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Our Children’s Economics

From project Syndicate by Barry Eichengreen:

The economics profession has not had a good crisis. Queen Elizabeth II may have expected too much when she famously asked why economists had failed to foresee the disaster, but there is a widespread sense that much of their research turned out to be irrelevant. Worse still, much of the advice proffered by economists was of little use to policymakers seeking to limit the economic and financial fallout.

Will future generations do better? One of the more interesting exercises in which I engaged at the recent World Economic Forum in Davos was a collective effort to imagine the contents of a Principles of Economics textbook in 2033. There was no dearth of ideas and topics, participants argued, that existing textbooks neglected, and that should receive more attention two decades from now.

Economists working on the border of economics and psychology, for example, argued that behavioral finance, in which human foibles are brought to bear to explain the failure of the so-called efficient markets hypothesis, would be given more prominence. Economic historians, meanwhile, argued that future textbooks would embed analysis of recent experience in the longer-term historical record. Among other things, this would allow economists-in-training to take the evolution of economic institutions more seriously.

Development economists, for their part, argued that much more attention would be paid to randomized trials and field experiments. Applied econometricians pointed to the growing importance of “big data” and to the likelihood that large data sets will have significantly enhanced our understanding of economic decision-making by 2033.

Overall, however, the picture was one in which the economics of 2033 differed only marginally from the economics of today. A textbook two decades from now might be more sophisticated than this year’s edition, fully integrating contributions that today constitute the frontiers of economic research. But it would not differ fundamentally in structure or approach from today’s economics.

The consensus, in other words, seemed to be that there would be nothing in the next 20 years as transformative as Alfred Marshall’s synthesis of the 1890’s or the revolution initiated by John Maynard Keynes in the 1930’s. In contrast to the economics of those years, economics today is a mature, well-established discipline. And, like any mature discipline, it advances incrementally rather than in revolutionary steps.


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