Economics is often criticised for being a reactionary science that predicts nothing and only explains its mistakes (Rodrik, 2015). It is rarely credited with discoveries that help society; and in a random survey, most participants did not trust economists (Economics Network, 2017). Instead, economists are criticised for their resistance to change and for limiting the exploration of real-world practical policy solutions. Moreover, it is true that theories that entirely revolutionise economics are rare nowadays; monetarism and neo-Keynesianism, the two most recent instances of such theories, only emerged after severe economic downturns. However, new ideas are still being investigated, such as Central Bank Digital Currencies (CBDC). Although they do not reframe economics, such ideas can still be considered “big” because of the scope of their impact on society – CBDC may significantly increase financial inclusion, as it would provide access to digital money for the 20% of the adult population which doesn’t currently own a bank account (IMF, 2022). This essay will investigate the reasoning behind pessimistic public opinion and evaluate whether it is justified. It will ultimately conclude that the subject is as agile as ever, spry with big new ideas.

The 2008 Global Financial Crisis significantly contributed to economics’ negative image. Prior to 2008, many economists claimed that another depression was impossible (Posner, 2009). When Chicago economist Raghu Rajan warned against the risks of new financial instruments, his ideas were admonished and ignored by mainstream economists, including Larry Summers, who worked at the top of the government (Ferguson, 2010). The crisis caused the perception that economics had run out of wisdom, as it seemed that even experts were blindsided, and the public were enraged as they experienced 10% falls in real wages (Centre for Economic Performance, 2014). Some economists, such as Krugman, even wrote articles criticising mainstream economics, further adding fuel to the fire (Krugman, 2009). However, the 2008 Financial Crisis is not a perfect argument against consensus economics. While it demonstrates the demonisation of non-conforming ideas, it also highlights the adaptability of economics. Following the crisis, economists re-evaluated their models. Research into economic crises sharply increased post-2008, with the number of working papers containing the word “crisis” in the first five paragraphs doubling (Mayer, Raviv and Levy, 2020). Many economists concluded that they could not stick with Fama’s efficient-markets hypothesis, which had previously justified market prices and risk-taking. Instead, they pivoted away from the long-accepted truth towards an emphasis on macroprudential policies and risk (IMF, 2009, and Acemoglu, 2009). Thus, the 2008 crisis in fact shows the capacity for economics to adapt to new ideas, should old ones fail.

The interpretation that economists are averse to new ideas is most evident through the treatment of behavioural economics in the late 20th century. Behavioural economics suggests that humans favour information that confirms existing beliefs (Thaler and Sunstein, 2008). Ironically, this explains why the field itself was not widely accepted in the economist circle. It deviated from the canonical assumption of rational decision-making that most economic models were built upon, and as such was frowned upon (Thaler, 2015). As a result, progress in developing behavioural economics was slow and its conclusions sparsely benefitted society for a long time. It was only in 2011, more than three decades after Kahneman and Tversky published their paper on Prospect Theory, the work that began investigation into the field, that the UK’s governmental “Nudge Unit” began experimenting with behavioural interventions, which has helped people save money for retirement and live healthier.

Economists have defended themselves against criticism of being resistant to change. Some claim that, if empirical evidence is provided, unorthodox ideas make it through the system of models and are heard (Rodrik, 2015); others say that mainstream economics is dominant because it has proved more useful than all the heterodox alternatives put together (Wren-Lewis, 2014). The example of behavioural economics contradicts these arguments, as it had empirical evidence, in the form of field experiments, and provided useful information to help economists rectify older models (Thaler, 2015). However, the example doesn’t destroy economists’ arguments; behavioural economics is the exception, rather than the rule. It challenged the fundamental assumption for all economic models, a feat no other new idea has done. Behavioural economics therefore generated far more resentment than any other idea, and critics were far louder. Many other unorthodox ideas made their way into the limelight with less resistance; for example, institutional economics began a new wave of research into historical and political economy (Acemoglu, Robinson and Johnson, 2001). While there were some critics of its techniques, the field prospered as it didn’t deviate excessively from economic fundamentals, and because of its applications to policy for development and growth. For example, the research has informed policy debates about property rights in Zimbabwe (Free Zimbabwe, 2020), showing that new big economic ideas can still come to fruition.

A more recent idea that proves that economics is not running out of fuel is digital currency. The concept originated in the early 2010s with the onset of digitalisation and boasts many benefits, such as reducing the costs of finance and increasing the possibilities for monetary policies. Research has progressed since then, with the Chinese central bank leading the way. 261 million people have now utilised the “e-yuan”, and the central bank has been able to employ unconventional methods to encourage demand, such as creating lotteries for individuals through Alibaba, the e-commerce app (Elston, 2023). Those without bank accounts in rural areas have been granted access to digital payments, increasing financial inclusion (Kumar, 2023). Critics of economics can point to the fact that under 20% of the Chinese population have e-wallets, and fewer actively use them, despite the concept having existed for a decade (Benzmiller, 2022). Moreover, the fact that digital currency is only in its infancy in other countries, such as England, is a worrying sight for proponents of the idea (Bank of England, 2023). However, this is not the fault of economists. The idea was not defeated by internal criticism; an amalgamation of other factors has slowed its progress, including lack of advanced technology and political resistance. These limitations slow down progress in other fields too, such as medicine, for similar reasons. In fact, economists are striving to overcome these issues; over two years, Europe has almost completely developed the technology for digital currency (ECB, 2023).

Economics is, like any other discipline, a place where it is hard to oppose existing paradigms. However, modern new big ideas are still created. Economics’ strict adherence to models may slightly restrict potential ideas, but many economists are still able to come up with ideas within these restraints, such as institutional economics. Moreover, some of the examples above have shown economics’ excellent ability to adapt to challenges, such as financial crisis or new technology. To that extent, one could go so far as to say that economics is unlikely to ever run out of new big ideas. Scarce resources mean that as time goes on, the number of challenges will only rise, and the number of ideas which attempt to solve them.