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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
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The OECD’s New Approaches to Economic Challenges unit has established Government Economists for New Economic Systems (GENESYS), a platform for government economists and policymakers to debate, experiment and discuss policy alternatives which could solve “systemic structural issues which threaten the future”. The goal is to help foster new analytical capabilities within governments. It is envisioned to be an informal network of country-based delegates, principally but not limited to Finance Ministries and Central Banks.
Watch their launch webcast with Paschal Donohoe, President of the Eurogroup, and others on 4 November, 14:00-16:00 GMT. Forum Director Thomas Fricke will also be present, joining a roundtable discussion to provide an overview of new economic thinking and acting, and why and how governments should embrace it.
The voices calling for a new economic consensus are gaining ground. In a recent article for Project Syndicate, Mariana Mazzucato argues that the world is indeed on the cusp of a long-overdue paradigm shift. She advocates for revitalizing the state´s economic role since global goals such as a decarbonized economy and worldwide vaccine distribution can only be achieved by increasing public expenditure.
According to the Italian economist, the Covid-19 crisis has demonstrated that the economic paradigm that advocated for free-market policies during the last mid-century – the Washington Consensus with its mantra of deregulation, privatization, and trade liberalization – has set the international community up for failure. Mazzucato argues that we are entering an era in which the irreversible damage caused climate change will determine nothing less than the survival of the human species. Therefore, policy makers must prepare to turn the tide.
Ahead of the upcoming G20 Leaders Summit on October 30-31, she urges policy makers to consider a set of policy recommendations comprised under the umbrella term “Cornwall Consensus”. The term was coined by the G7 Panel on Economic Resilience, in which Mazzucato represents Italy, ahead of the G7 meeting this June. The recent report by this advisory group proposes a new international social contract. Among the concrete policy proposals are a reform of intellectual-property rights, an increase of state investment to 2% of GDP per year, and a new research institute aimed at developing solutions in the field of climate technology modelled after the European Organization for Nuclear Research (CERN). By adopting a new kind of economic agenda, to be implemented through mission-driven institutions and policies, world leaders can prevent repeating the mistakes of the past.
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Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat.
Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi.
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At vero eos et accusam et justo duo dolores et ea rebum. Stet clita kasd gubergren, no sea takimata sanctus est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor invidunt ut labore et dolore magna aliquyam erat, sed diam voluptua. At vero eos et accusam et justo duo dolores et ea rebum. Stet clita kasd gubergren, no sea takimata sanctus est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur sadipscing elitr, At accusam aliquyam diam diam dolore dolores duo eirmod eos erat, et nonumy sed tempor et et invidunt justo labore Stet clita ea et gubergren, kasd magna no rebum. sanctus sea sed takimata ut vero voluptua. est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur
This year’s Alfred Nobel Memorial Prize was awarded to three U.S. economists whose research has been instrumental in advancing “natural experiments.” The prize thus goes to a trio whose work on real experiments has challenged common economic beliefs.
The Nobel Prize in Economics is the only one that does not go back to Alfred Nobel. It is endowed by the Swedish Riksbank. The awards committee justified its decision by saying that the three scientists “revolutionized empirical research” by using natural experiments – real-life situations in which random events or political decisions create conditions similar to those in a clinical trial.
Laureate David Card and the late Alan Krueger, who died in 2019, proved that raising minimum wages does not necessarily lead to a decline in employment by comparing two groups of workers in the low-wage fast-food restaurant industry. A finding of revolutionary character, it broke with the hitherto prevailing consensus that higher minimum wages lead to more unemployment. Card also shattered another consensus among economists a few years later with a similar study in which he showed that immigration need not lead to wage losses for native-born workers.
Joshua Angrist and Guido Imbens receive the prize for their methodological contributions to the question of what conclusions about causality can be drawn from natural experiments. Methodologically, they have advanced economics on the question of correlation and causality. This year’s award is a tribute to those scholars whose research represents a departure from long-established, previously believed economic doctrines.
A detailed analysis of this year’s award can be found in this Handelsblatt article.
Also worth reading on the topic is this article from the Financial Times.
OUR MAIN TOPICS
New Paradigm
NEW PARADIGM
After decades of overly naive market belief, we urgently need new answers to the great challenges of our time. More so, we need a whole new paradigm to guide us. We collect everything about the people and the community who are dealing with the question of a new paradigm and who analyze the historical and present impact of paradigms and narratives – whether in new contributions, performances, books and events.
Redefining
the role of
the state
REDEFINING
THE ROLE OF
THE STATE
For decades, there was a consensus that reducing the role of the state and cutting public debt would generate wealth. This contributed to a chronic underinvestment in education and public infrastructure. New research focuses on establishing when and how governments need to intervene to better contribute to long-term prosperity and to stabilize rather than aggravate economic fluctuations.
Remaking
finance
REMAKING
FINANCE
More than a decade after the financial crisis there still seems to be something seriously wrong with the financial system. Financial markets still tend to periodically misprice risk and contribute to boom and bust cycles. A better financial system needs to discourage short-termism and speculative activity, curtail systemic risk and distribute wealth more broadly.
Greening
prosperity
GREENING
PROSPERITY
During the high point of market orthodoxy, economists argued that the most 'efficient' way to combat climate change was to simply let markets determine the price of carbon emissions. Today, there is a growing consensus that prices need to be regulated and that a carbon price on its own might not be enough.
Reducing
inequality
REDUCING
INEQUALITY
The rising gap between rich and poor has become a threat to social cohesion in most rich countries. To reverse this trend it will be crucial to better understand the importance of different drivers of income and wealth inequality.
Innovation Lab
INNOVATION LAB
Do we need a whole new understanding of economic growth? What would be a real alternative? How viable are alternatives to GDP when it comes to measuring prosperity? These and other more fundamental challenges are what this section is about.
Globalization
for all
GLOBALIZATION
FOR ALL
After three decades of poorly managed integration, globalization is threatened by social discontent and the rise of populist forces. A new paradigm will need better ways not only to compensate the groups that have lost, but to distribute the gains more broadly from the start.
Europe
beyond markets
EUROPE
BEYOND MARKETS
The euro was planned during a period in which economic policy making was driven by a deep belief in market liberalism and the near impossibility of systemic financial crises. This belief has been brought into question since the euro crisis, which showed that panics do happen. New thinking needs to focus on developing mechanisms to protect eurozone countries from such panics and to foster economic convergence between members.
Corona Crisis
CORONA CRISIS
The current Corona crisis is probably the worst economic crisis of the post-World War 2 era. Economists are working hard on mitigating the economic effects caused by COVID-19 to prevent a second Great Depression, the break-up of the Eurozone and the end of globalisation. We collect the most important contributions.