Stephen C. Nelson has written a splendid book. Indeed, it is the most sophisticated account to date of how economic ideas and their policy implications shape the relationships between international economic organizations, such as the International Monetary Fund, and their borrowers. While this is not the first account of how a specific brand of economic ideas popularly associated with neoliberalism is woven into the organizational culture of the Fund, The Currency of Confidence is the first book that embeds those institutionalized ideas into concrete causal mechanisms about the treatment of borrower governments. In the book, these mechanisms are shown to shape variation on three discrete dimensions: access to credit, comprehensiveness of policy conditionality, and the rigor deployed in enforcing the loan conditions in question.

In my view, Nelson deploys very compelling evidence that material interest and power are not the only essential features of IMF–borrower relations, as much of the conventional wisdom has it. Nor are institutional pathologies the definitive constructivist concept regarding the lives of international organizations (IO)s. Instead, he shows that the closer the degree of fit between the economic ideas of IMF mission staff, executive directors or managing directors, and those of the officials of the borrower countries, the more likely that the country in question will get fewer conditions and less pressure to enforce those conditions. Furthermore, while many have conjectured in the past that the Fund changes the political outcomes of the borrowing countries, Nelson is the first scholar to demonstrate how this happens in concrete and very systematic empirical terms.

The book is exemplary in the fine assembly of quantitative and qualitative methods, and generations of graduate students should use it as the gold standard in mixed methods. Nelson marshals several original databases drawn from IMF programs from the 1980s and 1990s, refined and dynamic quantitative analyses of those data sets, and a granular comparative historical excursus of Argentina’s experience with the IMF between 1976 until 2001. The book is written with verve (a rare asset in mixed-method books) and exhibits a high sensitivity to local detail. Last but not least, the work is replete with smoking guns. IMF chief economists stating openly that policymakers operate under Keynesian uncertainty (p. 23) are at the top of my list of constructivist favorites. In brief, The Currency of Confidence stands to be a new classic on the shelf of the literature on IO–borrower relations.

That said, the book has two problems whose persistence reflects the lack of systematic interdisciplinarity in political economy in general. The first problem concerns the core concept of “neoliberalism,” while the second has to do with the standards of proof to be used in demonstrating that someone’s professional experiences can be reliably coded as proxies of neoliberal views.

Specifically, while the author’s core argument is sound, it has a serious problem of conceptualization that reflects some of the field’s faulty understanding of neoliberalism as a body of economic ideas. For Nelson, the bundle of theoretical principles posited as constituting neoliberalism has four main pillars: Economies are best represented through formal modeling showing how markets settle in equilibrium; competitive markets are efficient on average; free trade is welfare improving; and economic agents have rational beliefs (pp. 8–9).

While these principles sound familiar to every political economist schooled in the international political economy canon, they would be puzzling to historians of economic ideas, a scholarly community that political economists could benefit from engaging with more. Rather than serving as an exclusive marker of neoliberalism, the use of complex formal models seeking equilibria was in fact the methodological brainchild of postwar neo-Keynesianism, a known synthesis of neoclassical and Keynesian ideas encased in a fascination with mathematizing economics. Indeed, midcentury neo-Keynesians were challenged from both the right (Austrian School, Chicago School heavyweights) and the left (post-Keynesians) for their econometric hubris. Could it be, then, that what the Fund recognized as familiar in Argentina and other borrowing country elites—assumed by the book to be intellectually neoliberal—was not shared ideas but shared methodologies and tools to interpret the world? Could it be that it was this shared formal modeling training, along with shared vocabularies and calculative devices—rather than economic ideas—that gave the IMF the confidence that the technocrats they worked with “did the right thing”? In other words, perhaps it was tools, not the ideas, that did the trick.

Similarly, the proposition that liberalized trade is welfare improving was, with some qualifications, the very cornerstone of postwar neo-Keynesianism. Likewise, the Bretton Woods system was set in place in part to prevent a return to competitive protectionism. Neo-Keynesians had been almost as hostile to structuralist trade theories as neoliberals were, and the latter only added a difference of degree, as they pleaded for trade freed from all restrictions. Furthermore, while rational expectations are undoubtedly the exclusive identity marker of neoliberalism, they should not be conflated with rational beliefs, an early neoclassical postulate that the neo-Keynesian models used as much as their neoclassical predecessors. This last point brings to the fore Nelson’s problematic tendency to conflate neoclassical economics and neoliberalism. While neoclassical economics lent itself to extremely diverse hybridizations, with bundles of economic ideas that need not even be supportive of capitalism (remember market socialism), as a school of economic thought, neoliberalism is a much more specific, narrower, and harder to hybridize historical formation that is steeped in the New Classical (counter)revolution in economics during the 1970s.

As political economists, we could all benefit from reading more history of economic thought, and even a book as fine as Nelson’s suffers from the consequences of not doing so. These problems are not just semantic. The loose use of the term “neoliberalism” generates serious empirical misdiagnoses and puzzling policy implications. For example, the qualitative analysis of Argentina carried out in this book is weakened by the implicit assumption that the world of economic ideas in the 1970s and 1980s was such that whoever was not a structuralist was a neoliberal (Chapters 4 and 5). This is not entirely accurate. Structuralist economics was also contested by neo-Keynesians, and if Keynes had been alive it is likely that he would not have liked what the Economic Commission of Latin America had to say.

Arguably, the structuralist–neoliberal dichotomy applied to the 1960s and 1970s is the reflection of a related weakness of the book: the assumption that work experience in the Bretton Woods institutions and/or training in a highly ranked U.S. economics department or business school at any time is a reliable proxy for neoliberalism (pp. 58–59). In making this assumption, Nelson draws on a time-honored, yet ahistorical, sociologically thin, and empirically flawed strand of literature in political economy.

First, many students of the IMF would object that the Fund operated on an orthodox brand of neo-Keynesianism until the mid-1970s, and so working there in, say, the late 1960s was hardly indicative of neoliberal proclivities proper. Second, this is even truer of the World Bank, which was (and still is to some extent) an extremely diverse set of professional ecologies, particularly until the early 1980s. Third and most importantly, however, getting a degree anywhere in elite U.S. institutions outside of Chicago or Carnegie Mellon during the 1960s did not make one a neoliberal. Until well into the late 1970s, the American economics professoriate was solidly neo-Keynesian, and the neoliberals who did not make it to the Chicago safe haven were trying to eke out a living in maverick business schools and less prestigious places. Moreover, MIT was a neo-Keynesian stronghold up until the cusp of the 1980s. In my study of Spanish economics, I found that at the height of the Keynesian era at the London School of Economics, Spanish graduate students did their Ph.D.s with Lionel Robbins, a diehard anti-Keynesian, and so it all really depended on who one’s advisor was.

At a minimum, for Nelson’s book this means that an unknown number of borrowing country officials identified as having a U.S. economics degree before the 1980s (to be on the safe side) may have been wrongfully coded. This does not mean that many of the economists that Nelson identified as neoliberals were not neoliberals by the 1980s or 1990s. Certainly, many of the invoked names were. Yet what it does mean is that they may have been neoliberal for other reasons than the core variable of the book (socialization experience during graduate school). Indeed, it would be utterly sensible to argue that resocialization in new institutional settings, career incentives, hypocrisy traps and other events can plausibly make one lose beliefs from decades ago acquired in graduate school.

Nelson admits that graduate school and working experience in Bretton Woods is a crude indicator (p. 61) and goes on using it in the quantitative model. Given the large number of coded individuals, extensive calibration would have been unrealistic, perhaps. Yet at a minimum, it would not be inapt to use the history of economic ideas scholarship, sociological accounts of the discipline, and interviews with major figures in economics (both are enormously useful in my experience) to code the intellectual profile of the relatively limited number of U.S. elite economics departments that matter for Nelson’s story, and thus anchor the quantitative analysis in less ahistorical microfoundations. Coding two to three publications of the graduate school advisors around the time of graduation would not be excessively daunting for a representative sample either. Such alternative approaches are time consuming, but the same blunt indicator (elite U.S. training in economics = neoliberal beliefs) often persists in the qualitative case studies. Harvard, MIT, and Columbia are presumed to be incubators of neoliberalism during the late 1950s (p. 95), a contestable proposition. In the same case studies, the proposed neoliberal metric (graduate training in elite U.S. economics department) is inconsistently applied. Examples of those automatically considered to be neoliberal include, for example, an ambassador to Washington, DC, in the early 1960s, at the height of Keynesianism (p. 103), having a Harvard business degree from 1943, the apex of war economy Keynesianism (p. 105), serving as IMF executive director during the late ‘50s (p. 120).

As for the policy recommendation that follows (the IMF should hire more economists with non-U.S. graduate degrees in order to ward off neoliberal bias), we should be skeptical. Recent research on the training of European and Latin American economists suggests that these non-U.S. graduates outdo their American counterparts in terms of this bias. As Marion Fourcade concluded in her Economists and Societies (2010) opus, even French economics training has become “Americanized.”

All great books have flaws, and if Imre Lakatos was on the money, the point of progressive scientific work is to advance the state of the art through a conversation about the flaws. A superb book, The Currency of Confidence is no exception. Indeed, it is an excellent baseline from which to start honing and fine-tuning the conceptual and methodological tools with which we toil.