Leading economists, including Nobel laureate Joseph Stiglitz, Argentina's Minister of Economy Martin Guzman, as well as academics from Oxford, Yale, Columbia, and UCLA, are calling today for a deep shift in how economists understand the overall economy. According to the new thinking, a series of massive economic shocks have left traditional economic theory in pieces and the old macroeconomic paradigm is on its way out.
Oxford Professor David Vines says, ‘The old model of ‘macroeconomics’ was built for a stable world free from large economic shocks. If we ever lived in such a world, we no longer do.’ Summarising the Rethinking Macroeconomics project in the Oxford Review of Economic Policy, Oxford economists Professor David Vines and Dr Samuel Wills call for a shift away from the assumptions which have underpinned economic theory for decades – and which do not meet today’s challenges. They argue a more open, more diverse, paradigm is emerging, which is far better equipped to deal with contemporary challenges such as the global financial crisis, climate change and COVID.
An economic model that cannot handle serious shocks is like a medical science that does not study major disease outbreaks; it is likely to let us down at the most critical of moments.
- Professor Vines
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