Economics Is a Vibrant Discipline

Many observers were surprised to see that the trade unions’ recent nominee for Germany’s Council of Economic Experts is an economist who has bemoaned the discipline’s ‘lack of self-reflection and methodological and theoretical diversity’. However one views the nomination, it would be too simplistic to see it either as a mere affront to the discipline or an indication of a need for diversification in the wake of the financial crisis.

According to customary law, the trade unions have the right to nominate a candidate for one of the five positions on Germany’s Council of Economic Experts. The formal criterion for nominations is ‘exceptional economic expertise and experience’. Achim Truger, who began his career at the Hans Böckler Foundation’s Macroeconomic Policy Institute, will certainly bring both to his role on the council, and we wish him all the best in this new position.

It would nonetheless be a mistake to applaud Truger’s nomination as a corrective to the narrow-mindedness of established economics. Economics is a vibrant discipline that incorporates a range of approaches and schools. It neither conflates behavioural economics with mere reflection on homo oeconomicus, nor market design with market fever, nor sustainability with a blind faith in growth. This was strongly underlined by this year’s Nobel Memorial Prize in Economic Sciences, which was jointly awarded to an expert in endogenous growth theory and an environmental economist. The discipline has also sought to learn the lessons of the financial crisis. Dynamic macro models are now better at taking into account liquidity crises in national economies. Financial economists, meanwhile, have striven to improve their understanding of systemic risks and the manner in which systemic crises arise, addressing questions such as the systemic risks posed by the Deutsche Bank and the possibility of an insurance firm such as Allianz bringing the market to its knees in the manner of the Lehman Brothers collapse. Likewise, the discipline has expanded its methodological repertoire. The winners of this year’s prizes awarded by the Verein für Socialpolitk (VfS, German Economic Association), Isabel Schnabel and Moritz Schularick, are representative of a dynamic new school of research that examines the emergence and management of financial and economic crises on the basis of historical data.

"Economics is a vibrant discipline and will continue to develop"

These developments are taking place across the globe. The scientific community is an international community and Germany plays a key role within it. German students, for example, often take up careers in England, France, or the USA after finishing their undergraduate or postgraduate studies. Numerous lecturers at Yale, Chicago, the London School of Economics, and Paris, meanwhile, have studied in Germany. And many German economists have completed at least part of their studies abroad. The discipline’s international character is also reflected in the university curriculum in Germany. The classical canon of microeconomics, macroeconomics, and econometrics taught at most universities not only lays the basis for students’ later careers as economists in central banks or government ministries; it also gives them the opportunity to spend periods at universities abroad that draw on the same canon and often the very same textbooks.

Economics is a vibrant discipline and will continue to develop regardless of who is nominated for the Council of Experts. In terms of the academic landscape, however, the trade union nomination passes up an important opportunity. Germany’s doctoral students are always on the lookout for new, exciting, and timely approaches. Appointing an established academic who is also concerned with the interests, problems, and questions of workers and trade unions would have helped boost academic engagement with such issues. A number of potential candidates for the post would have fitted this profile. That they escaped the attention of the trade unions surely points to shortcomings in both camps, and highlights the need to heighten public awareness of economics as a discipline.

This article first appeared in the "Wirtschaftswoche" on December 14, 2018.