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Our mission is to tackle five major challenges the world is facing today: achieving a sustainable economy, managing the digital revolution, overcoming the globalization crisis, reducing poverty and inequality, and developing effective public policies. How we, as a society, deal with the challenges will have a decisive impact on how the world develops in the coming decades.
Understanding human behavior and developing research methods are crucial underpinnings of this mission – and a long-standing focus of our department, which we continue to emphasize
Reducing poverty and inequality remains a central policy priority of our time. The United Nations have put it at the core of their 2030 Agenda for Sustainable Development in which they pledge to “leave no one behind”. Over the past 25 years, there has been a considerable reduction in extreme poverty and between-country inequality. At the same time, extreme poverty remains high in sub-Saharan Africa and there has been a marked increase in within-country inequality, particularly through rises in income and wealth at the very top.
The ongoing destruction of our natural environment is threatening our survival. This is particularly true for climate change, which is widely recognized as one of the greatest risks to humanity. We need to respond to this risk through climate change mitigation and adaptation. This requires fundamental changes to our economy, such as reducing fossil fuel consumption and preparing for extreme weather conditions. The broader goal is to achieve a sustainable economy in the sense of “meeting the needs of the present, without compromising the ability of future generations to meet their own needs”.
Digital technology continues to revolutionize our economy. Its disruptive nature is comparable only to that of earlier general-purpose technologies such as the steam engine, the electricity generator, or the printing press. It is therefore important to carefully manage the digital revolution so that we can reap its social benefits at acceptable social costs. Important concerns include its effects on jobs, competition, and privacy, particularly with respect to recent applications such as big data, artificial intelligence, robotics, and 3D printing.
Nationalist, populist, and extremist movements are shaking up our political systems. It remains to be seen whether this is only a temporary crisis of liberal democracy or a turning point for the postwar liberal international order. Against this background, governments have to continue to develop effective public policies. Key public policy challenges beyond the four issue areas listed here include an aging population, rising sovereign debt, unconventional monetary policy, and increasingly complex financial markets.
Globalization as we know it is in a deep crisis. Problems related to the way in which we move goods, capital, and people have become so severe that something fundamental will have to change. The most visible expressions of this include the trade war, the collapse of the WTO, the financial crisis, the Euro crisis, the refugee crisis, and the ‘Brexit’ of the UK from the EU. Underpinning this is a broader crisis of international cooperation, ranging from security matters (i.e. NATO) to environmental issues (i.e. the Paris Agreement).
A comprehensive understanding of human cognition is essential in order to address these challenges. Traditional economic theory needs to be updated to incorporate the biological and neural mechanisms that underlie perception, attention, and evaluation as well as the influence of societal norms on economic decision-making.
To fully reap the benefits of the insights found within the areas of applied microeconomics, behavioral economics, and neuroeconomics, we need a well-founded economic tool box. This includes the further development of research approaches, mathematical models, and statistical methods.
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