Economic rationalists tend to favour economically liberal policies: 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.
However, the term was also used to describe advocates of market-oriented reform within the Australian Labor Party, whose position was closer to what has become known as the "Third Way".
The now dominant negative use came into widespread use during the 1990 recession; it was popularised by Michael Pusey's best-selling book Economic Rationalism in Canberra.
Some have denied that such criticisms are accurate and claim that the term refers only to rational policy formulation based on sound economic analysis, and it does not preclude government intervention aimed at income redistribution, correcting market failure, etc.
Others have accepted the accuracy of the description but have argued that the adoption of radical free-market policies is both inevitable and desirable.