The traditional state of economics is captured by the joke about ten economists, each of whom has a different theory of how the world works, none of which is directly tested or verified. Looking ahead, I am most excited about the prospect of having clear, evidence-based answers on which policies have the most beneficial economic impacts. I am especially optimistic that the expansion of access to large administrative datasets, such as earnings data from social-security records or student-achievement data from school districts, will yield sharp, quasi-experimental evidence that allows us to test theories and estimate key parameters of economic models. While theory will play an important role in guiding this research, its assumptions and conclusions will increasingly be empirically founded.
Eight young, respected economists are considering what breakthroughs need to occur in economics in the next two decades. The above quote is from Raj Chetty, a 32-year-old Harvard economist. Chetty did a study on how children with good kindergarten teachers and positive classroom environments often grow up earning more than their peers who had mediocre ones (I had a good one!).
One thing the young economists agree on is that they now have access to technology that will allow them to better evaluate empirical data. Will they be able to see the next crash coming and sound the alarm to soften the blow? Maybe that’s just a thing that happens in the movies.