Daim’s appraisal of our academics


March 23 ,2019

Daim’s appraisal of our academics

by Tajuddin  Rasdi

Daim Zainuddin recently made two important points in his speech at Universiti Teknologi Malaysia in Skudai.

Image result for daim zainuddin

Firstly, he said the Malays are being fed a narrative bordering on the idea that their race and Islam are both under threat, and that more affirmative policies will be needed in the new Pakatan Harapan government in the coming years and decades.

Secondly, and this is the main point of my article, he said Malay academics appear to be doing nothing at all but are letting this narrative play out to the opportunism of certain political parties and selfish NGOs.

I have been writing to the media for 20 years, saying absolutely the same thing, but it has earned me a negative perception from the Malay establishment especially in the public universities and even the previous higher education ministry.

Daim’s statement came as a sweet surprise to me as he was never one of my favourite politicians.

I know him as a savvy businessman who grew up within the Malay patronage system. As the economic and corporate worlds are outside of my understanding, I have shied away from trying to know anything about the man himself.

But a few days ago, I was surprised to find him articulating a historical, religious and political construct of what I consider a “Malaysia-Malay construct” as opposed to what I term a “Melayu-Malaysia” one.

A Malaysia-Malay construct is simply a Malay who understands his or her own heritage and faith within a Malaysian constitutional, multi-religious and multi-ethnic acceptance of co-existence, while a Melayu-Malaysia construct is a Malay who is just a Malay, then, now and forever, living in a land geopolitically defined as “Malaysia”. No compromise, no apologies.

The Melayu-Malaysia expects others to change for the sake of his race and faith, without the need to understand, tolerate or even acknowledge the importance of the existence of others as partners in nation-building.

The academics of this country have become purely self-serving and disinterested in nation-building.

The story of a disinterested academia began in the 1980s.

The Universities and University Colleges Act, or UUCA, was instituted to kill off or control student political activities and also that of the academics.

Under UUCA, no academic can speak or write to the media or the public without getting permission from the authorities. That basically sums it up.

A few academics were charged under the act, one of them the late Fadzil Noor who was the PAS president and an academic at a public university.

The involvement of the academia in nation-building basically died. With this law, the culture of academia turned inwards to a concentration on teaching until the idea of “world class” and being “internationally recognised” in rankings came into being in the late 1990s.

With this new mantra, academics are said to be successful if they publish in “high impact” or Scopus journals and receive million ringgit grants.

It would also sweeten the deal if an MoU were signed with European or American or Western universities deemed to be “world class” and “international”. Whether such ties would produce a culture of research and inquiry was disregarded as long as universities “dapat nama”, and a minister was there to observe the deals being signed. That’s it.

After the turn of the 21st century, public universities went full blast on rankings by journals with overseas publications. Locally published books, encyclopaedias and journals were regarded as third rate.

In the old days, books and media writings commanded a high percentage and weightage but now there is hardly a column to put them in on an evaluation or KPI form.

Once, I had to put my books, articles and 200 encyclopaedia entries in a column marked “other publications”.

I used to read Aliran, whose writers are academics from universities in the north. I found their writings to be fresh, bold and highly academic.

After 10 years, I noticed their designation was still “associate professor” and wondered when these people would be called “professor”.

I soon found out that they had migrated to the National University of Singapore. There is no future in Malaysia for “public intellectuals”.

I was lucky enough to be appointed a full professor before all the crazy journal hype began to take place in universities. I managed to squeeze by with my books, papers and other writings after attending the professor interview twice.

As my writings increasingly touched on society and the nation, my appointments at committees on the national level became fewer and fewer.

I no longer got invitations to public talks from universities, because I was told that I am “controversial” in the corridors of the chancellery.

So the only appointment letters from public universities that came to me were to be an examiner for PhD candidates and evaluator of professorships and associate professorships in architecture.

The coup de grace came after I went on optional retirement, leaving after 27 years of teaching and writing at a public university, exiting the campus alone and uncelebrated.

My application as contract professor to two public universities was rejected on grounds of me being “controversial”.

I have mentioned that the key to our future is the reeducation process of the Malay mind by Malay academics who understand that Islam is strong only if you read and understand, and not sit in front of the TV or the mosque podium listening to an ustaz giving his half-baked ideas of religion and society.

The fate of our country hinges on academics changing the narratives of what is important for Malaysians in the coming decades and centuries, to be in line with the goals of sustainable development outlined by the United Nations.

We won’t go very far listening to Friday sermons condemning progressive thinkers or LGBT that may have caused Allah to turn the hot weather on us.

Forget about STEM education if academics do not speak about it.

We are facing a Malay-Muslim society that has grown up with the Islamic resurgence of the 1980s with most Malays conscious about the afterlife and religious values for their children and society.

The International Islamic University Malaysia as well as Istac and Ikim were supposed to guide the Malays into a new era of modern and democratic understanding of Islam vis-a-vis nation-building and coexistence.

But where were these academics when two muftis encouraged the use of “kafir” on non-Muslim citizens, or when calls for “jihad” against the enemies of Islam came from the national mosque?

Daim’s speech must give pause to all the vice-chancellors of public universities to rethink their KPI for academics.

We need more public intellectuals to reform and rewrite the narratives of the nation, to bring social and religious harmony and sustainable wealth to the country.

We don’t need “high impact” journals to measure our success.

Just ask the man on the street whether he should vaccinate his children or whether the world is flat or defending minority groups would start a tsunami somewhere.

The views expressed are those of the author and do not necessarily reflect those of FMT.

 

Mourning the Passing of Economist Alan Kruger


March 20, 2019

Normally this newsletter would be concerned with events in the wider world. But right now I just have to write about the shocking death — reportedly by suicide — of my former Princeton colleague, the economist Alan Krueger, at the age of 58.

I thought I knew Alan reasonably well and never saw a hint that something like this might be coming. But people’s lives often feel very different from the inside than they look on the outside.

What I can talk about is Alan’s work and why it mattered so much to other economists, myself very much included. For his research arguably did more to change how we view the economy than that of any other modern economist.

Alan’s most influential, paradigm-shifting work was his 1992 study with David Card on the effects of minimum-wage increases.

Before Card and Krueger, most economists just assumed that raising the minimum wage leads to lower employment. But Card and Krueger realized that this was a proposition you can test. Their initial study compared employment in New Jersey and Pennsylvania before and after New Jersey raised its minimum wage. And they found no adverse effect on employment — if anything, a small rise in New Jersey relative to its neighbor.

His study opened a new frontier in economic research. Economics is always bedeviled by the lack of controlled experiments; there are so many things going on in the economy that it’s hard to tell what’s causing what. But unilateral state wage hikes amount to natural experiments that tell you far more than standard economic methods.

Furthermore, this was a method that could be replicated many times, and has been over the years, right up to the recent round of minimum wage increases in a number of cities. And the preponderance of the results have confirmed Card and Krueger’s initial finding: raising minimum wages has far less negative impact on jobs than standard economics would have predicted.

This has implications that go far beyond minimum wages themselves. What Card, Krueger and the research that follows tell us is that labor markets are a lot more complicated than we thought, that market power matters a lot and that there may be much more room for public policy to raise wages in general than Econ 101 would have it.

This paper alone would secure Alan Krueger’s reputation as one of the greatest labor economists ever. But he did far more, on everything from growth and the environment to the effects of computers on wages — and he was a public servant too. He will be sorely missed.

 

Does GDP truly reflect a nation’s progress?


 

March 18,2019

Does GDP truly reflect a nation’s progress?

Opinion  |
by Lim Su Lin

Published:  |  Modified:

 

COMMENT | In the eyes of the world today, Malaysia is seen as a relatively affluent upper-middle income nation.

According to World Bank projections, we are expected to reach the high-income threshold sometime between 2020 and 2024.

Our economy has transformed impressively since post-Independence. From a primary resource-based, agriculture-dominant settings, Malaysia experienced industrial ‘boom and growth’ in the 1970s.

The heyday lasted roughly 30 years, followed by a gradual tapering of export-oriented industrialisation, and the tandem rise of the services sector, at the turn of the century.

Today, Malaysia’s economy continues to transform and advance, in the wake of digitalisation and accelerated technology adoption rates.

One of the ways that economists, politicians and top-level decision-makers measure our country’s progress is by referring to key national economic indicators, such as Gross Domestic Product (GDP).

Seen through the lens of GDP, Malaysia’s development story in the past decade has been one of steady progress, and encouraging year-on-year growth, as seen in the chart below.

While these are indeed comforting figures, has this economic progress also brought about improvements in other dimensions of our society? To what extent does GDP tell us the full story of socio-economic development?

A limited proxy of human well-being

To answer this question, we first need to ask ourselves if GDP is an accurate proxy for human well-being and quality of life. The brief answer to that is, not really.

GDP is typically measured by adding the following:

  • a nation’s personal consumption expenditure (households’ payments for goods and services);
  • government expenditures (public spending on the provision of goods and services, infrastructure, debt payments, etc.);
  • net exports (the value of a country’s exports minus the value of imports); and
  • net capital formation (the increase in value of a nation’s total stock of monetised capital goods).

In other words, it is a very specific tool designed for the particular purpose of measuring the flow of goods and services produced within the market, and which are publicly traded for money.

The US Bureau of Economic Analysis describes the purpose of measuring GDP as being to answer questions such as:

  • how fast is the economy growing;
  • what is the pattern of spending on goods and services;
  • what percent of increase in production is due to inflation; and
  • how much of income produced is being used for consumption, as opposed to investment or savings.

Today, many – though not all – governments continue to treat GDP not only as a measure of national economic activity, but also as if it were the default indicator of how well its people are faring.

However, this is a short-sighted view.

On the one hand, it might be true that increased economic activity spurs creation of more jobs, providing income for people to access basic necessities such as food, clothing and housing, and, over time, opportunities to accumulate capital and so enjoy more material comforts.

However, it is also important to recognise that human welfare is not exclusively based on material well-being.

Past a certain level, well-being and happiness is also determined by other social and environmental factors and activities, such as volunteer work, social capital formation within families, the costs of crime and depletion of natural resources.

These are all important indicators of economic welfare, societal well-being and quality of life, yet are entirely excluded from GDP measurements.

GDP conceals inequality

Another major weakness of using GDP as a measure of progress is that it measures how much economic activity there is, but not necessarily who might be benefitting from this economic activity.

The graph above depicts national trends in Malaysian household incomes, ranging over roughly the past two decades, sourced from the Department of Statistics (The figures shown are absolute, i.e. before adjusting for inflation.)

From 1997 to 2016, the figures show that top 20 percent earners (T20) saw their average household incomes rise from about RM8,000 to RM17,000, while income for the middle 40 percent (M40) increased at a slower pace, only from around RM3,000 to RM7,000.

What should be of greatest concern is that, compared to both these groups, the bottom 40 percent (B40) households experienced extremely lagging income growth, increasing from RM1,000 to a mere RM3,000 over two decades.

Comparing income differences at both start and end points, T20 and M40 households were initially separated by an absolute earnings gap of RM6,000 in 1997, increasing to RM11,000 in 2016.

Meanwhile, the original gap between T20 and B40 was RM8,000, and this stretched to RM15,000 in 2016.

In other words, the absolute earnings gap between the top 20 percent earners, versus the middle and bottom 40 percent households, have almost doubled in the past two decades.

The staggering, and ever-increasing, gap between richer and poorer households tells us this: although rising GDP figures may tell a shining story of economic growth and progress, not everyone is benefitting from this growth.

Closer to reality is that scores of individuals and families have been left behind in the development story. These are Malaysians, who still lack the economic wherewithal to meet their basic living needs, let alone enjoy a good quality of life.

Disguised poverty

Talking about inequality brings us to confront poverty, another major issue that has largely been disguised in national indicators and statistics.

The graph above shows official poverty counts sourced from the Department of Statistics, and trends in the reduction of poverty over the years.

One glance at these figures, and it would seem as if there is almost no poverty left in Malaysia!

According to the data, the official poverty rate has fallen from nearly 50 percent in 1970 to just 0.4 percent in 2016 (the latest year available). This supposedly amounts to one of the lowest poverty rates in the region.

Yet, relative poverty (defined as earning less than 60 percent of the median income) has risen by more than 50 percent, to three million households since 1995, based on a 2018 Khazanah Research Institute report on the state of Malaysian households.

According to the same report, 40 percent of 7.5 million households nationwide are still considered relatively poor, pointing to a starkly different reality from the rosy picture of virtual poverty eradication depicted in official figures.

Poverty line set too low

One important reason for this discrepancy lies in the limitations of the Poverty Line Index (PLI), the official indicator used to measure poverty in Malaysia.

In simple terms, PLI is an income-based index which calculates the minimum monthly income requirements of households to fulfil basic survival needs, such as food, clothing, shelter and transport.

These calculations are used to determine a cut-off threshold for poverty.

The problem with measuring poverty using this ‘cost of basic needs’ approach is that it sets the bar at an extremely low threshold, and computes income needed to fulfil only the barest minimum of necessities, instead of realistically representing the standards of what an average family would need to survive.

Currently, Malaysia’s national PLI is set at RM920 per household per month, or a little over RM7 per person per day, at average household size.

Considering the high level of living costs, not to mention the diversity of needs and demographics of households across states and regions, RM920 clearly is far from what most Malaysian families would realistically need to thrive and live decently, let alone survive.

In the government’s Household Income Surveys, PLI is further broken down into regional categories: for Peninsular Malaysia, the cut off is RM 960, whereas for Sabah, it is RM 1,180 and Sarawak, RM 1,020. But even this threshold is too low.

In comparison, Japan defines poverty as being the income of a household at or below half of the median household income. This method of estimating poverty “relatively” is the same as that used in the UK and most other OECD (Organisation for Economic Co-operation and Development) nations.

Though still not a perfect definition, it is a far more meaningful interpretation compared to an absolute poverty line that is severely out of touch with current needs.

Key takeaways

To sum up, it is important to question indicators and “grand” statistics that are commonly bandied in Malaysia’s economic debates, and understand what they truly represent.

With the GDP example, it is important to remember that economic indicators may measure the size of a country’s economic activity, but not necessarily capture the true state of economic welfare, or society’s quality of life.

On the other hand, certain other indicators, like poverty rates and the PLI, might be better “barometers” of societal wellbeing.

Yet, as argued above, the current dimensions of measuring poverty in Malaysia do not translate to a meaningful index. Rather, what it does is hide the true extent of poverty in our country.

Often times, the power of simple, easy-to-grasp figures can mask the presence of critical issues that are setbacks to human-centred development and well-being: chronic income inequality among different households for instance, or lingering impoverished and vulnerable communities.

These matters require critical attention from the authorities and those involved in steering policy decisions.

There needs to be more criticism of how certain measures and indicators have been popularised as proxies for national progress, and collective effort to develop better measures, hand-in-hand with a strong and sustained reform process.

If we can collectively accept that the overall goal of an economy is to sustainably improve human well-being and quality of life, then we will not be satisfied with maintaining the status quo.

Instead, we will make it a priority to unmask the realities that have been shoved under the carpet, and push for necessary changes, so that there will be more equally balanced development, and a better future for all citizens of this country.


LIM SU LIN is a policy analyst with the Penang Institute. A History graduate from Cambridge University, her research interests lie primarily in promoting good mental health as a criterion for public policy, and to carry out research into the social, economic and cultural factors that help to enhance mental well-being and support recovery from mental distress.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

The Case for a Bold Economics


March 12,2019

The Case for a Bold Economics

Although economists are well positioned to imagine new institutional arrangements, their habit of thinking at the margin and sticking close to the evidence at hand encourages an aversion to radical change. But, when presented with new challenges, economists must envision new solutions – as a new group is determined to do.

https://www.project-syndicate.org/commentary/bold-evidence-based-economics-by-dani-rodrik-2019-03

 

CAMBRIDGE – At the end of 1933, John Maynard Keynes sent a remarkable public letter to US President Franklin Delano Roosevelt. FDR had taken office earlier that year, in the midst of an economic slump that had pushed a quarter of the labor force into unemployment. He had launched his ambitious New Deal policies, including public works programs, farm subsidies, financial regulation, and labor reforms. He had also taken the US off the gold standard to give domestic monetary policy freer rein.

Image result for keynes and FDR

Keynes approved of the general direction of these policies, but also had some sharp criticism. He worried that FDR complicated the economic recovery effort by broadening his policy agenda unnecessarily. FDR was doing too little to increase aggregate demand and too much to change the rules of the economy. Keynes took particular aim at the National Industrial Recovery Act, which, among other things, greatly expanded labor rights and fostered independent unions. He fretted that the NIRA would sap business confidence and weigh on the federal bureaucracy, without making a direct contribution to recovery. He wondered whether some of the advice FDR was getting “is not crack-brained and queer.”

Image result for american default book

Keynes did not think much of FDR’s economics, but at least he was a sympathetic critic. Because much of the New Deal ran against the prevailing economic orthodoxy, FDR’s policies had little support from leading economists of the day. For example, as Sebastián Edwards explains in his fascinating recent book American Default, the predominant view among economists was that breaking the dollar’s link with gold would create havoc and uncertainty. The only bona fide economist in FDR’s “brain trust” was Rexford Tugwell, a little-known 41-year old Columbia professor who did not even teach graduate students.

Will economists prove more helpful today, at a time when the challenges we face are nearly as pressing as those during the Great Depression? Unemployment may not be a severe problem in most advanced countries currently, but large segments of the labor force seem cut off from economic progress. Record levels of inequality and poor earnings prospects for younger, less educated workers are eroding the foundations of liberal democracies. The rules that underpin globalization are badly in need of reform. And climate change continues to pose an existential threat.

These problems demand bold responses. Yet, for the most part, mainstream economists seem preoccupied with marginal fixes – a tax-code tweak here, a carbon tax there, perhaps a sprinkling of wage subsidies – that leave untouched the structures of power underwriting the rules of the economic game.

Economists can rise to the challenge by adopting a broader vision. Last month, I joined a group of prominent economists to launch an initiative that we have called “Economics for Inclusive Prosperity” (EfIP). From labor markets and finance to innovation policies and electoral rules, the goal is to advance ambitious policy ideas that pay much closer attention to inequality and exclusion – and to the power imbalances that produce them.

As Suresh Naidu, Gabriel Zucman, and I explain in our “manifesto,” neither sound economics nor convincing evidence support many of the dominant policy ideas of the last few decades. What has come to be called “neoliberalism” is in many ways a derogation of mainstream economics. And contemporary economic research, appropriately deployed, is in fact fully conducive to new ideas for creating a fairer society. Economics can be an ally of inclusive prosperity. But it is up to us economists to convince our audience of the merits of these claims.

Our network is made up of academic economists who believe new ideas can be developed without abandoning scientific rigor. The catchphrase of our day is “evidence-based policy.” Accordingly, our policy briefs are based on empirical analysis, using tools of mainstream economics. But, for us, an “evidence-based” approach is not one that reinforces a conservative bias in favor of policies at the margins of existing institutional arrangements; it is one that encourages experimentation. After all, how can we develop new evidence without trying something new?

Markets rely on a wide range of institutions to create, regulate, and stabilize them. These institutions do not come with predetermined forms. Property and contracts – the most elementary institutions required to make markets work – are legal constructs that can be designed in any number of ways. As we grapple with new realities created by technological innovation and climate change, questions about the allocation of property rights among different claimants become crucial. Economics does not provide definite answers here, but it supplies the tools needed to identify the relevant tradeoffs.

A common theme running through our initial set of policy proposals is the power asymmetries that shape the functioning of the contemporary global economy. Many economists dismiss the role of such asymmetries because there is little scope for power under conditions of perfect competition and perfect information. But in the real world that we examine, power asymmetries abound.

Who has the upper hand in bargaining for wages and employment benefits? Who dominates markets and who must submit to market forces? Who can move across borders and who is stuck at home? Who can evade taxation and who cannot? Who gets to set the agenda of trade negotiations and who is excluded? Who can vote and who is effectively disenfranchised? We argue that addressing such asymmetries makes sense not only from a distributional standpoint, but also for improving overall economic performance. Economists have a powerful theoretical apparatus that allows them to think about such matters.

Although economists are well positioned to develop institutional arrangements that go beyond what already exists, their habit of thinking at the margin and sticking close to the evidence at hand encourages an aversion to radical change. But, when presented with new challenges, economists must envision new solutions. Imagination is crucial. Not everything we try will succeed; but if we do not rediscover the value of FDR’s credo – “bold, persistent experimentation” – we will certainly fail.

  • Faruk Timuroglu  

    Read More

  • krempep @yahoo.com  

Why Economics Must Get Broader Before It Gets Better


March 9, 2019

Why Economics Must Get Broader Before It Gets Better

By

Even as the public’s skepticism toward their profession has grown, economists have continued to ignore increasingly obvious flaws in their analytical frameworks. A discipline long dominated by “high priests” must now adopt a more open mindset, or risk becoming irrelevant.

Image result for economists have failed

L-R: Stigltz- Hayek- Sowell-Keynes- Sen-Schwartz-Sachs- Friedman

NEW YORK – The economics profession took a beating after most of its leading practitioners failed to predict the 2008 global financial crisis, and it has been struggling to recover ever since. Not only were the years following the crash marked by unusually low, unequal growth; now we are witnessing a growing list of economic and financial phenomena that economists cannot readily explain.

Like Queen Elizabeth II, who famously asked in November 2008 why nobody had seen the crisis coming, many citizens have grown increasingly skeptical of economists’ ability to explain and predict economic developments, let alone offer sound guidance to policymakers. Some surveys rank economists among the least trusted professionals (after politicians, of course, whose trust economists have also lost).

A solid economic training is no longer regarded as a must-have for candidates for top positions in finance ministries and central banks. This marginalization has further weakened economists’ ability to inform and influence decision-making on issues that relate directly to their expertise (or what they would call their comparative and absolute advantage).

The profession owes its deteriorating reputation largely to excessive reliance on its own self-imposed orthodoxies. With more openness to interdisciplinary approaches and the broader use of existing analytical tools, particularly those offered by behavioral science and game theory, mainstream economics could start to overcome its shortcomings.Three recent developments underscore the urgency of this challenge. In the 12 months between the World Economic Forum’s 2018 and 2019 in Davos, those in attendance went from celebrating a synchronized global growth pickup to worrying about a synchronized . Notwithstanding the , neither the extent nor the speed of the change in consensus seems warranted by economic and financial developments, which suggests that economists may have misdiagnosed the initial conditions.

A second area of concern is monetary policy. Professional economists still have not spoken up clearly enough about the challenges facing the US Federal Reserve’s communication strategy, despite the fact that even slight misfires, such as occurred in the fourth quarter of last year, can trigger severe bouts of financial instability that threaten growth. Instead, they have simply continued to embrace the contemporary view that greater Fed transparency is always a good thing.

We have come a long way since the era of former Fed Chair Alan Greenspan’s “Fedspeak” (or, as he put it, “mumbling with great incoherence”). But that raises a new problem: illusionary precision. The Fed now follows every policy meeting with a release of statements, minutes, transcripts, blue-dot plots, and a press conference, signaling to markets a level of sophistication that is scarcely realistic in a world of fluidity and heightened uncertainty.

Rather than simply going along with the view that more is better, economists should be urging the Fed to adopt an approach more like that of the Bank of England, which emphasizes scenario analyses and fan charts. Economists could also be doing more to inform – and perhaps even influence – the Fed’s ongoing review of its policy frameworks and communications strategy. After all, the economics literature on asymmetrical information suggests that greater input from economists outside of the Fed is both appropriate and necessary for ensuring an optimal policy outcome.

A third area of concern is the Sino-American trade conflict, which is more controversial, owing to its political nature. So far, the vast majority of economists have trotted out the conventional argument that tariffs (real or threatened) are always bad for everyone. In doing so, they have ignored work from their own profession showing how the promised benefits of trade, while substantial, can be undermined by market and institutional imperfections. Those who wanted to make a productive contribution to the debate should have taken a more nuanced approach, applying to distinguish between the “what” and the “how” of trade warfare.

These are just three recent examples of how economists have dropped the ball. In addition, economists are struggling to explain recent productivity developments, the implications of rising inequality, the impact of persistently negative interest rates in the euro-zone, the longer-term effects of other unconventional monetary policy measures (amplified by the European Central Bank’s latest policy pivot), and the sudden slowdown in European growth. They also failed to foresee the Brexit saga and the political explosion of anger and alienation across the West in general.

None of this is a huge surprise, given the profession’s embrace of simplistic theoretical assumptions and excessive reliance on mathematical techniques that prize elegance over real-world applicability. Mainstream economics has placed far too much analytical emphasis on the equilibrium condition, while largely ignoring the importance of transitions and tipping points, not to mention multiple-equilibria scenarios. And the profession has routinely failed to account adequately for financial links, behavioral-science insights, and rapidly evolving secular and structural forces such as technological innovation, climate change, and the rise of China.

All of this should tell economists that there is plenty of room for improvement, and that they need to expand the scope of their analysis to take into account human interactions, distributional effects, financial-economic feedback mechanisms, and technological change. But this cannot just be about devising new analytical models within the field; economists also must incorporate insights from other disciplines that the profession has overlooked.

A discipline long dominated by “high priests” must now adopt a more open mindset. That means acknowledging and addressing unconscious biases, not least by making a concerted effort to improve inclusion and diversity within the field. It also means focusing more on inter-disciplinary approaches and distributional effects, and less on the purity of mathematical models, average conditions, and just the belly of distributions. Such structural changes will require more and better intellectual and institutional “safe zones,” so that analytical disruptions can be managed and channeled in productive directions.

Without significant adjustments, mainstream economics will remain two steps behind changing realities on the ground, and economists will be risking a further loss of credibility and influence. In an era of concern about climate change, political upheavals, and technological disruption, the shortcomings of mainstream economics must be addressed posthaste.

 

  • Rick Puglisi  

 

  • Michael Public  
  • Mike Robinson