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Positive signs regarding "The Future of Economics" from Davos

Mark D. White

As pointed out by Lynne Kiesling at Knowledge Problem, Nobel laureates Peter Diamond and Joe Stiglitz, along with (this year's ASE/ASSA keynote speaker) Robert Shiller and Brian Arthur, discussed "The Future of Economics," which moderator Martin Wolf summarizes at the Financial Times' The World blog. Kiesling condenses Wolf's summary (as reproduced below):

  1. First, orthodox economics had, in the years leading up to the crisis, become more a cult than a science, particularly with the assumption that what exists in competitive markets has to be the best possible outcome, since, if it were not, it could not exist.
  2. Second, let a thousand flowers of thought bloom.
  3. Third, the sociology of the profession – the need to define and defend a core discipline that can be taught to students and so determines what it means to be an economist – militates against such heterodoxy.
  4. Fourth, human beings are not rational calculating machines.
  5. Fifth, time matters in economic processes, which are, in general, not reversible and not characterised by any sort of equilibrium.
  6. Sixth, the world is not computable.
  7. Seventh, being a study of complex human behaviour, in which the world is created by human understand [sic] and motivations, economics is hard.
  8. Eighth, in theory it is right and proper to abstract in order to focus on a specific phenomenon. In addressing policy, this is irresponsible.
  9. Ninth, even though economists get much wrong, they still have much to offer to non-economists who tend to assume that economic problems are far more simple than they actually are.
  10. Tenth, there is a great danger that in rejected the most simplistic pro-market mantras, economists and policymakers will embrace even more dangerous and naïve statism.

In my opinion, these are fantastic, especially 4, 6, 7, and 9 (concerning the complexity of economics as a social science and popular misunderstandings of that), 8 (about the responsible conduct of policy analysis), and 10 (cautioning against extreme reactions to the crisis). I just hope people are listening.

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