SAFE Research Web Seminar: Matthias Thiemann (Sciences Po, Paris)
Speaker: Matthias Thiemann (Sciences Po, Paris)
Title: How Did Economics Change After the Financial Crisis? The Rise of Macro-finance as Mainstream Economic Discourse and the Role of Central Banks and International Organizations in its Establishment
joint work with Oliver Levingston (Sciences Po)
How do abstract academic theories of society, such as economics develop over time? Do they develop internally according to self-referential rules of the discipline or do they evolve with respect to external events? Is there possibly a pattern of both alternating over time? Economics as the academic discourse that seeks to understand economic dynamics and to prescribe optimal economic policies is important because of the impact it exerts on public policies. For few issues this question has been more relevant than for financial markets, which have experienced a long period of deregulation from the 1970s, accompanied by the rise of finance theory, which legitimized such deregulation. This paper investigates how theories of financial markets and their impact on the real economy have developed since the great financial crisis of 2008. Based on a dataset of 142000 economic papers written on the topic since 1990, it shows that a new view on financial markets has taken hold in academia which problematizes the nature of financial markets as instable and subject to boom and bust cycles, which in turn generate negative spillover effects on the macro-economy. It goes on to show that economists in central banks and international organizations have been important producers of such economic knowledge. Based on 32 expert interviews it elaborates on the mode of collaboration between these applied economists and academia in the production of this new knowledge, pointing to the peculiar knowledge production by the former, which is driven by their specific task environment, finding its expression in actionable knowledge and stylized facts about the economy-finance relationship.