The lineup for our latest Pre-Discovery meeting (The Sociology of Economics and Economic Institutions) has been released. The Pre-Discovery Meetings are four-hour roundtable discussions between policymakers and academics – both economists and scholars from related disciplines. The speakers for the RM PDM on 17 November are:

  • Richard Bronk, Visiting Fellow, European Institute, LSE
  • Professor Beatrice Cherrier, University of Caen
  • Professor Sheila Dow, University of Stirling
  • Professor Kevin D. Hoover, Duke University, North Carolina

This pre-discovery meeting will take place on 17 November 2017 at NIESR, to find out more contact r.arnold@niesr.ac.uk

Background:

Macroeconomics is primarily the domain of finance ministries, central banks and the university sector (and the multilateral institutions). Yet macroeconomic theory suggests that this ought to include education, welfare (to address distributional issues), innovation ministry and a commercial policy institution. This Discovery Meeting will examine our macroeconomic institutional landscape in three ways. First, how does macroeconomic policy intersect with the social and other institutional networks and networks of firms, communities and the public? Second, are barriers to innovation in the macroeconomic academic and policy communities and how these can be overcome? Political choices are often presented as economic trade-offs. If survey evidence is correct, that economics is not well understood in society, are there better ways of improving political legitimacy?

Since the 2008 crisis enormous changes in macroeconomic policy arrangements have taken place. The introduction of an independent fiscal council was a debated political issue, but other powers such as quantitative easing and macro-prudential regulation have not featured in political discourse, yet have very substantial distributional consequences. Is it appropriate that such powers are delegated to an independent body? Fiscal policy and international policy appear to be conducted on the basis of creating arbitrary narratives (the UK would become Greece, losing triple-A would be calamitous etc.) rather than the presentation of evidence. We face a knowledge gap in institutions, a conservatism in academic macro-economics and a legitimacy deficit among the public. The research hub will examine how we can build more constructive relationships between economic institutions, academic macro-economics and the public.

Macroeconomic policy institutions

Policy institutions in macroeconomics are, in effect, black boxes, usually with some simple rule. New institutional economics (Coase, Olmstrom, Williamson) model the social norms and legal rules that affect the economic action taken by organisations and cooperative groups. These are one-way process in which ‘externalities’ affect action, shape cooperation and economic processes and institutions that impact the entire economy. Yet, the economic actions taken by organisations intersect with, and affect social action, in a complex manner. For example, policy action taken within institutions can be guided by monocultures and limited networks of participants drawn from a limited number of institutions. The actions of various organisations and their institutional norms often interact producing diffuse and unexpected effects throughout society, potentially contributing to macroeconomic and wider political changes.

This research hub would address these complex interactions in an interdisciplinary way with help from social science on public policy, cooperative action, ethical norms, social and recruitment networks and social decision making. It could also potentially extend approaches within macro to modelling, measuring and evaluating policy effects. Its aim would be to improve macro techniques by building a more complex understanding of the effects of organisations. Ultimately it could lead to: new metrics; the greater use of qualitative data in combination with macro-economic data; the construction of new models of institutional effects on the macro-economy; and innovative ideas for interventions & organisational forms. There are important questions around how representative are these institutions when choices can have substantial distributional consequences.

Academic macroeconomic institutions

Is the disconnect between academic macroeconomics and policy making perceived or real? Perhaps academic macroeconomic ought to have no-role in policy as it is not cast in the context of society. Academic economists are afforded a privileged role in advising policy makers, having influence but without responsibility. This policy advice may be more value-laden then may appear. In the years before and after the crisis academic macro has been surprisingly supportive of policy decisions and largely uncritical. Is there a reason for this, and do their networks over-lap? Ought academics declare any interests before commenting on public policy?

There are suggestions that there are barriers to innovation in academic departments. One view is that a small number of universities control the major journals and therefore, access to the most influential posts. If this is the case, why do these journals still dominate? Does the REF and research metrics stifle risk-taking in economic departments? Do the established journals have an incentive to put procedures ahead of subject to maintain their status? Are there other reasons why academic macroeconomics appearing to offer little challenge and policy guidance on the most substantive economic issues facing our citizens? Are there barriers against so-called heterodox ideas?

Coordination across policy institutions

Given the multi-dimensionality of our economic challenges, there is a case for a broader and more integrated approach to macroeconomic policy. However, this may lead to trade-offs in terms of coordination and governance issues. Do we need more coordinated practices of intervention and planning within and between economic institutions? What might planning be in an era of uncertainty and after the decentralisation of authority to multiple government departments, regulatory and private sector agents? What are the expected gains and which department would oversee coordination?

Governance and dealing with uncertainty

Alongside this, it will aim to develop new forms of macro-economic knowledge closer to the realities and uncertainties of policy-making. It will create new cross-disciplinary connections with psychology, anthropology and sociology that can help in the creation of this knowledge.

How can economic policymakers achieve a greater understanding of the demographic features, decision-making practices and social networks that shape economic action in corporations, communities, and households? How might we rethink the role of, and forms of knowledge used by, institutions so as to make their interventions more effective and equitable? How could we combine insights from qualitative data with macro-economic analysis and modelling?

20 October 2017

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