The end of economics?

If economics has failed to accurately capture the motives of the modern individual, what about modern countries? These days, the quest to maximize profit does not seem like a helpful way to understand why states act the way they do. Many European countries, for example, have higher labor productivity than the United States. Yet citizens there choose to work fewer hours and take longer vacations, decreasing their output—because, they might argue, they prioritize contentment or happiness over economic output. Bhutan has explicitly decided to pursue “gross national happiness” rather than gross domestic product.

I am not arguing against the importance of the evolution in thinking regarding public policy that has taken place since the Reagan-Thatcher era or even since the Clinton-Blair era. For reasons that reflect both progress in understanding the world, and changes in its structure, I and most other economists are more concerned with issues of redistribution, regulation, monopoly and maintaining demand than we would have been a quarter century ago. As Keynes famously said “When I get new information, I change my mind. And you?”

The silence of most economists on the underlying causes of the political ructions erupting throughout the West – and on what, if anything, can be done to restore economic vigor – has been deafening.