Staff Discussion Notes

• Pages: 12-12

10

IMF Research Bulletin

laureates as to why the economics disc ipline had got so

much wrong in recent years, wit h its assumptions and

predictions proving to be far removed from rea lity. She

wondered whether the underlying ec onomic theories were

wrong, or that policy makers listened to the wrong people.

She encouraged economists to build bridges b etween theory

and evidence, provide guid ance to policymakers, and be

honest enough to indicate areas where t here is ambiguity

and uncertai nty. Emphasizing the constr aints politicians

face in decision maki ng and implementation, she insisted

that political adv ice would be useful if it is mindf ul of the

realities of the day, which may be hard to compress into

theoretica l models.

Amid talk s of failures, crisis, and risk s to the global

economy, the thought-provoking special lecture by Mar io

Vargas Llosa on the value of liberal ism and freedom provid-

ed a much-needed glimmer of hope. Arg uing that collectiv-

ism is a threat to civi lization, Vargas Llosa emphasized how

freedom and the wi llingness of humans to respect and l ive

with those from d ierent backgrounds has contributed more

than any scientic d iscovery to end violence and make intel-

lectual progress . He remained optimistic about the future

and, citing Karl Popper, argued t hat while catastrophic

things are happeni ng around us, we have instruments as

never before to defeat the “demons” of poverty, illness , and

discrimi nation. is, he stressed, should give us enthusiasm

to face the challenges, a nd create a structural tr ansformation

that benets all ma nkind.

e three days of intensive learn ing in the Bavarian town

(also home to the Rapunzel tower; see photo!) were brought

to a close with a boat trip to Ma inau Island in Lake Con-

stance, where the gues t of honor, Queen Silvia of Sweden,

addressed the par ticipants, and where the three laureates—

Diamond, Merton, and Roth—debated t he overarching

question of “How Useful Is Economics—How Is Economics

Useful?” e lau reates acknowledged th at economists do not

always have solutions to economic or social problems, but

vehemently agreed that economics has had a n extraordinary

impact on the eciency and development of national econo-

mies through, for inst ance, policy advice, nancial m arket

development, and market design. Look ing forward, they

suggested, that t he development of new technologies, and

accumulation of knowledge in ot her elds, oers innite

opportunities to adapt , and improve upon existing models

and theories—which ma ke the progress that has happened

to date “just look li ke the beginning.”

At a time when the usefu lness of the economics disci-

pline is being questioned by those outside t he profession,

and economists themselves a re doing much soul-searching,

the talk s at Lindau were a useful reminder of how rigorous

analysis of various f acets of economic behavior has come

together to profoundly benet society—while a lso inspiring

young economists to stand on the shoulder s of these Nobel

giants and tr y to reach further.

Meeting the Nobel Giants

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Staff Discussion Notes

Staff Di scussion Notes showcase new policy-related analy sis and research by IMF depart-

ments. These papers are general ly brief and written i n nontechnical lang uage, and are aimed

at a broad audience interested in economic policy issue s. For more information on this

series and to download the paper s in this series, please visit: www.imf.org/external/pubs/cat/

createx/Publications.aspx?page=sdn

No. 14/9

Emerging Market Volatility: Lessons from the Taper Tantrum

Ratna Sahay, Vivek Arora, anos Arvanitis, Hamid Faruqee, Papa N’Diaye, Tommaso Mancini-

Grioli, and an IMF Team

No. 14/ 10

Making the Most of Public Investment in MENA and CCA Oil-Exporting Countries

Maria Albino-War, Svetlana Cerovic, Francesco Grigoli, Juan Carlos Flores, Javier Kapsoli, Haonan

Qu, Yahia Said, Bahrom Shukurov, Martin Sommer, and SeokHyun Yoon