World economy needs intellectual revolution to get out of low-growth trap

Modern policy makers operate in a world of radical uncertainty. They simply do not know what might happen next - and under these conditions, economic models need to be seen in a new light

A decade ago, we thought the banking crisis was over and the expansion already visible in emerging economies would spread to the industrialized world. There’s been a recovery, but a frustratingly slow one. The International Monetary Fund just lowered its estimate of world growth both this year and next. Every data release seems to bring gloomy news. If the problem before the crisis was too much borrowing and too much spending, then the problem today is too much borrowing and too little spending.

The world economy is stuck in a low-growth trap. The question is why.

The Great Depression was followed by