Here are three responses to the prompt, “Identify the biggest unanswered questions in economics and predict what breakthroughs will define it a decade or two hence” from some of the so-called brightest young minds in economic thinking today. But beware– one of the three is a parody, not a sincere response.
I see a big payback to integrating psychology, anthropology, and history into economics more directly, using real-world data to understand how prices, output, and inequality relate to institutions, norms, education, and taxes. And vice versa.
The modeling of agents with bounded rationality will help us build economic models (in particular, macroeconomic and financial models) and institutions that better take into account the limitations of human reason.
In an increasingly globalized world, the search for answers will necessarily require a much deeper understanding of three areas that interest me. One, we need a better understanding of the interlinkages across countries in trade, finance, and macroeconomic policy.
Which is which? For the answer, visit Eric Falkenstein’s blog.