In recent years economics has entered into the public imagination in a way that it hadn't for a generation. It was not the policy disputes between Milton Friedman and John Kenneth Galbraith this time around, but instead economics as a tool of reasoning, and its wide application outside of concerns with inflation and unemployment, and growth and development. Popular books in economics offered explanations why drug dealers still live with their Moms, the consequences of names on future earnings, and how to get your kids to wash the dishes. These fascinating works in "freakonomics" demonstrate to all the great versitility of the "economic way of thinking". But the issues of inflation and unemployment, and growth and development didn't disappear. They just didn't get explained in this new brand of economic writing.
But the full coming to grips with economics after the Keynesian divergence is hard for many to deal with. First, we have to recognize that while there may be macroeconoimc questions, there are only microeconomic solutions. Second, we have to recognize that attempts to pursue command and control strategies with the policy tools of old Keyensianism (fiscal and monetary policy) are counter-productive for long term growth and economic development. In short, scientististic pretension that affects both our analytical and policy work must be rejected. Instead, the logic of choice, institutional analysis, and a variety of empirical approaches must replace highly formalistic models which get their realism only through ad hoc assumptions, and refined statistical estimation techniques that subtitute extended discussion of econometric methods for the analysis of the real-world problems they were intended to address.
While Andrei Shleifer will not agree completely with my assessment of modern economics, his work reflects in my opinion the concern with the logic of choice, institutional analysis, and a variety of empiricism to make sense of the important issues in economics, political economy, and public policy. In his latest paper forthcoming in the Journal of Economic Literature, Shleifer demonstrates once again his status as the most insightful top-flight economist of his generation.
Milton Friedman once famously remarked that there is only good economics and bad economics, not different schools of thought that define the terms good or bad internally. As I have argued elsewhere, I think Friedman is correct in that assessment, but I would just add that good economics must be an economics that deals with our ignornance, the arrow of time, the role of special interests in political processes, and questions of the framework within which economic activity takes place. If you read Friedman's review of Lerner's The Economics of Control, what I just said is what Milton Friedman himself also argued when he rejected economic analysis of practical problems as if it was in done in a vacuum.
And as Shleifer points out in this paper --- Friedman was correct on the big picture questions of policies of economic freedom and economic growth and development as well. The key issue for us as researchers, teachers, and as economic communicators to the general public is to see the link between the analytical approach and the big picture vision. It may be the case that 9 out of 10 top tier academic economists don't, but the 1 who does (Andrei Shleifer) has had enough intellectual energy that for the past two decades he has done more than any other mainstream economists to identify the institutional pre-conditions of economic development and prosperity.