The economics profession has not had a good crisis. QueenElizabeth II may have expected too much when she famously asked why economistshad failed to foresee the disaster, but there is a widespread sense that muchof their research turned out to be irrelevant. Worse still, much of the advice proffered by economists was of little use topolicymakers seeking to limit the economic and financial fallout.
Will future generations do better? One of the moreinteresting exercises in which I engaged at the recent World Economic Forum inDavos was a collective effort to imagine the contents of a Principles ofEconomics textbook in 2033. There was no dearthof ideas and topics, participants argued, that existing textbooks neglected,and that should receive more attention two decades from now.
Economists working on the border of economics andpsychology, for example, argued that behavioral finance, in which human foibles are brought to bear to explain the failure ofthe so-called efficient markets hypothesis, would be given more prominence.Economic historians, meanwhile, argued that future textbooks would embed analysis of recent experience in the longer-termhistorical record. Among other things, this would allow economists-in-trainingto take the evolution of economic institutions more seriously.
Development economists, for their part, argued that muchmore attention would be paid to randomized trials and field experiments. Applied econometricians pointed to the growing importance of“big data” and to the likelihood that large data sets will have significantlyenhanced our understanding of economic decision-making by 2033.
Overall, however, the picture was one in which theeconomics of 2033 differed only marginally from the economics of today. Atextbook two decades from now might be more sophisticated than this year’sedition, fully integrating contributions that today constitute the frontiers ofeconomic research. But it would not differ fundamentally in structure or approachfrom today’s economics.
The consensus, in other words, seemed to be that therewould be nothing in the next 20 years as transformativeas Alfred Marshall’s synthesis of the 1890’s or the revolution initiated byJohn Maynard Keynes in the 1930’s. In contrast to the economics of those years,economics today is a mature, well-established discipline. And, like any maturediscipline, it advances incrementally rather than in revolutionary steps.
This presumption is almost certainly mistaken. It reflectsthe same error made by scholars of technology who argue that all of the radicalbreakthroughs have already been made. As this view is sometimes put, the next20 years will see no breakthrough as revolutionary as the steam engine or the transistor. Technological progress will be incrementalrather than revolutionary. Indeed, insofar as the incrementsare small, the result is likely to be slower productivity growth and a “GreatStagnation.”
In fact, the history of technology has repeatedly refutedthis pessimistic view. We can’t say what the next radical innovation will be,but centuries of human experience suggest that there will be (at least) one.
Similarly, we can’t say what the next revolution ineconomic analysis will be, but more than a century of modern economic thinkingsuggests that there will be one.
All of this suggests that the economics textbook of 2033will look very different from the economics textbook of today. We just can’tsay how.
Indeed, one might question the very premise that, twodecades from now, there will be textbooks as we know them. Today, introductoryeconomics is taught using a textbook in which an eminentprofessor authoritatively bestows theconventional wisdom on his or her (typically, his) students. Knowledge, as encapsulated in the textbook and interpreted by theprofessor, is delivered from above.
This, of course, is also how newspapers traditionallydelivered the news. Editors and publishers assembled and collated stories, and the newspaper that they producedwas then delivered to the subscriber’s doorstep.But the last decade has seen a veritablerevolution in the news business. News is now assembled and disseminated via Web sites, wikis, and the commentsections of blogs. News, in other words, is increasingly delivered from the bottom up. Rather than relying on editors, everyoneis becoming their own news curator.
Something similar is likely to happen to textbooks,especially in economics, where everyone has an opinion and first-handexperience with the subject. Textbooks will be like wikis, with facultyadopters and students modifying text and contributing content. There still maybe a role for the author as gatekeeper; but the textbook will know longer bethe font of wisdom, and its writer will no longer control the table ofcontents.
The outcome will be messy. But the economics professionwill also become more diverse and dynamic – and our children’s economics willbe healthier as a result.