Paradigm Lost

Last weekend, I had the great privilege of attending, as part of the Young Scholars’ Initiative, a sublime conference organized by the Institute of New Economic Thinking:

Paradigm Lost: Re-thinking Economics & Politics.

Leading lights of the economics profession came together with top policymakers and journalists to appraise the state of current economic thinking, and to chart a better way forward.

Conference highlights are viewable here.

My own personal highlights include the debate on the future of Europe, chaired by Wolfgang Munchau (Financial Times), Joseph Stiglitz’ contribution on the fallacy of mercantilism, and Richard Koo’s presentation of a paper on ‘Revitalizing the Eurozone without Fiscal Union‘. The latter was particularly timely, as I had presented only days beforehand an earlier draft of Koo’s recent work to my ‘Topics in International Finance’ class with Guillermo Calvo.

Last, but certainly not least, Andres Velasco, my Professor at Columbia, Michelle Bachelet’s Finance Minister, and hopefully the next President of Chile closed the conference with a barnstorming performance. New Economic Thinking could benefit, he said, from reading old economic papers. Europe’s current crisis is little different to those experienced periodically in Latin America.

 

In my own  view (from my ‘Young Scholars Initiative’ application):

The Great Recession of the 21st Century has confounded much of what could be described as conventional economic wisdom.

A ‘new economic thinking’ is needed to push an inter-disciplinary research agenda that matches the real-world interdepdendencies between politics, finance, psychology and the macroeconomy.

For me, it is by exploring the frontiers of these disciplines that current and future economic thinkers will make the most important advances in our understanding of the functioning of the global economy over the coming decades.

Without such a deepening of our understanding, it may be impossible to effect the paradigm shift needed to avoid a false dilemma between a return to mercantilist protectionism & currency wars and increasingly volatile finance-led economic globalization marked by intra-national inequalities.

Either would be an appalling vista, and a savage indictment of the march of human progress. A new economic thinking can help provide the intellectual framework for a more cooperative, efficient and welfare-enhancing outcome.

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