This is an ambitious book, and an important one. It asks one of the key questions of contemporary political economy: how to explain the rise of neoliberal economic policies in advanced industrialized countries. It answers this question by considering the rise of neoliberal policies in four countries—Britain, France, Germany, and the United States—in three policy areas—taxation, welfare, and industrial policy. Although the book's main focus is on important moments of policy change in the 1970s and 1980s, it considers these in the light of the preceding postwar period and uses them to illuminate more recent events. It notes that although in retrospect it may seem natural that the United States and the UK would have become neoliberal and France and Germany not, this was not at all obvious at the time. Much the contrary, since both the United States and the UK in the 1970s had more progressive tax policies, more egalitarian welfare states, and more anti-business industrial policies than France or Germany. The puzzle, then, is how to explain the transformations in all four countries, which left the United States and the UK much more neoliberal in tax policies, less egalitarian in welfare states, and arguably more pro-business.

Monica Prasad's theoretical argument is complex. The author suggests that countries with “adversarial” policies—meaning ones that are likely to split the electorate—and with electoral majorities that shifted between left and right were more vulnerable to neoliberal reform than ones in which the Right dominated throughout, and which produced less divisive or progressive policies. Her argument is that where politicians were able to exploit the kinds of “adversarial” divisions promoted by tax and welfare policies—which resulted in one portion of the electorate paying for the other—and by stringent regulatory policies that pitted government regulators against business, more radical change became possible once the bulk of the electorate's interests shifted to the other side as they became more middle class.

Prasad makes her case in two ways. First, she shows that none of the traditional explanations fully accounts for the neoliberal transformation of national economies—whether those which argue that globalization and capital flight caused a race to the bottom in terms of social protections, those which insist that business groups mobilized to protect their class interests, those which identify the rise of neoliberal ideas as the culprit, or those which explain the differing responses in terms of national cultures. Second, she argues that the best explanation for the success of reform efforts is one that focuses on the politicians who seized on ideas that resonated with the public, which they then used to electoral advantage in favorable institutional contexts.

In the United States, Prasad's story of the triumph of Reaganite neoliberalism is one of political entrepreneurs in fragmented institutions capable of gaining the advantage with supply-side ideas that were not necessarily sound economically but that nevertheless won over the electorate. In the UK, her story of Thatcherite neoliberal transformation is instead one in which government leaders, benefiting from more centralized institutions, developed ideas that served to convert the electorate to policies that radically altered the economy through reduced public spending and privatization of major industries and of council housing. In France and Germany, by contrast, the story is of economic transformation with a minimum of neoliberalism, in the former because Giscardian reform in particular was stymied by state-centered elites, in the latter because neoliberal political entrepreneurs in one part of Helmut Kohl's governing coalition were unable to overcome opposition by more left-leaning politicians in another part or to win over the majority of the electorate to their ideas.

The Politics of Free Markets is rich in empirical detail. Prasad's interpretations of that detail are sometimes controversial, her critiques of rival methodological approaches occasionally excessive. Substantively, the U.S. and UK cases are the most convincing. The discussion of Germany is idiosyncratic but interesting, whereas that of France, while accurate in its conclusions, is flawed, in particular with regard to the discussion of Valéry Giscard d'Estaing's 1970s neoliberalism and his failure to propose privatization—why would he even have imagined it at that time? Methodologically, moreover, Prasad is so intent on dismissing alternative arguments that she tends to caricature them, especially with regard to explanations in terms of national culture or of ideas.

The rejection of arguments in terms of ideas is the most surprising, however, since Prasad's own innovative methodological approach is itself all about ideas constructed through deliberation and debate and carried by political actors to win over electorates within given national policy and institutional structures. Such a rejection may result from her limited reading of the “ideas” literature, in which she assumes (wrongly) that it considers only economists' ideas, which she (rightly) shows were more often than not ignored by politicians unless they fitted their own political ideas. It may also be because she is intent on rejecting a particular approach to the explanation of ideas, which she sees as static, deterministic, and idealistic because it ignores interests and institutions. But in condemning so categorically all approaches to ideas in political science, she fails to recognize that her own methodology fits with the work of a growing group of ideational scholars (e.g., Sheri Berman, Mark Blyth, Craig Parsons, Colin Hay, Len Seabrooke, John L. Campbell) who can be considered part of the newest of the “new institutionalisms” in political science and sociology, which I call “discursive institutionalism” because it takes ideas and discourse seriously as constructive of interests, rather than just reflective of them, and sets these in an institutional context.

Finally, Prasad, by demonstrating the importance of ideas and discourse in an institutional context, also implicitly offers an answer to the problems of democracy that she herself raises in the introduction and elaborates in the conclusion, which comes down to “Beware majorities that shift from poor to rich in countries where the Left occasionally managed to institutionalize more politically liberal and economically progressive policies.” The real moral of the story, following from the logic of her own argument, is: “Beware politicians whose ideas and discourse seek to exploit those shifts in wealth, and hope instead for politicians with another set of ideas and a discourse capable of convincing vacillating electorates as to the best interests of their country.”