Relative to research output from academia and think-tanks.
The modern discipline of economics depends on a lot of assumptions. And here's the thing: you can still have a discipline of economics even if you drop some of these assumptions.
Fields like behavioral economics and neuroeconomics, for example, were among the most "understudied" areas of economics 10-20 years ago and before. They're attracting more interest now - largely because old economic models had made an assumption of Homo economicus - the assumption that all humans acted rationally. And this assumption did not reflect reality.
Now, that's still only one assumption that modern economists often drop. But there are still numerous other assumptions that are rarely dropped, if ever. That's because the modern discipline of economics had only exploded in the last half-century, and so we're used to making the assumptions that have been true only in the last half-century. But this also means that we're not used to studying economics in alternative societies or alternative settings. Especially ones that can come through massive social-technological transformations, as explained in http://modeledbehavior.co
I'll attach a further quote in [1] from Modeled Behavior, and [2] from Robin Hanson's blog. These two quotes do better than I can in explaining the areas of economics that really are understudied
Thanks to the massive changes brought by the Internet, there are "really big things" that are happening, and those things are often among the most understudied areas of economics. And these areas are those where financial transactions are not involved, as you can see from Gregory Rader's blogpost about the economics of value (http://onthespiral.com/ ). In particular - in the following blogpost, he explains 4 areas of economics - only one of which involves financial transactions: http://onthespiral.com/un
With http://onthespiral.com/un
Also, the economics of time (and exchanging time for money). See http://money.cnn.com/2011
Are there any startups that could help address our unemployment issues at scale (i.e. need a lot of labor)?
And in the medium term future, What is the plan if a computer or robotic workforce cause catastrophic unemployment? is definitely something that needs further exploration. See Karl Smith's blog post here: http://modeledbehavior.co
In short, we want to understand the below graph better (taken from http://econfuture.wordpre
![]()
As with the possibility that utility functions can change from one form to another with respect to shifts in economic conditions or an individual's personality changes through life (most importantly, utility functions can change with respect to what type of reward is offered - which is often dependent on whatever means of production is most scarce)
There are so many other regions of possibility space we can explore.
Personally, I think that discoveries of extrasolar planets have some potential to cause some cutting-edge thinkers to branch out and drop some major assumptions - and make some very interesting (and surprising) predictions (or in other words, a discipline of astroeconomics could turn into a discipline of "possibility space" economics).
In fact, Paul Krugman explored this a little in one of his papers labelled The Theory of Interstellar Trade (http://www.princeton.edu
Alex K. Chen's answer to If energy was free and renewable, how would the economy be fundamentally different from what it is now? and What happens when we start producing more "important" media than an individual can consume? are other posts I wrote to make a preliminary attempt at exploring possibility space (not that my answers should be trusted beyond those of professional economists - but I certainly hope that they can help people think a bit).
We don't have to go that far, of course. Nicholas Taleb (in his book The Black Swan) makes the case that many economists had systematically overestimated the relevancy of using Gaussian distributions as an assumption, but that due to over overuse of these distributions, we have a systematic tendency to underestimate the effect of extremes - which often happen even more often than would be predicted by any conventional distribution. And this assumption was one of the major factors that caused the current economic crisis.
So what I'm saying is that out-of-box thinking can help us move beyond these assumptions (like bell curve distributions and Homo economicus) so that we could better anticipate complete changes in the structure of the economic landscape. After all, economics tends to only study what has happened, so we only have good economical models of capitalism and communism (roughly coterminous with the rise of the discipline in the last 50 years). But we have too little data for any other government system, or of any society that could come following possible upheavals that could arise in the 21st century.
===
[1]
[2]
http://hanson.gmu.edu/eco
Additional References
How will "Coasean growth" be measured?
Fields like behavioral economics and neuroeconomics, for example, were among the most "understudied" areas of economics 10-20 years ago and before. They're attracting more interest now - largely because old economic models had made an assumption of Homo economicus - the assumption that all humans acted rationally. And this assumption did not reflect reality.
Now, that's still only one assumption that modern economists often drop. But there are still numerous other assumptions that are rarely dropped, if ever. That's because the modern discipline of economics had only exploded in the last half-century, and so we're used to making the assumptions that have been true only in the last half-century. But this also means that we're not used to studying economics in alternative societies or alternative settings. Especially ones that can come through massive social-technological transformations, as explained in http://modeledbehavior.co
What then should we as economists say about the potential for new really big ideas? On the one hand, our training makes us skeptical of their existence, but on the other observations like the industrial revolution make it clear that when really big things happen they can swamp everything else.
I'll attach a further quote in [1] from Modeled Behavior, and [2] from Robin Hanson's blog. These two quotes do better than I can in explaining the areas of economics that really are understudied
Thanks to the massive changes brought by the Internet, there are "really big things" that are happening, and those things are often among the most understudied areas of economics. And these areas are those where financial transactions are not involved, as you can see from Gregory Rader's blogpost about the economics of value (http://onthespiral.com/ ). In particular - in the following blogpost, he explains 4 areas of economics - only one of which involves financial transactions: http://onthespiral.com/un
With http://onthespiral.com/un
Also, the economics of time (and exchanging time for money). See http://money.cnn.com/2011
Taskrabbit, which was founded in 2009, is a market where busy people can hire other people to help them with with myriad tasks, such as picking up groceries or making reservations for dinner and a movie. The company says a disproportionate number of the tasks involve Ikea or assembling furniture
Are there any startups that could help address our unemployment issues at scale (i.e. need a lot of labor)?
And in the medium term future, What is the plan if a computer or robotic workforce cause catastrophic unemployment? is definitely something that needs further exploration. See Karl Smith's blog post here: http://modeledbehavior.co
TFT: So what do we do about it?
MF: If we do nothing, that would result in social instability; you’ll have people living in tent cities, losing their homes, even worse than now. That’s the path to disaster. What I suggested in the book is [to] get the government involved in providing an income with what I consider to be a market-based approach because you’re doing taxation and redistribution, you’re giving people some kind of an income but they’re still participating in the market as consumers. There isn’t a solution where everything will be OK – but we have to do something. I want lots of people, including economists, to be thinking more about this issue because right now they’re very dismissive of it and they don’t see it as a problem and I think it deserves more attention. If in fact so many of the ideas that I’m suggesting turn out to be correct and we run into a problem, at least people will have thought about it.
In short, we want to understand the below graph better (taken from http://econfuture.wordpre
As with the possibility that utility functions can change from one form to another with respect to shifts in economic conditions or an individual's personality changes through life (most importantly, utility functions can change with respect to what type of reward is offered - which is often dependent on whatever means of production is most scarce)
There are so many other regions of possibility space we can explore.
- What about an economics in an island where all resources were scarce?
- Or where there were only 10 people living in the world? Or 3 people?
- Or in a place like Runescape, where people often willingly quit the game and willingly give away their level-99 accounts to strangers?
- Or alternatively, what about an economics in a place where everyone had practically an infinite amount of energy? (say, if we were able to construct a Dyson Sphere around the Sun).
- Or where you had two different interacting intelligent species - say - humans and Neanderthals?
- Or in a society where the average lifespan was hundreds or thousands of years? Or where everyone had antisocial personality disorder?
- Or in a place where people didn't get the idea of money yet?
- Or when everything started to fall apart (as in, the case of the civilizations in Jared Diamond's Collapse).
Personally, I think that discoveries of extrasolar planets have some potential to cause some cutting-edge thinkers to branch out and drop some major assumptions - and make some very interesting (and surprising) predictions (or in other words, a discipline of astroeconomics could turn into a discipline of "possibility space" economics).
In fact, Paul Krugman explored this a little in one of his papers labelled The Theory of Interstellar Trade (http://www.princeton.edu
Alex K. Chen's answer to If energy was free and renewable, how would the economy be fundamentally different from what it is now? and What happens when we start producing more "important" media than an individual can consume? are other posts I wrote to make a preliminary attempt at exploring possibility space (not that my answers should be trusted beyond those of professional economists - but I certainly hope that they can help people think a bit).
We don't have to go that far, of course. Nicholas Taleb (in his book The Black Swan) makes the case that many economists had systematically overestimated the relevancy of using Gaussian distributions as an assumption, but that due to over overuse of these distributions, we have a systematic tendency to underestimate the effect of extremes - which often happen even more often than would be predicted by any conventional distribution. And this assumption was one of the major factors that caused the current economic crisis.
So what I'm saying is that out-of-box thinking can help us move beyond these assumptions (like bell curve distributions and Homo economicus) so that we could better anticipate complete changes in the structure of the economic landscape. After all, economics tends to only study what has happened, so we only have good economical models of capitalism and communism (roughly coterminous with the rise of the discipline in the last 50 years). But we have too little data for any other government system, or of any society that could come following possible upheavals that could arise in the 21st century.
===
[1]
So What?
Now what do we do with all of this. The first thing we want to do is try to flesh out the potential space as much as possible. I sketched above three techs that are popular in the futurist community. They are certainly not the only potential really big ideas. Moreover, there may be ideas which are bigeconomically that futurists have not even realized are big. So we want to catalog these potential techs.
Second, we want at least very general sketches of what the economic models of these techs might be. How, do you modify growth models in the presence of such techs. How do you think about the supply and demand in certain markets, etc.
Third, we want to use those models to make estimates of the economic effects that could occur with these techs. Can we pin down number ranges for what we are talking about. What are GDP effects, government spending effects, inequality levels, etc.
Fourth, we want to collaborate with the technologists to get some idea of what the probability distribution functions are for these techs occurring. This is something that economists may be able to help with since we can potentially answer questions regarding the resources which might invested in these techs.
[2]
http://hanson.gmu.edu/eco
The Economics of Science Fiction by Robin Hanson
Academic discussion of the non-immediate future seems almost non-existent. Yet the topic is of widespread popular interest. Why? The explanation seems obvious: it seems very hard to say anything rigorous about the topic, and individual academics avoid the topic in order to distinguish themselves from the sloppy wishful thinkers who seem to dominate the topic.
Most discussion of the non-immediate future seems to take place in science fiction, and the small subset of science fiction where authors try hard to remain realistic is called hard science fiction. Loosely associated with hard science fiction is an intellectual community of people who try to make projections which are true to our best understanding of the world. They work out the broad science and engineering of plausible future space colonies, starships, virtual reality, computer networks, survellience, software assistants, genetically engineered people, tiny machines made to atomic accuracy, and much more.
Unfortunately, few if any people of these people know much social science. So their projections often combine reasonable physics or computers with laughable economic assumptions. This often seriously compromises their ability to make useful projections.
Professional economists, on the other hand, do understand social science, and often do talk about the future. Quite a few of them are even paid a lot to think about what the next hot technology will be. Economists, however, seem to almost completely ignore the longer-term implications of specific envisionable technologies. When looking more than a few years out, they almost always abstract away from specific technologies and think in terms of aggregate economic processes, which are assumed to keep on functioning much as they do today.
This leaves an unfilled niche, which I call the "economics of science fiction", or the "economics of future technology." This is economic analysis of the sorts of assumptions typically explored in science fiction. It is distinguished from the typical hard science fiction analysis by using the tools of professional economics, rather than the intuitive social science of the typical engineer. And it is distinguished from most economics by taking seriously the idea that we can now envision the outlines of new technologies which may have dramatic impacts on our society.
Additional References
How will "Coasean growth" be measured?
