Rethinking economics for a sustainable future

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Policymakers around the world are facing many challenges when it comes to meeting the Sustainable Development Goals (SDGs). Developing countries in particular have been struggling with a wide range of issues such as political and economic instability, poverty, and climate change. The recent history of economic crises and recessions has highlighted some of the shortcomings of economics in preventing and mitigating these events.

For all their sophistication, economic models have sometimes struggled to foresee and mitigate financial shocks and downturns. The 2008 financial crisis serves as an apt illustration. Predominant models at the time largely underestimated the risk of a global financial meltdown due to their inability to account for the interconnectedness of the financial sector. They failed to predict the domino effect that the US subprime mortgage crisis would have on global economies.

Similarly, the economic fallout of the COVID-19 pandemic took the world by surprise. Models failed to foresee the depth and duration of the economic contraction due to the unprecedented nature of the pandemic and the variability in global responses. These instances highlight the inherent limitations of traditional economic theories, underscoring the need for models that better account for systemic risks as well as unforeseen events.

While economists continue to debate the causes and solutions for these crises, it is clear that a fundamental rethinking of economic theory is necessary to create a more stable and sustainable global economy.

Pluralism not monism

During the “Discipline of Economics in Addressing SDGs Challenges” roundtable, Sherine Al-Shawarby, the Dean of Cairo University’s faculty of economics and political science, underscored the necessity of embracing pluralism instead of monism when approaching economic thinking. Hosting the event in March 2023 as part of the annual AUC Business Forum, the AUC School of Business facilitated the discussion on breaking silos to tackle the multifaceted complexities of the economy.

Al-Shawarby emphasized the significance of incorporating pluralism and cooperation in the governance of our institutions, calling for ministries to coordinate and communicate with one another, thereby fostering a platform for public debate. She stressed the importance of establishing an intergenerational composition that combines technical knowledge with real-world experience, aiming to address the intricate challenges of the modern economic landscape.

Highlighting the relevance of home economics, Al-Shawarby noted how it can offer valuable insights into sustainable living and resource management. She also emphasized the need for knowledge sharing among universities in Egypt, aiming to foster collaboration and innovation within the field of economics. Al-Shawarby further highlighted that economics plays a pivotal role in prioritizing contradictory goals and guiding resource allocation decisions based on their impact and feasibility.

“We must embrace pluralism and cooperation in our approach to economic thinking. The governance of our institutions should reflect these principles, enabling ministries to coordinate and communicate for public debate,” Al-Shawarby remarked.

“An intergenerational composition that combines technical knowledge and real-world experience is vital to address the complexities of modern economic challenges,” she added.

Al-Shawarby emphasized the importance of knowledge sharing among universities, stating that “universities in Egypt should promote collaboration and innovation in economics through active knowledge sharing.” She further highlighted that “economics plays a crucial role in prioritizing contradictory goals and guiding resource allocation decisions based on their impact and feasibility.”

“Let’s harness the power of economics for positive change and shape a better tomorrow,” Al-Shawarby concluded.

Challenging the status quo

In the rapidly changing world we live in, Sandra Farid, CEO of Acumen Consulting and economic adviser to the Egyptian minister of tourism and antiquities, stressed the importance of economics keeping pace with the times. She stated that “there are significant differences in how different age groups behave in response to changes in monetary policy.” This highlights the need for economic courses to adapt to current market dynamics and consumer behavior, rather than solely relying on traditional concepts and methods that have been used for decades.

Farid further argued that the high interest rates offered by bank facilities are impeding private sector activity, leading to a decrease in the supply of goods and contributing to the considerable inflationary pressure observed today. She emphasized the significance of comprehending consumer behavior through neuroeconomics and neuroscience to make well-informed decisions. Consequently, it is crucial for the field of economics to embrace new technologies, insights, and data in order to remain relevant and effective. The future of economics hinges on its ability to evolve and adapt to the ever-changing world we inhabit.

Economics of abundance

In the same roundtable discussion, World Bank Senior Economist Hoda Youssef highlighted the concept of abundance instead of scarcity in resource allocation, stating that “the economics of abundance is about exploring resources such as renewable energy, big data, AI, machine learning, migration flows, and ideas.” Youssef further emphasized the need for a multidisciplinary approach and collaboration between experts from various fields.

“To achieve the Sustainable Development Goals, we must focus on development-driven localization, decentralization, and community-driven development,” Youssed said. Furthermore, she underscored the crucial role of data accessibility and a shift towards a purpose-driven mindset in bridging the growing gap between the wealthy and the impoverished, as well as in addressing environmental degradation.

Youssef concluded that by enhancing human capital through knowledge, implementing the SDGs agenda, and conducting action-oriented research, we can pave the way towards a sustainable future. The economics of abundance offers an alternative perspective on resource allocation that prioritizes sustainability. As we look ahead, the future of economics lies in reshaping how it is taught and practiced, embracing a holistic approach that places the well-being of society and the environment at its core.

Bridging the gap

On her part Hala El-Ramly, an associate professor of economics at AUC School of Business, emphasized the vital role that universities play in the attainment of the Sustainable Development Goals (SDGs) through outreach, raising awareness, and enhancing the capabilities of executives. She stated, “universities can be champions of public opinion for SDGs.” This highlights the potential influence and advocacy universities possess in driving public support for sustainable development.

El-Ramly further emphasized that businesses’ contribution to the SDGs requires more than just fulfilling corporate social responsibility—it necessitates financial and political gains; to achieve SDGs, there must be some sort on incentive such as economic profit or political gain to drive progress towards SDGs Therefore, bridging the gap between public policy and the SDGs is essential for achieving a sustainable future.

Classroom learning vs. real-world implementation

While academic courses are essential to gain theoretical knowledge, practical experience is crucial for students to understand how to apply this knowledge in real-world situations.

Ghada Nadi, managing editor of Business Forward, the digital publication of AUC School of Business, emphasized the importance of bridging the gap between classroom learning and real-world implementation. Research practicum courses achieve this balance, where students work with local authorities, consider cultural sensitivities and implementation challenges, and learn how to sustain the programs they implement. Furthermore, evaluation of previous programs or programs in pilot or design phase are a wealth of knowledge that if accessed by students of economics and public policy can serve as a valuable learning experience.

Exposing students to impact evaluations conducted by organizations like J-Pal—that has its MENA office at the AUC School of Business—could deepen their understanding of how mathematical models are applied on data to explore the impact of interventions on real lives. Nadi also stressed the importance of building in students the skill of communicating complex concepts by simplifying them into easy-to-understand public messages, which is an underrated but essential skill for economists.

Breaking the silos between different disciplines is the first step towards a more holistic and integrated approach to addressing the complex challenges of sustainable development. As highlighted by experts, economics cannot be taught in a vacuum and must be integrated with other fields such as health, environment, and social justice. By taking a multidisciplinary approach, we can solve the complex cross-sectoral that underlie the SDGs.

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