The challenges to the practice of economics in the new global economy

The global economy is experiencing rapid worldwide upheaval. The radical changes taking place are also leading to greater insecurity and inequality, while populism and nationalism are on the rise. Advanced OECD economies, especially those that have no raw materials, must examine whether their economic model is sustainable in the long term. Both emerging countries and developing countries need to develop quickly, raising living standards and well-being while encouraging inclusiveness and open societies.

This upheaval has to be seen in conjunction with emerging megatrends, including those that lie outside economics, such as continuing digitalisation and the challenge of climate change. These megatrends can create great opportunities for countries – but at the same time, the associated risks and difficulties must be taken seriously.

In the last two centuries, starting with Adam Smith and David Ricardo, economic policy and piecemeal economic ‘engineering’, backed up by economic theory within the typical rationalistic and instrumentalist methodological approaches, have been very influential in shaping these processes. There is no standstill in the development of theories and of better and more sophisticated analytical tools to conduct empirical research and create evidence-based policy advice. But there is an important question: is this piecemeal engineering approach sufficient and the only thing we can do or realistically hope for? Or do we need a fundamental rethinking of economics in a more holistic and less imperialistic mode so that it can be much more helpful in shaping the future, with better policies for better lives?