So says Andrew Sheng in this op-ed for Project Syndicate. Writing about INET’s recent Berlin conference, where Sheng was also a speaker, Sheng notes, “Almost everyone agreed that the old paradigm of neoclassical economics was broken.” But what comes next wasn’t as clear.
Looking for answers, Sheng goes beyond the traditional inductive/deductive dichotomy of Western thinking. He suggests something entirely different: “Eastern thinking, by contrast, has been abductive, moving from pragmatism to guessing the next steps. Abductive inference is pragmatic, looking only at outcomes, guessing at the rule, and identifying the cause. “
In the wake of the Berlin conference, Sheng recommends that “New thinking is required to manage these massive and systemic changes, as well as the integration of giants like China and India into the modern world. A change of mindset is needed not just in the West, but also in the East.” Sheng sees a healthy process of creative destruction occurring, but warns, “We cannot postpone the pain of adjustment forever by printing money. Sustainability can be achieved only when the haves become willing to sacrifice for the have-nots.”
What we need now, Sheng says, is new economic thinking for a new paradigm.