At the yearbook At the American Economic Association meeting, held in New Orleans this year, Wonks discussed everything from inflation and technological advances to the economics of crime and the energy transition. But those looking for big breakthroughs would have been unsatisfied. Most of the new work has focused on rigorous analysis of data or careful theoretical modelling. As one participant noted, such modeling often produces unsurprising results as it tends to reflect the assumptions that go into it.
The evidence for this reduction in ambition is not just anecdotal. A newer paper in Nature analyzes citation data from 1945 to 2010 to assess publication and patent disruption. Authors consider new work to be disruptive if later work they cite is less likely to also mention their predecessors. The paper concludes that the proportion of disruptive research in the social sciences has declined sharply, even more than in the sciences proper. As Tyler Cowen of George Mason University puts it: “Over the past 30 years, the reliability of empirical work and estimates has increased dramatically. What is good. But few new important ideas were generated.”
In New Orleans, the biggest names in economics offered fresh and interesting ideas, but few breakthroughs on the scale of, say, Nash equilibrium or the idea of asymmetric information. Gita Gopinath, the IMFChief Economist at , discussed research on how the economics of international finance has changed since the pioneering work of Robert Mundell and Marcus Fleming in the 1960s. In a seminar on economic growth, New York University’s Thomas Philippon argued that growth follows linear trends and is not an exponential process. Daron Acemoglu of the Massachusetts Institute of Technology presented a paper on “biased innovation” and argued against the notion that markets tend to get innovations right.
New theories without solid empirical support can be dangerous, as the rise of central planning in the 20th century has shown. And great progress is easier to see in hindsight. It may even turn out that some were hidden under the presentations in New Orleans. Some conference attendees were also more optimistic about the current state of affairs. One professor remarked that good questions in economics tend to come from real-world events – and the last few years have been tumultuous enough to prompt many good questions. Erik Brynjolfsson from Stanford University observed that the use of large datasets, machine learning and field experiments are all game changers. Innovation can therefore easily be shifted from theory to practice. Indeed, the use of high-frequency data, a feature of a presentation by the Federal Reserve’s Lisa Cook, has given economists and central bankers a helpful new way of looking at the world in their fight against inflation.
But the most compelling evidence of the impact of monetary policy on inflation came from Christina Romer of the University of California, Berkeley, who dusted off an old-fashioned method. In her presentation, she argued that monetary policy changes have a bigger impact on unemployment than inflation and that it sometimes takes a few years for their main impact to be felt. The method used by Ms Romer and her husband and co-author David Romer was not a new statistical technique or even more recent data, but a “narrative approach”. The Romers combed through minutes and minutes of Federal Open Market Committee meetings — just as they had when developing the method in a paper published in 1989. ■
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