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A young group of economists based in Australia and New Zealand have launched a new network to champion the contribution of theoretical economics to solving real-world problems.
Called the Research Network in Applied and Theoretical Economics (ATE), the network is hosted and administered at Massey University. It was co-founded by Drs Simona Fabrizi and Lorenzo Ductor, both lecturers in economics at Massey, to bridge the gap between the work of theoretical economists and how their research is applied in practice.
“Everyone in this network has a strong theoretical base, and an interest in applying that theory to solving real-world problems,” Dr Fabrizi says.
“We all want to see policy recommendations made that are based on sound, validated research. Sometimes the urge to try and find solutions quickly means that policies are implemented too early in the process, without necessarily waiting for scientifically proven research findings, or worse – without using existing results that have been certified by the academic community.”
Fellow ATE executive board member Dr Steffen Lippert says the sub-prime mortgage crisis was an example of “a wrongful application of economic theory”.
“Banks learned that it would increase their profits if they gave incentives to their staff to sell more mortgages, but providing incentives is not a one-dimensional problem,” he says. “The banks disregarded the second dimension to the problem, which is the quality of those mortgages.
“Leading contract theorists were studying such dangers, but the dialogue between theory and practice was not as effective as it could have been before the crisis hit.”
Dr Fabrizi hopes ATE will facilitate the sharing of information between academics, and also the dissemination of research to a wider, non-academic audience. The network encourages joint research projects between members, and will host regular public lectures and workshops.
While ATE has an Asia-Pacific focus (its executive board are all based in Australia and New Zealand), the network connects trans-Tasman scholars to other researchers from Europe, North and South America, China, and Japan.
It also has some high profile international support. Highly-regarded academics including Professor Francis Bloch from the Economics Department at Ecole Polytechnique, Professor Patrick Rey from the Toulouse School of Economics, and Professor Sanjeev Goyal from Cambridge University provide mentorship and advice as members of the network’s advisory board.
ATE has identified some key research themes, including the health sector, social networks, fiscal and financial stability, decision theory, game theory, and institutions and incentives. Its members are already working on joint research projects in areas ranging from the relationship between patenting criteria and venture capital activity, to using a researcher’s social networks to predict their future productivity, and the regulation of direct-to-consumer advertising in the prescription drug market.
Dr Fabrizi also hopes ATE can play a role in encouraging young New Zealanders to pursue postgraduate studies in economics, and to thereby increase the value placed on rigorous research and fundamental economic theory.
“In New Zealand there seems not to be enough appreciation for a PhD in economics, which is a shame. In Europe, where I am from, a lot of people do a PhD in economics, whether they plan to become an academic, a policy maker, or a consultant,” she says.
“The network wants to change the perception of ‘Oh, you’re an economist. You sit in your office doing complicated mathematical things and no one understands you.’ I think there really is a misconception about what an economist can do.”
ATE’s executive board is made up of Dr Simona Fabrizi and Dr Lorenzo Ductor from Massey University’s School of Economics and Finance; Dr Steffen Lippert, Otago University; Associate Professor Hodaka Morita, University of NSW; and Associate Professor Matthew Ryan, Auckland University.
For more information visit: http://ate.massey.ac.nz