It isn’t just economies that have been in trouble over the past couple of years; the profession of economics has also been going through a rough patch. Critics argue that, in the wake of the financial crisis, some of the favourite ideas of mainstream economists in recent decades are now looking a little threadbare.
Few have had more to say on the subject than George Soros, the billionaire investor and philanthropist. But rather than just complaining, Soros is trying to do something about it. He’s spent $50 million to establish The Institute for New Economic Thinking, which aims “to confront the flawed mechanisms in our economic and financial infrastructure and develop new paradigms in economic understanding.”
The institute has assembled an impressive advisory board of 26 men (the absence of women has not gone unnoticed), including five Nobel laureates (Amartya Sen and Joseph Stiglitz are among them), leading academics such as Harvard’s Kenneth Rogoff, the former IMF chief economist and blogger Simon Johnson, and the former BIS economist William White, who now chairs a senior economics committee at the OECD.
The economics commentator Anatole Kaletsky, another of the institute’s advisors, describes the event as an opportunity “to reopen many of the debates closed down by unrealistic theories”.
This is not the first time Soros has challenged economic orthodoxies. The author of a number of books, he’s long questioned approaches like the efficient markets and rational expectation hypotheses, which have provided the intellectual underpinning for market liberalisation in recent decades. Instead, Soros promotes his own theory – “reflexivity” – that he believes better describes the complex interaction between realities and perceptions in markets.
Whether Soros’s theories will ever become mainstream economic thinking remains to be seen. But his commitment to fresh thinking – and deep pockets – may well ensure that The Institute for New Economic Thinking is a player in the search for economics’ next big idea.