Barry Eichengreen, Professor of Economics and Political Science at the University of California, discusses the economics of our future generations
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.
This presumption is almost certainly mistaken. It reflects the same error made by scholars of technology who argue that all of the radical breakthroughs have already been made. As this view is sometimes put, the next 20 years will see no breakthrough as revolutionary as the steam engine or the transistor. Technological progress will be incremental rather than revolutionary. Indeed, insofar as the increments are small, the result is likely to be slower productivity growth and a “Great Stagnation.”
In fact, the history of technology has repeatedly refuted this pessimistic view. We can’t say what the next radical innovation will be, but centuries of human experience suggest that there will be (at least) one.
Similarly, we can’t say what the next revolution in economic analysis will be, but more than a century of modern economic thinking suggests that there will be one.
All of this suggests that the economics textbook of 2033 will look very different from the economics textbook of today. We just can’t say how.
Indeed, one might question the very premise that, two decades from now, there will be textbooks as we know them. Today, introductory economics is taught using a textbook in which an eminent professor authoritatively bestows the conventional wisdom on his or her (typically, his) students. Knowledge, as encapsulated in the textbook and interpreted by the professor, is delivered from above.
This, of course, is also how newspapers traditionally delivered the news. Editors and publishers assembled and collated stories, and the newspaper that they produced was then delivered to the subscriber’s doorstep. But the last decade has seen a veritable revolution in the news business. News is now assembled and disseminated via Web sites, wikis, and the comment sections of blogs. News, in other words, is increasingly delivered from the bottom up. Rather than relying on editors, everyone is becoming their own news curator.
Something similar is likely to happen to textbooks, especially in economics, where everyone has an opinion and first-hand experience with the subject. Textbooks will be like wikis, with faculty adopters and students modifying text and contributing content. There still may be a role for the author as gatekeeper; but the textbook will know longer be the font of wisdom, and its writer will no longer control the table of contents.
The outcome will be messy. But the economics profession will also become more diverse and dynamic – and our children’s economics will be healthier as a result.
The opinions expressed here are those of the author, not necessarily those of the World Economic Forum. Published in collaboration with Project Syndicate.
Author: Barry Eichengreen is Professor of Economics and Political Science at the University of California, Berkeley and participated at the World Economic Forum’s Annual Meeting 2013 in Davos
Image: Students participate in a simulated stock market during classes at MIT REUTERS/Brian Snyder