I am just returning from the 12th Conference of the Society for the Advancement of Economic Theory at the University of Queensland, which was very successful in that a great many economic theorists from all over the world got together and presented their work. I presented my recent work on falsifiability, complexity, and revealed preference in a session devoted to revealed preference theory.
One of the sessions was a panel discussion on the question “What Can Theory Tell Us About the Financial Crisis?” (My comments below may reflect my (mis)interpretations.) The moderator, Rohan Pitchford (Australian National University) foreshadowed some of the comments to come by stating at the outset that the panelists should feel free to turn that question around, asking what the financial crisis can tell us about economic theory. Some of the comments made were expected—for example, that theory has, of course had everything about the crisis figured out, just take a look at (Name, Year), and (Name, Year), and (Name, Year)… you get the picture. Even granting that (Name, Year) were all brilliant, this is hardly answering the question in a satisfactory way. Another point, often said, but not without reason, is that one should not expect economic theorists to be able to predict when a crisis would take place, and predicting that there would be one (some time) is hardly news. In fact, if the crisis could be predicted correctly, it is often repeated, it wouldn’t take place! And if it did, (some) economic theorists would be very rich.
But some of the panelists made some interesting points. Continue reading Dispatch from Down Under
David Warsh has an Economic Principals piece on the direction of the economics profession for the next decade. Warsh points to a compilation of 55 papers, Ten Years & Beyond: Economists Answer NSF’s Call for Long-Term Research Agendas, posted at the Social Science Research Network. Charles Schultze from Brookings provides some perspective in the title piece:
The National Science Foundation’s Directorate for the Social, Behavioral and Economic Sciences (NSF/SBE) for challenging economists and other relevant research communities “to step outside of present demands and to think boldly about future promises.” Specifically, NSF/SBE invited groups and individuals in August 2010 to write white papers that describe grand challenge questions in their sciences that transcend near-term funding cycles and are “likely to drive next generation research in the social, behavioral, and economic sciences.” NSF/SBE planned to use these white papers “to frame innovative research for the year 2020 and beyond that enhances fundamental knowledge and benefits society in many ways… We are disseminating the white papers of interest to economists independent of the NSF because these papers offer a number of exciting and at times provocative ideas about future research agendas in economics that are worth further consideration by economists.
There are many titles that look promising, including Deidre McCloskey’s “Language and Interest in the Economy,” which argues that economists should pay more attention to the role of persuasion. A number of us have been plowing through McCloskey’s Bourgeois Dignity, so we certainly welcome a succinct case.
Some other provocative titles include Nicholas Bloom’s “Key Outstanding Questions in Social Sciences,” David Autor and Lawrence Katz’s “Grand Challenges in the Study of Employment and Technological Change,” Randall Krozner’s “Implications of the Financial Crisis,” and Kenneth Rogoff’s “Three Challenges Facing Modern Macroeconomics.”
These are short, generally readable pieces from some of the biggest names in the profession. This seems like a good place to poke around.
The National Science Foundation solicited the views of a number of leading (?) economists on what the grand challenges of economic science are for the next decade. Some of the responses are available here–you may not understand much of what these white papers are about without serious background in economics, but I still encourage you to take a look and see where the hottest stuff in economics might be when you are in grad school, if you choose that route. After a quick glance, it does seem to me that many of these white papers are about the authors advancing their agendas rather than visionary perspectives that live up to the “grand” in the challenge. These are certainly no Hilbert’s ten problems for economics. Another thing that occurred to me: of the fifty or so authors of these white papers, only three or four are women. Therein lies another grand challenge for economics, I think.
[HT to Noam Nisan at the Algorithmic Game Theory Blog]