October 14, 2020 - 7:00am

A knock on the door in the middle of the night is usually bad news. But not for the American economist Paul Milgrom. His midnight caller was his colleague, Bob Wilson, bringing the happy news that the pair had just won the 2020 Nobel Prize for economics. Milgrom, not unreasonably given the hour, took some rousing. You can see the video here.

A lovely moment, but also a symbolic one. The whole world is knocking at the door of the economics profession, but without getting the answers we need. In this respect, the Nobel Prize is part of the problem — because, too often, it honours the wrong sort of economics.

Just look at the list of former winners. For a start, it’s dominated by the academic establishment of just one country. Most of the laureates are American, and most of those who aren’t are based at a US university. Other nations barely get a look in.

Another thing the laureates have in common is that almost all of them are men. To date, just two women have won: Elinor Ostrom (2009) for showing how, counter to the ‘tragedy of the commons’, communities are capable of stewarding shared resources; and Esther Duflo (2019) for her work using on randomised control trials to assess the effectiveness of aid programmes.

The real issue, though, is what the winners are being honoured for. While Ostrom and Duflo’s contributions do concern real-world problems, other contributions are mind-numbingly abstract. Economists are honoured for their devotion to such technicalities the ‘Markov perfect equilibrium’, the ‘Diamond coconut model’ and the almost-too-exciting ‘generalised method of moments’.

Obviously, these represent genuine academic achievements — and some will have practical applications. But do they answer the really big economic questions of our time? In a series of tweets, Branko Milanovic puts forward some examples of what we actually need to know:

Ok, let’s start with a huge topic that stares us in face. We have 40 years of the most extraordinary increase in income for the largest number of people ever. Do we know what propelled China’s growth? Perhaps not fully, but there are people who have been writing about it.

They might disagree among themselves, but let’s hear from them. Did, for example, any Chinese *ever* write anything to explain this extraordinary development?

- Branko Milanovic

He carries on in this vein.

I’d add the following questions to the list: How did governments manage to slash interest rates to zero for the last decade without unleashing runaway inflation? Why has the internet made such a meagre contribution to productivity? How does the global economy recover from a devastating pandemic? Why didn’t economists see the last recession coming?

We need to be incentivising the most brilliant minds on the planet to work on these issues instead of fiddling about with obscure equations.

If the Swedes won’t change their prize-giving criteria, then I hope that some public-spirited billionaires will fund a new economics prize with the express aim of shaking up the discipline.

Finding out more-and-more about less-and-less is not what we need right now.

Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.