After economists and traditional economic models failed to predict the financial crash of 2008, many called for a rethink on how we study macroeconomics - the branch of economics that deals with how the wider economy behaves and which is concerned with issues such as economic growth, inflation, employment and financial stability. The Economic and Social Research Council (ESRC) have therefore taken the lead and commissioned a new Network, 'Rebuilding Macroeconomics', which will be led by Dr Angus Armstrong, Director of Macroeconomics at the National Institute of Economic and Social Research (NIESR).
The £4.6 million Network will champion new interdisciplinary approaches to studying the macroeconomy, and investigate new methodologies which offer alternatives or complements to mainstream macroeconomic models. It will fund innovative new research initiatives and explore creative and fresh approaches and methods to studying the field. The aim of the Network is to transform the field of macroeconomics into one that is once again useful and relevant to policymakers and the public, asking and answering questions about economic issues affecting the real world and the people in it. The Network will also directly engage the public with macroeconomics, exploring relevant issues through an extensive out-reach programme ranging from 'town hall' style debates across the UK to a series of broadcast radio debates and podcasts.
The Network will consist of between four and six 'research hubs', each of which will address a fundamental macroeconomics question. It will be led by a team of 25 world leading experts taken not only from different branches of economics, but also from psychology, anthropology, sociology, neuroscience, economic history, political science, biology and physics. In order to make sure that the research is relevant to current policy issues, the team of academics will work closely alongside senior policy makers, representatives from civil society groups, business organisations and the public. The ultimate goal is to explore which new research questions are valuable, and which new research ideas would benefit most from future research investment.
Dr Angus Armstrong, Director of Rebuilding Macroeconomics Network said:
"The need for new ideas in macroeconomics is evident. Most macroeconomists not only failed to recognise the weaknesses in the global economy before the financial crisis, their main macroeconomic model specifically excluded the possibility of financial vulnerability. Assumptions made about human behaviour and how markets operate have undermined the effectiveness of macroeconomics as a guide for practical policy making."
"The aim of the Network is to transform macroeconomics back into a policy relevant social science. We will encourage and fund new and fresh research ideas that address the most pressing ‘real world’ economic challenges facing us today. The ESRC’s award is an exceptional opportunity to rebuild the UK’s position as the world leader in macroeconomic research."
Professor Jagjit Chadha, NIESR Director, said: "With its long history of innovative macroeconomic research, NIESR is honoured to be hosting this Network – macroeconomics has yet to find answers to the questions posed by the financial crisis and this Network may well offer the best chance yet."