New Approaches to Economic Challenges - About NAEC



With the proposed work programme, NAEC aims to:

  •  Improve the understanding of the complex and interconnected nature of the global economy, identify synergies (e.g. between growth, inequality, stability and the environment) and better ways to cope with policy trade-offs. In this context, NAEC will examine how global trends may evolve in the longer term and the challenges they may pose to policy objectives;
  • Recognise the importance of economic growth as a means, but not as an end, of policy-making. This implies a broader definition of well-being and developing policy outcomes that combine strong economic growth with improvements in outcomes that matter for people’s quality of life (e.g. good health, employment, etc.);

  • Identify areas where OECD analytical frameworks need to be adjusted or complemented; and examine the potential for mainstreaming new economic data, tools and approaches (e.g. behavioural economics); and

  • Enable governments to identify, prioritise and combine reforms to support sustainable, inclusive growth. This has a bearing on the implementation challenge that is an analytical area of its own, but also on the other NAEC pillars. To diminish the implementation gaps and build the right framework for economies to flourish, it is important that governments upgrade their regulatory and institutional capacities.



Work under NAEC is divided under three streams of work:

 Pillar 1. Reflection & Horizon Scanning

 Pillar 2. Policy Trade-Offs and Complementarities 

 Pillar 3. Institutions and Governance







 Pillar 1. Reflection & Horizon Scanning

Until 2007, large parts of the world had enjoyed a long and sustained period of relatively strong economic growth and stability, the so-called “Great Moderation”. While there were signs of weaknesses and risks, most observers tended to underestimate these threats. The OECD was not alone in failing to connect or missing the warning signs. Other institutions involved in international surveillance, many finance ministries, credit rating agencies, national and supra-national financial regulators and financial institutions themselves had been lulled into a sense of complacency during the Great Moderation. Given the analytical models used to examine the financial sector, the extent of the crisis and the subsequent global recession were consistently underestimated, which contributed to significant policy failures. Five years since the crisis began many advanced economies remain fragile, with significant downside risks and high unemployment. In short, OECD countries were generally not prepared for the crisis and were poorly positioned to withstand it.

In light of work already undertaken by the OECD, as well as the extensive scholarly literature on the causes and lessons from the crisis, the proposals for further work under this category are necessarily selective and targeted towards addressing key gaps and priorities. This work includes:

  • Drawing lessons from the crisis and economic history and evaluating OECD forecasting and surveillance;
  • Examining the role of the financial system in the crisis and the reforms required for sustainable growth (including fostering long-term investment and responding to the challenges of ageing and longevity, and exploring new approaches to SME financing);
  • Revisiting policy instruments for achieving growth- and equity-friendly fiscal consolidation; and exploring new economic tools and approaches (such as behavioural economics, complexity science, and increased use of micro-data) and reviewing country experiences.


 Pillar 2. Policy Trade-Offs and Complementarities

For reasons related to measurability, comparability and tractability, economic growth has often been used as a proxy for living standards or wellbeing and thus the main objective for economic policy. Evidence suggests, however, that while economic growth is a necessary condition for improvements in wellbeing, it is not sufficient. Furthermore, policies aimed at increasing economic growth can have a mixed effect on the various components of wellbeing. The multi-dimensional nature of wellbeing, therefore, leads to numerous potential trade-offs and complementarities when different policy levers and instruments are adopted to maximise one or more dimensions of wellbeing. These trade-offs and complementarities have become even more relevant since the crisis hit, as they not only confirmed that previous analytical frameworks were unsustainable, but because they confirmed that “business as usual” is not an option in an increasingly interconnected economy.

The proposed work under this category will:

  • Examine the impact of various policies on wellbeing and the economy.
  • Review conceptually and analytically the complex policy trade-offs and interactions in dealing with key dimensions of wellbeing, from income growth, to income inequality, to environment and economic stability, which have gained centre stage in the policy agenda of governments in OECD and, increasingly, in emerging economies.
  • Highlight the need to work towards greener and more inclusive growth, taking into account the multidimensionality of the challenge, the drivers of the distribution of non-monetary dimensions of progress, and the link between policy instruments and the monetary and non-monetary dimensions of wellbeing. In this context, a working definition of inclusive growth could be a rise in multi-dimensional wellbeing (including environment, health, etc.) that is driven both by average increases in welfare and by a rise in equity. Depending on the outcomes of the projects in this stream, further work could examine other trade-offs and synergies among the dimensions of wellbeing.
  • Provide a longer-term perspective on how global trends may evolve and the challenges they may pose to policy objectives. In this context, structural policies can affect the direction and extent of these global trends. Indeed, one aim will be to illustrate how different evolutions of the global trends will affect the trade-offs between policy objectives. 


 Pillar 3. Institutions and Governance

Policy makers are facing a number of near-term challenges in the wake of the crisis, including high and rising unemployment, stagnating growth, and weak fiscal positions. Long-term trends, such as population ageing and migration, pose additional challenges.

The crisis also sparked a debate on the role of governance failures in the crisis, many of which still need to be addressed. At the same time, there has been increasing demand from citizens for the state to better support inclusive growth and to offer greater transparency and access to information. In addition, new technologies including the internet and various social media have significantly changed the time frame and constraints under which governments operate, particularly in the context of a crisis.

These interconnected challenges require a rethinking of the role of the state. Against this background, this category of work will discuss approaches that could help to improve institutions and governance in order for national and sub-national governments to more effectively adopt and implement policies in an increasingly interconnected world. It will also examine how the OECD can better develop its work and assist governments in implementing reforms.

There are three streams in this category of work.

  • Trust in Government: The first stream will explore the impact of the crisis on trust and effectiveness in government and identify specific policy measures to rebuild them.
  • Vulnerability of Social Institutions: The second stream will focus on the vulnerability of social institutions to the consequences of the crisis as well as major global trends, with a particular focus on the implications of population ageing.
  • New Challenges for Governance: A third stream will take a close look at new challenges for governance, including the importance of effective regulation to support inclusive growth and opportunities for regulation to be adapted to a globalised world.

All these aspects aim to provide concrete options to reflect the notion of the ‘smart state’, which was introduced by Philippe Aghion at the first NAEC Group meeting in October 2012.



The NAEC Group: A multi-stakeholder working group, chaired by the OECD Secretary-General, provides a platform to discuss the substance of the initiative and the draft papers developed by the Secretariat. The group is comprised of representatives from OECD Member and Partner countries, relevant OECD policy committees, as well as the Business and Industry Advisory (BIAC) and Trade Union Advisory (TUAC) Committees to the OECD.



Related Documents