The Economic Anti-Consensus

With the Delta variant fueling fourth and fifth waves of COVID-19 infections, digital technologies transforming our jobs and lifestyles, and the effects of climate change becoming increasingly apparent, a “business as usual” approach to economic policy has never seemed so futile to so many. But what can or should replace?

In this Big Picture, Cornell University’s Kaushik Basu says that the new world in which we live demands major breakthroughs in economic thinking, and closer scrutiny of some of the discipline’s core assumptions. James K. Galbraith of the University of Texas at Austin agrees, arguing that the assumptions that underlie the neoliberal orthodoxy should have been discarded long ago – and would have been, if dissenters had access to the handful of leading journals shaping economic thinking.

But the economics profession is also narrow in another sense. As Northeastern University’s Alicia Sasser Modestino explains, women and minorities remain severely underrepresented in the discipline, owing to a persistently dysfunctional academic pipeline, which economists wrongly think market forces will solve. For his part, Harvard University’s Dani Rodrik sees some progress in addressing the profession’s gender and racial imbalances, but laments the woefully inadequate representation of voices from outside North America and Western Europe.

Despite the growing recognition that change is needed, upending the prevailing orthodoxy will be no easy feat, not least because, as the University of Chicago Law School’s Eric Posner points out, some free-market advocates are clinging to their beliefs, even when they veer into incoherence. Yet New York University’s Nouriel Roubini offers reason for hope, noting that in the United States, Joe Biden has broken from the neoliberal creed that was followed by every president from Bill Clinton to Barack Obama.

Whatever new dispensation emerges, however, will not be without risk. As Anne O. Krueger of Johns Hopkins University warns, if we fail to account properly for the incredible progress the current system has enabled, the reforms we implement could well leave us worse off.