Beyond Efficiency: A More-human Economics
IMF Blog, March 4, 2024
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Bibliographic details
- Authors: Gita Bhatt
- Published: March 4, 2024
Overview
- Publication: This issue of Finance & Development magazine takes a fresh look at the discipline.
- Date and author line: Gita Bhatt, March 4, 2024.
- Core premise: There is a growing consensus that the economics profession must be open to new ideas and frameworks if it hopes to solve the world’s biggest problems.
- Context: The piece situates the call for change amid disruptions from climate change, artificial intelligence, demographic change, social and economic inequality, and geopolitical conflicts, and notes “growing disenchantment with the economics profession and calls for the discipline to change to better reflect individual and societal values.”
Key perspectives and findings
- Historical framing:
- John Maynard Keynes’s characterization of the “master-economist” as needing “a rare combination of gifts…. He must be mathematician, historian, statesman, philosopher.” Keynes viewed economics as “a moral science” requiring an “open mind to the shifting picture of experience.”
- Niall Kishtainy provides an account of forces shaping the discipline since Adam Smith’s The Wealth of Nations.
- Calls for rethinking core priorities:
- Nobel laureate Angus Deaton argues mainstream economists must “revisit their assumptions, cast a more critical eye on the influence of power, stop prioritizing efficiency above all else, and be humbler.”
- Wendy Carlin (University College London) asserts the curriculum must be made more relevant to real-life problems, going “well beyond the traditional concern with efficiency,” and that ethical considerations—especially fairness and solidarity—are unavoidable.
- Diversity and perspective gaps:
- Jayati Ghosh (University of Massachusetts, Amherst) laments the profession’s lack of diversity—ethnic, racial, and gender—arguing this deprives economics of new ideas, new problems to work on, and new talent.
- Methodology and policy design:
- Dani Rodrik (Harvard) cautions against rule-of-thumb economics and contends existing policy models are inadequate for challenges such as climate change, inclusion, and economic development; economics must expand collective imagination to tailor solutions to differing economic and political contexts.
- Atif Mian (Princeton) shows why new approaches are needed to break the debt supercycle, which poses a grave danger to the global economy.
- Alternate view:
- John Cochrane (Stanford) argues that solutions to today’s challenges lie in the revival of evergreen ideas, including supply-side incentives and fiscal policy reforms.
- Additional topics in the issue:
- Contributions on behavioral economics, political economy, and how wages are set.
- A profile of Betsey Stevenson, a noted labor economist who has helped lead a rethinking of economics.
Implications and recommendations emphasized
- Discipline-wide openness:
- Economics should be open to institutional alternatives and experimentation.
- The profession should reflect the complexity of economic reality and the values of our time.
- Teaching and curriculum:
- Make the economics curriculum more relevant to real-life problems and broader ethical concerns.
- Research agenda:
- Integrate insights from social sciences, elevate welfare and distributional issues, and cast a more critical eye on the influence of power.
- Diversity and inclusion:
- Increase ethnic, racial, and gender diversity to bring new ideas, problems, and talent into the profession.
- Methodological stance:
- Avoid overreliance on rule-of-thumb prescriptions; tailor policy to differing economic and political contexts.
- Intellectual humility:
- Embrace intellectual humility and escape from entrenched ideas: “The difficulty lies not so much in developing new ideas as in escaping from old ones.”
Editorial closing
- The issue aims to reveal new insights about the present to help readers better understand the world and invites continued readership and engagement.
- Closing line from the editor: “We are grateful to be able to share these insights with you. We hope that it reveals something new to you about the present that helps you better understand our world. Thank you, as ever, for your readership and engagement.”
Content summarized from Beyond Efficiency: A More-human Economics (Finance & Development), March 4, 2024.