Economics may come out of the Covid-19 crisis better than after the last financial crash because the knowledge it has developed will be vital to governments navigating the “trade-offs” involved in responding to a pandemic, it has been suggested.
Charles Wyplosz, editor of a new online publication from the Centre for Economic Policy Research on the economics of the pandemic, said the central question being raised by the crisis – how to limit economic damage while also dampening the outbreak – was a “bread and butter” issue for the discipline.
“One of the first things we learn when we become economists is that life is full of trade-offs, and we have developed techniques and theories to think about [this],” the professor of international economics at the Graduate Institute Geneva said.
The discipline was criticised in the wake of the 2008 global financial crisis for being too attached to certain theories and for not having foreseen the credit crunch.
But economist and Labour peer Lord Desai, whose 2015 book Hubris looked at economists’ perceived failures in relation to that crash, said the fact the current crisis was not caused by the financial system would aid the discipline.
“The interesting thing about Covid is that it isn’t a cyclical shock…it was not caused by governments, or stock markets or central banks. It is a big external shock, a real black swan,” he said.
Macroeconomics – the study of how the wider economy works – may in particular end up being “liberated” as policymakers reach for the tools and policies that the field has developed over time but which have not always been deemed politically palatable, Lord Desai added.
Professor Wyplosz said he was already dealing with a “tidal wave” of “impressive” research on the pandemic for Covid Economics, which he and a board of about 40 associate editors are vetting before publication.
He said it had been astonishing how researchers “from all subfields of economics…literally cleaned their desks overnight, forgot what they were doing and plunged into this issue. I have never seen anything like that.”
Professor Wyplosz added that much of the new research “tacked” economic models on to those originally developed by epidemiologists so that the effect of lockdowns on various parts of the economy could be estimated.
Such interdisciplinary work should be something that is developed further in the future, said Andrew Oswald, professor of economics and behavioural science at the University of Warwick, who co-authored a paper last month on the benefits of releasing younger people from the lockdown before others.
“Maybe the Covid crisis will do something that I would favour and that is draw economics into the broad sciences,” said Professor Oswald, one of the only economists to sit on the editorial reviewing board of the journal Science.
He added that he felt medical sciences such as epidemiology had been having too much sway on policymaking so far, and would like to see economists more involved. “It would be just as bad if economists completely dominated…we need a balance.”
As well as new publications such as Covid Economics, the discipline has also been able to disseminate new research quickly using well-established preprint routes such as Research Papers in Economics (RePEc), an international database of articles and working papers maintained by volunteers.
Economist Christian Zimmerman, assistant vice-president of research information services at the Federal Reserve Bank of St Louis, who helps to maintain access to RePEc, said information in the crisis was “evolving too fast" for peer review to keep up, especially given that peer review was “excruciatingly tedious and long in economics”.
He said the crisis was also forcing people to arrange conferences and seminars in the discipline virtually, which “makes it possible for people who could never have attended talks physically to participate in them”.
“This gives even earlier exposure of research to more people,” he added.
