Economics Needs a Breakthrough Idea, like Continental Drift
Almost 30 years ago, the evolution of economics stopped with mathematical models. Despite the massive resources spent, we have had few major breakthroughs since then. Lots of research, lots of funding awarded to think tanks, and economics research centers, lots of John Bates Clark awards for best economic scholars under 40, lots of tenured professorships given, lots of Nobel prizes awarded, lots of highly regarded articles published in the American Economic Review (one of the most prestigious academic economic journals), but no significant breakthroughs.
It seems as if with all these prizes and funding, the profession is having a breakthrough every day! But, it’s not, and that’s why economists are having such problems dealing with our current economic downturn. In fact, all the activity and prizes almost seemed designed to distract from the lack of real breakthroughs. Like cheerleading in the financial markets, it is cheerleading in the economics profession. Using the earlier analogy of thousands of geologists studying the Appalachians with no real breakthroughs on understanding why mountains form, we could give out thousands of tenured professorships, print thousands of articles in prestigious journals, give out lots of prizes for great work on the Appalachians, but it still won’t help us understand what created the Appalachian Mountains.
Unless, of course, you have someone like Alfred Wegener, who is willing to ...