What is new economic thinking?

New economic thinking (NET) describes an organized attempt to design and deliver an economy that is fit for the 21st century.

As a term, it collects the many organizations, economists and researchers around the world who:

(1) challenge the main underpinnings of neoliberalism,

(2) develop new economic thought models,

(3) design new governance structures, and

(4) advance economic policies that serve the people and the planet.

NET currently includes versions of sustainable green economies (circular, regenerative, ecological, etc.), feminist economics, solidarity and democratic Economics, de-growth/post-growth, the economy of wellbeing, laws of the common good, indigenous and local wisdom, as well as a wide range of ownership debates. It serves as an umbrella term for collective and organized rethinking, despite differing ideological origins.

Most economic rethinking is frequently dismissed as ” left-wing” or “radical”. NET is not a left-wing term because it actually transcends dichotomies. Within it, there are multiple schools of thought. For example, Warren Buffet’s Institute for New Economic Thinking coined the term; declaring him a socialist would be quite the task. Still, NET stems from the belief that economies should serve the people and the planet. This belief comes in direct opposition to the subtle but widely shared view that a strong economy predicted by GDP growth creates prosperity. As we now know, this is an unrealistic view, significantly challenged by hard evidence. Therefore, NET explores how the economy could serve as a tool for a better life, rather than an end in itself.

More importantly, as NET represents a diversity of ideas, it is more about deliberation than simply marketing an alternative. In the EU, for example, there are more than 100 organizations that actively engage in building new theories, models, policy tools, and governance structures. NET is, thus, not an alternative. It is a direct outcome of continuous economic thinking, debate, and progress. In that sense, it does not call for a replacement of neoliberalism; it simply arises from neoliberalism’s failure.

If neoliberalism is bad, why has it persisted?

Traditionally, the neoliberal economy has been dubbed as “the only alternative”. Neoliberal economics equals “orthodox” economics. There is only one type of economic theory that is taught at universities; our financial systems, banks, and national economies all function under the same economic principles: rationality, growth, and efficiency.

There are three main reasons why neoliberal economics is solid, despite its shortcomings — and they have nothing to do with evidence, or the absence of a “viable enough alternative”:

1. 50-100 years of application. Despite its sensitivity to crises, neoliberalism is the only currently tested option. Moving away from it would require that we enter an era of uncertainty. Neoliberalism may be bad, but at least it’s familiar.

2. A philosophy that claims to be descriptive and Newtonian. Neoliberalism’s internal sense of superiority stems from its assertion that it describes and empowers what is already there. It doesn’t require much personal involvement or self-questioning. In other words, it legitimizes the “easiest option” (the “defect-defect” equilibrium).

3. Power generally stays where it is and the shifts are topical and tiny. Neoliberalism doesn’t significantly challenge current power structures. Power doesn’t just come in the form of billionaires — who in many cases show approval towards “heterodox” economics. Institutions and multinational corporations also serve as gatekeepers of power.

Is new economics another form of “heterodox” economics?

Challenging neoliberalism is far from new. Neoliberalism has always faced criticism both by economists and social scientists. However, attempts to enrich neoliberal thinking, or even explicitly attack it, have been dubbed as “heterodox”. Heterodox economics is anything that is not neoliberal or classical, resulting in the marginalization of all new proposals. Under this definition, Marxist economics can be heterodox — including socialism and communism – but so is radical free-market economics. Heterodox economics is often dismissed as peculiar or irrelevant.

Even so, it is possible to jump from the heterodox to the orthodox: for example, behavioral economics started off on the fringes of economic thought. Challenging the core assumption that humans behave rationally, behavioral economics borrowed from the humanities and social sciences to explain why real-life examples of human behavior seem so irrational. Behavioral economics explained both altruism and self-destruction. So, neoliberal economics can be somewhat sympathetic to new instalments, as long as they are not too challenging.

That is why the new economics cannot be an alternative or “heterodox” option. Instead, it can carve its own path, foster its own vibrant community, and lead with conviction. With its diverse pool of ideas, it provides the right tools for policymakers, local communities, academics, researchers, members of the public, economists, and all other stakeholders to build something new from the ground up. It can promote profound transformations and incremental improvements. In fact, both will be needed as we take part in creative destruction that fuels our imagination and funnels our frustration. Continuing the deliberation process will ultimately break through the barriers to change, granting our species and our planet new opportunities for survival, fairness, and joy.

What is new economic thinking?

If neoliberalism is bad, why has it persisted?

Is new economics another form of “heterodox” economics?

What are some NET organizations to follow?

Want to read about the state of new economic thinking in four European countries?

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