New a pproaches to e conomic c hallenges

1. NAEC New approaches to economic challenges Shardul Agrawala Coordinator, NAEC Senior Advisor to the Secretary-General

2. The NAEC initiative At the 2012 MCM, “New Approaches to Economic Challenges (NAEC)” was launched. NAEC is an organisation-wide reflection process on the roots and lessons from the crisis with the aim of catalysing a process of continuous improvement of the OECD analytical framework and policy advice.

3. What we mean by New Approaches • Within a broad context, new approachesinvolve: • Revisiting some of the fundamental assumptions about the functioning of the economy • Looking at the limitations and extending the capabilities of existing tools for structural analysis • Investigating new economic thinking to find more effective tools • New approaches encompass the idea that growth is an important means but not an end of policy making.

4. Timeline so far May 2012: New Approaches to Economic Challenges (NAEC) was launched at the 2012 MCM Oct 2012: First meeting of the NAEC Group Jan 2013: Scoping Paper circulated to the NAEC Group Feb 2013: Second meeting of the NAEC Group Apr 2013: Revised Scoping Paper/ Interim Report circulated to Council

5. Reflection and Horizon Scanning Policy Trade-offs and Complementarities Institutions and Governance • Draw lessons from the crisis and economic history • Examine the role of the financial sector in the crisis and reforms required to promote sustainable growth • Revisit policy instruments for achieving growth- and equity-friendly fiscal consolidation • Explore new economic tools and approaches (such as behavioural economics, complexity science, micro-data) • Improve the understanding of interlinkages between policy drivers and wellbeing outcomes • Examine interlinkages between: • Inequality and growth • Environment, growth and inequality • Growth and stability • Analyse the implications of long-term global trends and the resulting policy tensions • Explore the impact of the crisis on trust in government and identify policy levers to regain trust • Design policies for more resilient social institutions in view of the crisis and long-term trends • Address new challenges in governance to respond to increasing interconnectedness and complexity, e.g. in competition and taxation Organising structure for NAEC

6. The NAEC Interim Report Reflection and Horizon Scanning • We need to draw lessons from the crisis and economic history and revisit analytical frameworks. • There is also a need for horizon scanning for new tools and approaches - such as behavioural economics, complexity science, data use, etc. Policy Trade-offs and Complementarities • We need to analyse trade-offs and complementarities between policy drivers and wellbeing outcomes, e.g. between: • Inequality and growth • Environment, inequality and growth • Growth and stability • Long-term trends may also have important policy implications.

7. The NAEC Interim Report (ctd.) Institutions and Governance • There is a need to develop new approaches to improve public institutions and governance. • This is important to better manage near-term challenges that emerged in the wake of the crisis and to cope with additional pressures arising from long-term trends.

8. The NAEC Interim Report (ctd.) However, the report has changed in a number of ways. For example: • The report streamlines the number of project proposals, as was requested by several delegations. • The report tries to better show the cross-directorate aspects of particular issues, by merging projects with a common issue. Such as: • In the work on long-term investment, we pulled together projects separately addressing the asset and liability sides of the balance sheets of long-term institutional investors, • The toolkit for implementing multi-dimensional policy frameworks has been combined with new approaches to analyzing multi-dimensional wellbeing.

9. The NAEC Interim Report (ctd.) • We have also consulted internally to take better account of the cross-directorate aspects of particular issues. In this context, we have also begun to hold internal seminars to facilitate this process. • We have re-defined many projects in a way that is more consistent with the NAEC philosophy. For example, we have made clearer what is “new” in the proposed work and methodology.

10. NAEC goals • Improve our understanding of the complex and interconnected nature of the global economy and associated policy challenges • Recognise the importance of economic growth as a means but not as an end of policy-making • Identify areas where OECD analytical frameworks need to be adjusted • Enable governments to identify, prioritise and combine reforms to support inclusive growth

11. Next steps A revised Interim Report will be delivered to the 2013 MCM. Lines of work under NAEC will continue to advance following the 2013 MCM. A comprehensive Synthesis is envisaged after the 2014 MCM.