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What Should Economists Be Doing?

Economics is now at a stage when we need to examine the assumptions in the woodwork that are hindering our ability to understand and map the new world of digital technology and inter-linkages that we are just beginning to inhabit. “Normal science” must continue, but it also is time for paradigmatic thinking.

ITHACA – The unexpected financial crash of 2008, the persistence of the slowdown that occurred in its wake, the failure of conventional monetary and fiscal policies to revive economies, and the cracks in global trade that we are witnessing now have all given rise to a widespread disquiet about conventional economics. As David Graeber wrote in a recent review of Robert Skidelsky’s new book Money and Government: The Past and Future of Economics, “There is a growing feeling … that the discipline of economics is no longer fit for purpose.”

Rather than offering a specific critique or solution, I want to draw attention to some foundational issues concerning the evaluation of economics. What makes assessing the discipline so challenging is the very nature of the subject, which is a strange mixture of science and commonsense. This is the reason for many policy mistakes by politicians – they take it to be all commonsense.

Another challenge arises from the fact that, unlike for most natural sciences, what economists say can affect what they study. Consider the frequent complaint that no economist has been able to predict, say, stock market crashes or exchange-rate fluctuations. Now, assume such an economist exists. If she predicts a stock market crash next month, the crash will happen immediately, not next month, because people will sell their stocks right away. Moreover, the sole reason for the immediate crash may well be that the economist predicted it. An economist who is known to be able to forecast crashes with a lead time, and can demonstrate this ability, is a logical impossibility.