What Should Economics Do in the Next Decade?

Over at Economic Principals, David Warsh summarizes 55 short papers about the big questions that face economics. Among the suggestions:

Most popular of the pitches, judging from the number of SSRN downloads, is, Why Don’t People and Institutions Do What They Know They Should?, by David Cutler, of Harvard University  (a pungent exploration of the complexity of aligning incentives within and among organizations); followed by A Complete Theory of Human Behavior, by Andrew Lo, of the Massachusetts Institute of Technology(confront and reconcile inconsistencies across disciplines, complete with summer camps for newly-minted PhDs);  Research Opportunities in Social and Economic Networks, by Matt Jackson, of Stanford University (study the patterns of interaction that most economic models abstract away); and Modeling and Measuring Systemic Risk, by Markus Brunnermeier, of Princeton University, Lars Peter Hansen and Anil Kashyap, both of the University of Chicago, Arvind Krishnamurthy, of Northwestern University, and Lo, of MIT (build network models and collect new and often sensitive data) .

In macroeconomics: Randall Krozsner, of the University of Chicago, offered a concise blueprint for improving the dialogue between financial economics and macro, beginning with more attention to economic history. Kenneth Rogoff, of Harvard, described a three-item wish list, including a better cost-benefit analysis of financial-market regulation. Martin Neil Baily, of the Brookings Institution, described a series of fundamental questions and appended a strong brief for evolutionary economics. Ricardo Reis, of Columbia University, suggested investigating more carefully the potential upside of transfer programs such as Medicaid, tuition assistance, disability insurance and early retirement for combating recessions. Glenn Hubbard, of Columbia, called for more modeling and estimation of fiscal policy multipliers “outside of the heat of battle of individual policy debates.” And Herbert Gintis, of the Santa Fe Institute, plumped for more agent-based modeling.

Read David’s entire post for many more.

2 thoughts on “What Should Economics Do in the Next Decade?”

  1. I suggest a more humble but more useful task. Recent data refute some economic “factoids” so often taken for granted, that labor compensation will rise in line with productivity gains and that the labor share of the value of output is stable. (See BLS, Monthly Labor Review, 2011.) Neither recovery nor equity is being well served by the current trend that distributes value away from workers who are likely to spend and toward businesses that refuse to invest. The causes of this trend should be investigated.–Cornelia Strawser

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