A Manifesto for a Paradigm Shift from Traditional Economics to Evidence Based Economics

A Manifesto for a paradigm shift from traditional Economics to Evidence Based Economics By Dr. Stefano Gori 1 1 Nov. 2016 “You want a valve that does not leak and you try everything possible to develop one. But the real world provides you with a leaky valve. You have to determine how much leakiness you can tolerate.” (Arthur Rudolph the developer of the Saturn 5 rocket quoted by Saxon, 1996). Abstract In the past century, the Mainstream Economic debate has been the quasi-monopoly of males educated or having a tenure in elite Anglo-Saxons universities. This has severely hindered a diversified and multifaceted approach to economic theory and to empirical research with a negative spill-over on policy making. Hence, there is a growing need for a new economic paradigm encompassing the changes in technology and the evolution of our societies. This paper has the objective to bring one step forward the debate on Evidence Based Economics, which is providing a sensible approach to complicated issues in these times of economic, political and financial uncertainty. An open, transparent, pragmatic, innovative and non-ideological method using Relative Preferences could help to bring some order also by helping to develop a code of conduct for the Economic profession and could eventually lead to a Paradigm shift in the medium and long term with unprecedented and unexpected policy implications. A. Introduction In the past century, the Mainstream Economic debate has been the quasi-monopoly of males educated or having a tenure in elite Anglo-Saxons universities (e.g. Ivy League, Stanford, University of Chicago, Oxford/Cambridge, LSE) 2 and the affiliation of Noble Price winners proves it. This has severely hindered a diversified and multifaceted approach to economic theory and to empirical research with a negative spill-over on policy making. There is a growing need for a new economic paradigm encompassing the changes in technology, the evolution of societies (e.g. immigration, cultural globalization, changes in the relations between the different genders) and the intertwined communication, economic and demographic flows between countries. The Financial Crisis, the increasing economic inequalities, the ongoing digitalization of the economy, environmental changes, the impact of globalization and the Fourth Industrial Revolution (Schwab, 2016) are challenges which need to be addressed by thought leaders from a different perspective and with new tools eventually leading to an overhauling of the traditional approach of the “Dismal Science”, Economics. The objective of this Working Paper is not to develop a one-fit for all economic theory instead it is to lay down the first steps of a methodology to comprehend the economic trends and try to tackle the economic issues with a practical tool box useful also for non OECD countries. To attempt to develop this approach there is a need to involve young experts in Economics and other social Board Member of the CESPI Research Center. The content of this Working Paper does not reflect the opinion of the affiliated institution. Responsibility for the information and views expressed in this Working Paper lies entirely with the author. I dedicate this Working Paper and the research work which will follow to my dearest friend Professor Michael Crew, who passed away on September 26 th , 2016, and his wife Hillary. 2 It is very interesting the analysis carried out by Colander, Holt & Rooser (Colander et al., 2004) on the terms mainstream, orthodox, heterodox and how they can be applied to Economics.