One of the few benign consequences of last year’s financial crisis was the exposure of modern economics as an emperor with no clothes. In February I argued that economists deserved as much blame as bankers, regulators and politicians. Quite a number of others, including Nobel laureate economists, made the same point that economics had to be urgently reinvented. These ideas have borne fruit much sooner than anyone expected with yesterday’s announcement of an Institute for New Economic Thought.

INET, funded with an initial commitment of $50 million from George Soros and backed by a phalanx of distinguished academic economists, could lead to a flowering of original thinking in a profession whose creativity has been stifled by the intellectual monopoly of orthodox...