy change in the early 1970s, with a focus on the role of intellectual entrepreneurs. Drawing on the literature regarding neoliberalism, policy entrepreneurs, and punctuated equilibrium, the author claims that laissez-faire economists—most notably, Milton Friedman and George Shultz—effectively exploited an external shock in persuading key policy audiences and undermining the existing policy regime. Their entrepreneurship, as well as economic ideas, facilitated the turn to a monetary system based on market-determined exchange rates. As such, this research bridges different aspects of neoliberalism: intellectual and policy aspects. Also, it contributes to the scholarship on policy entrepreneurs by suggesting a new strategy: policy neglect. Policy entrepreneurs may refrain from fully implementing existing rules, which, in punctuated equilibrium, can lead to non-compliance on a large scale, instigating a radical policy shift. Further, this research responds to a recent call to examine contextual factors that affect policy entrepreneurship. The policy domain of foreign economic affairs poses distinct challenges and opportunities for policy entrepreneurs, with special implications for policy venue shopping and non-traditional policy audiences.