9 economists whose ideas are changing the world

We’re living in the age of the rock star academic.

Everyone is trying to make sense of financial crises and the old economics textbooks don’t work so well anymore.

So it’s natural to turn to the people who study this stuff for a living.

Thomas Piketty, a French academic, sold 1.5 million copies of his book “Capital in the Twenty-First Century,” while Nobel prize-winning economists like Paul Krugman and Joseph Stiglitz can be found burning up social media, the newspapers, and the conference circuit.

But not everyone with influential ideas on economics and finance is as well-known.

Here are the academics that are changing the world behind-the-scenes. The list isn’t exhaustive. If you think we’ve missed anyone out then please email in suggestions.

1: Ha-Joon Chang, University of Cambridge

Alma Mater: Seoul National University

Big Idea: Developed countries talk a lot about the free market but really use their power and financial strength to profit at the expense of emerging economies.

Chang’s ideas are controversial, centering on the role that international bodies like the IMF and World Bank play in the world economy.

In books such as Kicking Away the Ladder and The Myth of Free Trade he argues that the governments of bigger economies help out their own companies, while preaching the benefits of the free market to developing nations.

2: Katherina Pistor, Columbia Law School

Alma Mater: University of Freiburg

Big Idea: The rule of law must be suspended for financial markets in a crisis, or the whole system will collapse.

Pistor, who won the Max Planck academic research award in 2012, is developing a legal theory of finance to work out how laws affect its shape and composition.

She discovered that, in a crisis, the regulations that build markets aren’t worth the paper they’re printed on. Political power is the driving force behind who gets hit in the heat of the moment.

3: Charles Calomiris, Columbia Business School

Alma Mater: Yale University

Big Idea: Financial collapses don’t happen at random and aren’t inevitable.

They come from complex bargains between politicians and bankers that spiral out of the government’s control. That’s one of the reasons why the US has had 12 major banking crises since 1840, while Canada has had none.

4: Jon Danielsson, London School of Economics

Alma Mater: Duke University

Big Idea: Trusting your risk models will lose you money in a crisis.

Risk models will generally tend to have the same outcomes when everything is going well, even if they have different mathematical foundations.

This tricks people in to thinking that they work all the time. But when all hell breaks loose, the models will give you wildly different risk assesments, leaving you flying blind.

This is bad for banks and hedge funds but even worse for central banks, who have to make policy decisions for everyone else.

5: Marianne Bertrand, University of Chicago Booth

Alma Mater: University of Brussels

Big Idea: CEOs are rewarded for luck rather than performance. Also, employers judge applicants on their name as much as their qualifications.

Bertrand is one the reasons why there’s been such a shareholder backlash against CEO pay, after proving their huge bonuses are based on luck rather than genius.

In a 2003 paper, she and Sendhil Mullainathan also famously replied to help-wanted ads in Chicago and Boston with fake names. Some applicants used names like Emily and Greg, while others used names like Lakisha and Jamal.

“The results show significant discrimination against African-American names,” the authors wrote. “White names receive 50% more callbacks for interviews.”

6: Alvin Roth, Harvard University and Stanford University

Alma Mater: Columbia University

Big Idea: You don’t need money to make a stable market for something.

Roth, along with Lloyd Shapely, won the Nobel Prize in 2012 for showing that people can make a market based on mutually-beneficial swaps rather than cash to satisfy a specific need.

This was particularly useful for easing the shortage of kidney donors in the US. Roth used game theory to pair up donors with patients they didn’t know, making it easier for people to swap their organs and find a match.

7: Richard Portes, London Business School

Alma Mater: Yale University

Big Idea: Bondholders can often work together to get concessions from a borrower.

Portes, now professor of economics at London Business School, laid down the groundwork for collective action clauses, where sovereign bondholders use their bargaining power to impose conditions on a debtor country. The work has been especially important in cases like Greece or Argentina.

8: Charles Goodhart, London School of Economics

Alma Mater: Cambridge University

Big Idea: Goodhart’s Law.

Goodhart said that as soon as governments or central banks turn a statistic, such as the stock market, into an implicit policy target, it ceases to become a reliable statistic.

This is because players in financial markets change their investment strategies to pre-empt the policy.

Goodhart was one of the orignal members of the Bank of England’s monetary policy committee in 1997, and a veteran of financial crises in 1970s.

9: Alberto Alesina, Harvard University

Alma Mater: Bocconi Univerisity, Milan

Big Idea: Far from hurting growth, austerity measures can actually help economies recover.

In 2009, Alesina and Silvia Ardegna published a paper called Large Changes in Fiscal Policy: Taxes Versus Spending.

It was an important part of the debate in the years that followed over whether austerity and reducing debt or boosting government spending were the best strategies for economies recovering, cited by fiscal hawks.

This article is published in collaboration with Business Insider. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Ben Moshinsky is a senior finance reporter, covering markets and banks. He previously worked for Bloomberg News in Brussels and London.