CBS re­search­er re­ceives pres­ti­gi­ous ERC grant to study how new act­ors are chal­len­ging es­tab­lished eco­nom­ic ideas

For decades, central banks, researchers and government ministries have played a central role in producing economic knowledge. These are the places where economic experts have been trained, ideas have been tested, models have been built, and particular ways of understanding the economy have gained authority.

But that order can no longer be taken for granted.

Today, economic ideas are also developed, discussed and spread through YouTube channels, podcasts, social media, blogs and online forums. Here, narratives about money, debt, inflation and economic policy can attract large audiences, even when they are far removed from mainstream economic research.

This shift is the focus of Digital Interactions and the Rise of New Economic Ideas (DIRE), a research project led by Oddný Helgadóttir, Associate Professor at CBS, which has just received a prestigious ERC Starting Grant from the European Research Council.

For Helgadóttir, the central question is not simply which new economic ideas are emerging. It is what happens to economic authority when the institutions that have traditionally held a privileged position in interpreting the economy face competition from entirely different actors.

“They no longer have a monopoly on interpretation. A great deal of interpretation is taking place in other spaces, and we still do not understand very well how those spaces come to exert influence,” says Oddný Helgadóttir.

A shift after the financial crisis

The project builds on Helgadóttir’s previous research into economic ideas and the macroeconomics profession. Among other things, she has studied how economists develop models and build professional networks, and how particular ideas move from research environments into economic policy.

The 2008 financial crisis marked a turning point.

The crisis hit an economics profession that held a great deal of authority, but which did not foresee the crisis and struggled to explain its scale once it had happened. At the same time, the digital public sphere was changing rapidly.

The two developments coincided. As trust in established economic institutions came under pressure, new digital media allowed other alternative actors to offer their own explanations of what had gone wrong and what should be done about it.

“Suddenly, you have these new actors online offering completely different interpretations and beginning to compete with the established ones. That is the dynamic I am really interested in,” says Oddný Helgadóttir.

One example is Modern Monetary Theory, or MMT.

The theory has academic supporters, but sits squarely outside the mainstream of economic research and has faced considerable criticism from established economists. At the same time, an active online community emerged around MMT early on, with its ideas being discussed and developed through blogs and internet forums.

From there, the ideas moved into a much broader political debate. In the United States, MMT was discussed by parts of the political left and became associated with debates surrounding figures including Bernie Sanders and Alexandria Ocasio-Cortez.

 “Remarkably quickly, it went from being an internet phenomenon to something that influential politicians were taking seriously,” says Oddný Helgadóttir. “But that momentum proved short-lived. When inflation surged, the political appeal of MMT largely died a quick death, as it a limited institutional basis to fall back on as arguments about the limits of government spending came under much sharper scrutiny.”

Cryptocurrenciesare another example.

Here, Helgadóttir is interested not only in the technology or dramatic price movements, but also in the economic and political ideas found in parts of the crypto community: criticism of central banks, scepticism towards the state, and the idea that traditional currencies themselves contain a fundamental problem.

We know the institutions and professional norms that establish authority and quality control for professors, civil servants and central bank economists. But what happens when economic authority is produced outside those institutions?

“But what makes an economic YouTuber, podcaster or other digital actor seem credible? That is one of the mechanisms DIRE will try to uncover. The point is really to understand the sources of this new, alternative authority,” says Oddný Helgadóttir.

Students suddenly knew about fiat currency

Oddný Helgadóttir first noticed the change that led her to her new project in the classroom.

For around ten years, she has taught students political economy, including the history of different monetary regimes. One concept she used to spend considerable time explaining was fiat currency: currency that is not backed by tangible assets such as gold or silver, but instead relies on trust in the state that issues it. Not the most intuitive concept.

Then something began to change.

Around six years ago, she noticed that more students were arriving in class with a surprisingly detailed understanding of the concept.

“Suddenly, the students already knew about a concept and a phenomenon that I had previously had to spend a lot of time explaining. They did not just understand what fiat currency was; they also came with very different views about what it meant and what was right or wrong about it. Behind those views were entire political and economic worldviews, many of them informed by an interest in cryptocurrencies or other internet-driven phenomena. That was really what made me start thinking about all of this,” says Oddný Helgadóttir.

That small shift in the classroom pointed to a much larger question: if students are already arriving at university with economic worldviews shaped in digital spaces, universities can no longer assume that they are where students – or citizens more generally – first develop their understanding of the economy.

The contest over economic ideas begins long before students arrive at university.

“We should understand what is happening”

It would be easy to describe this development as yet another story about online misinformation: established expertise on one side and questionable internet explanations on the other.

But that is precisely the conclusion Helgadóttir does not want to build into the project from the outset.

“I really want to approach this empirically rather than begin by assuming that some economic ideas are right and others are wrong,” she says and adds: “The point is not to decide which way of understanding the economy is the correct one, but to understand which ideas gain influence, how they do so, and why.”

That approach is also informed by the history of economics itself. Dominant ideas about how the economy works have changed considerably over time, with ideas that were once marginal sometimes moving into the mainstream. No economic theory or model captures the whole of economic life: each necessarily draws attention to some phenomena and dynamics while leaving others in the background. Different approaches, in other words, offer different ways of making sense of the economy.

DIRE is therefore not an attempt to separate economic claims into those that are legitimate because they come from established experts and those that are suspect because they emerge online. Instead, it asks how different understandings of the economy emerge and circulate—and, crucially, how some come to acquire influence and authority.

“The interesting question is not whether these ideas come from inside or outside established economics. It is why some ways of understanding the economy resonate with people, travel across digital spaces and sometimes begin to shape political debate. That is the process I want to understand,” says Oddný Helgadóttir.

Time and a team

The ERC Starting Grant will allow Helgadóttir to investigate these questions on a scale that would otherwise be difficult.

DIRE is planned as a research project involving Helgadóttir, two postdoctoral researchers and a PhD student. Together, they will examine how new economic ideas emerge and circulate online, how particular actors build credibility, and what happens when these ideas move between digital communities, established institutions and the wider political debate.

For Helgadóttir, the grant is also recognition of a project that deliberately sits between several fields of research.

“It feels like a major and very welcome vote of confidence in a slightly different kind of idea,” she says.

But the grant also gives her something more practical. Something that, in academia, can be almost as difficult to find as a good idea:

“Professionally, it means that I get time. Time and a team, and that is incredibly valuable,” says Oddný Helgadóttir.