The future of economics
Brendan Greeley visits the annual American Economic Association in Atlanta to discuss with old and young economists the state of economic sciences and whether lessons were learnt from the financial crisis.
Produced and edited by Gregory Bobillot. Filmed by Donell Newkirk. Archives: Getty
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Every year, I go to the meeting of the American Economic Association. It's literally 13,000 economists. They pack into three or four hotels in a downtown somewhere. This year was Atlanta. And they speak to their own kind.
I write about economics for the Financial Times. I am not an economist, but I observe them for a living. This meeting is like Thanksgiving in America with your family. Everyone knows everyone. And the fights are all so familiar.
Every year, there's a meta conversation about the study of economics. Has the profession learned from the financial crisis, and how should it teach those things to the next generation?
So I don't think that we've really learned lots of lessons from the crisis. And that's partly why I'm here. I think some of the lessons that are being discovered are really in academia.
It's been a decade since the crash this year, so we decided to see how the family is doing. We asked Mum and Dad, the older economists who are working through the crisis. But we also talked to the kids, the ones who've gotten their PhDs since the crisis.
I think that we're emerging from the time period where economics took a focus on abstract theory and rational decision-making, that I think it was overstressed.
When I started my undergraduate studies in 2008, as I said, there was already this discrepancy between the textbooks and what you saw in the real world. I mean, we were really, say, using what we learned in classes and compared it to the real world. And that gave us a foundation to discuss what we were actually seeing. And we were thinking about, OK, what has changed, and what is happening nowadays that is not represented in these kind of models and these kind of methods that we use?
For the older generation, the crisis is a benchmark. It's a way to measure whether the profession has changed. For the younger generation the crisis is more likely to have affected them personally, but it also gave them something to publish about. The crisis gave them data. Here's something, though, that I hadn't expected to discover. This family of economists has been talking about the financial crisis for so long, it's easy to forget that a decade is just a long time. The profession of economics has changed in ways that have absolutely nothing to do with the fall of Lehman Brothers.
There is some real cutting edge academics, looking at things like automation, the future of work, things like that, the relationships that just seem to have broken down in economics. And so I'm here trying to suss that out, because even though this work exists, I don't think it's being translated into the mainstream.
You see that there is a shift toward more empirical work.
I'm very much integrated with people working on financial frictions and financial crises and monetary policy issues. These are very new issues that probably would not have been studied in such detail before the financial crisis.
More and more people are including machine-learning techniques, although sometimes the value above more traditional approaches is questionable. But then you see that there is a trend, and that's certainly also something to do with the possibility of outside options. And in the profession itself, it's being more and more valued to have these skills, because it's a hot topic.
Here's the other thing. Economics is like every other industry. It studies power, but there's also power within the profession. This is a fight the family has only just started. But it's an important one, and it's an uncomfortable one. Women don't feel welcome.
There's still a lot of departments that have very few female research faculty, or at least that are experienced research faculty, that can serve as mentors and advisors to female PhD students.
I am concerned about the lack of diversity, not just women, but the lack of diversity generally. Because I think that the way that we come up with new ideas and really think outside the box, in order to figure out what went wrong in the crisis and why things work so differently since then, is to have a massive diversity of thought. And I don't think we're embracing that in academia or in the private sector.
What did I walk away with? Closure. I'm done wondering how economics needs to change, because honestly, the new PhDs weren't that worried about it. They were worried about what people their age worry about - jobs, their own. In the last 10 years, I got old. Yeah. It feels like Thanksgiving.