On this first anniversary of the financial crisis, we're running guest posts from economists about what they've learned in a miserable year. Today Simon Johnson, who teaches at MIT's Sloan School of Management, writes about how economics has changed in his classroom.
I used to think of research and teaching as largely disconnected activities. Certainly there were spillovers in both directions, but my MIT MBA students were mostly interested in hands-on issues pertaining to entrepreneurial start-ups and company operations around the world, and my 20 years of research on economic crises often seemed somewhat distant from their concerns (except, perhaps, for students from Argentina, Russia or other emerging markets).
After staring in the face of global financial collapse, and narrowly avoiding a Second Great Depression in the United States over the past 12 months, all this has changed.
I now try to run everything I do, from classroom materials to op eds to technical papers, through my website, Baseline Scenario. This serves partly as a way to make explicit links between these various activities, but it also opens up both the MIT classroom to anyone interested, anywhere in the world, at the same time as allowing outside voices — from the experienced and savvy community that regularly comments on the blog — into our MIT face-to-face discussions.
The website has plenty of opinions — and suggestions for "reforms" of various kinds, ranging from financial innovation to healthcare - but it also tries hard to demystify issues. Questions from MIT students or from others on the blog lead to "explainer" material that helps structure further conversations about how the global economy works (or doesn't).
This discussion-based material also becomes more explicitly political over time. Before the crisis I was more inclined to separate economic issues from underlying considerations of who had what kind of power in various societies. Now such distinctions seem increasingly artificial.
If you want to think about where are the new opportunities in the world, including where to start a business and how to run it, you need to understand a great deal of the political environment — both locally and globally. Nothing we have seen over the past year means we should shy away from taking real (as opposed to financial) risk. But it does suggest we should weigh carefully the potential scenarios for global economic development — and take seriously the possibility that major global financial crisis is as much in our future as in our past.
And the best way to stay on top of what is happening, and likely to come next, is find ways to engage actively in global economic debate. Don't sit back and assume that anything can be left to the "experts." This is not a homework assignment; this is a much broader suggestion, learned the hard way.