One of the shifts that will take place as a result of the global economic crisis now underway -- and significant shifts are inevitable -- will be that new knowledge will appear. Or alternatively, already-existing knowledge will take on the appearance of being new. What new knowledge will emerge? I see the possibility for two kinds of knowledge to become more recognized and central to understanding the reality around us.
First, the work of so-called 'left-wing' economists will become more central within acceptable economic understanding. Economists like Paul Krugman and Brad Delong and Joseph Stiglitz -- each of whom has long argued in their different ways for a more interventionist role for governments, so that they assist in making markets more efficient and socially valuable -- are basically seeing their empirical arguments (if not their ideological bents) come true in a very general sense.
Second, the work of sociologists will become crucial to understanding how markets work and how they should work. I mean this in two ways. For one, capitalism today is being exposed as dependent on the free flow of credit. Credit is shaped not only by economic relations of supply and demand, but sociological relations of trust, confidence, and power. It will take experts on social relations to fully make sense of the way that today's 'credit economy' works. For two, the notion that an economy is best left to its own regulatory tendencies is being shown as inefficient for society as a whole. In other words, an economy is not good in and of itself. An economy is good as measured by the good it brings society. In sum, sociological knowledge is needed to explicate the way that social effects shape the economy, and the way that economic effects shape society.
To this end, yesterday's Financial Times included an excellent column by Richard Sennett, a sociologist at the London School of Economics. The article is here. I want to highlight a couple of the interesting points Prof. Sennett made in it.
How did we get into this dangerous mess? Both Europe and the US have done a poor job and not invested the necessary sums to create new, sustainable work.
Full employment is more important to our societies than efficient profitability.
While I think the latter statement underplays how important efficient profitability is to full employment, Prof. Sennett's points are well taken. In the first statement, he focuses on the way that political agendas shape economic outcomes, and in the second, he focuses on the way that economic agendas shape social outcomes.