Wanted: a new economics to fit the facts

Effective policies today require increasingly complex models that can more fully capture the chaotic dynamics of the twenty-first-century economy

The economics profession was arguably the first casualty of the 2008-2009 global financial crisis. After all, its practitioners failed to anticipate the calamity, and many appeared unable to say anything useful when the time came to formulate a response. But, as with the global economy, there is reason to hope that the discipline is on the mend.

Mainstream economic models were discredited by the crisis because they simply did not admit of its possibility. And training that prioritised technique over intuition and theoretical elegance over real-world relevance did not prepare economists to provide the kind of practical policy advice needed in exceptional circumstances.