EVERY January more than 10,000 economists meet for the annual conference of the American Economic Association (AEA). This year, the shindig was in balmy Chicago, a stone’s throw from its second-tallest building, the name TRUMP stamped in extra-large letters across its base. Most papers had been written months in advance; few sessions tackled the electoral earthquake in November. Yet there was no mistaking the renewed sense, following its failure to foresee the 2007-08 financial crisis, of an academic field in a crisis of its own. The election was seen as a defeat for liberalisation and globalisation, and hence for an economics profession that had championed them. If economists wish to remain relevant and useful, the modest hand-wringing at this year’s meetings will need to yield to much deeper self-reflection.
Their theories had always shown that globalisation would produce losers as well as winners. But too many economists worried that emphasising these costs might undermine support for liberal policies. A “circle the wagons” approach to criticism of globalisation weakened the case for mitigating policies that might have protected it from a Trumpian backlash. Perhaps the greatest omissions were the questions not asked at all. Most dismal scientists exclude politics from their models altogether. As Joseph Stiglitz, a Nobel laureate, put it on one star-studded AEA panel, economists need to pay attention not just to what is theoretically feasible but also to “what is likely to happen given how the political system works”.
Researchers on topics of political relevance—from the global effects of dollar appreciation to the economics of the production of fake news—promised in Chicago to produce more timely research. One recent example: just after the election, David Autor, of the Massachusetts Institute for Technology, and others published a short paper comparing congressional-district election results against data they had previously gathered assessing local-area exposure to Chinese imports. Similarly, Anne Case and Angus Deaton of Princeton University were able to compare their results on recent increases in mortality rates in parts of America with voting patterns.
In a keynote address, Robert Shiller—a Nobel prizewinner, habitual freethinker and outgoing AEA president—suggested that economists should…