Listen to the Gentiles

What I mean by this rule is "Pay attention to what intelligent people are saying, even if they do not have your customs or speak your analytical language." ...
 By all means express your thoughts in models, as pretty as possible (more on that below). But always remember that you may have gotten the metaphor wrong, and that someone else with a different metaphor may be seeing something that you are missing.

Question the question

...  In general, if people in a field have bogged down on questions that seem very hard, it is a good idea to ask whether they are really working on the right questions. Often some other question is not only easier to answer but actually more interesting! (One drawback of this trick is that it often gets people angry. An academic who has spent years on a hard problem is rarely grateful when you suggest that his field can be revived by bypassing it).
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Dare to be silly

If you want to publish a paper in economic theory, there is a safe approach: make a conceptually minor but mathematically difficult extension to some familiar model. Because the basic assumptions of the model are already familiar, people will not regard them as strange; because you have done something technically difficult, you will be respected for your demonstration of firepower. Unfortunately, you will not have added much to human knowledge.

What I found myself doing in the new trade theory was pretty much the opposite. I found myself using assumptions that were unfamiliar, and doing very simple things with them. Doing this requires a lot of self-confidence, because initially people (especially referees) are almost certain not simply to criticize your work but to ridicule it.
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What I believe is that the age of creative silliness is not past. Virtue, as an economic theorist, does not consist in squeezing the last drop of blood out of assumptions that have come to seem natural because they have been used in a few hundred earlier papers. If a new set of assumptions seems to yield a valuable set of insights, then never mind if they seem strange.

Simplify, simplify

The injunction to dare to be silly is not a license to be undisciplined. In fact, doing really innovative theory requires much more intellectual discipline than working in a well-established literature. What is really hard is to stay on course: since the terrain is unfamilar, it is all too easy to find yourself going around in circles. Somewhere or other Keynes wrote that "it is astonishing what foolish things a man thinking alone can come temporarily to believe". And it is also crucial to express your ideas in a way that other people, who have not spent the last few years wrestling with your problems and are not eager to spend the next few years wrestling with your answers, can understand without too much effort.

Fortunately, there is a strategy that does double duty: it both helps you keep control of your own insights, and makes those insights accessible to others. The strategy is: always try to express your ideas in the simplest possible model.
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The downside of this strategy is, of course, that many of your colleagues will tend to assume that an insight that can be expressed in a cute little model must be trivial and obvious -- it takes some sophistication to realize that simplicity may be the result of years of hard thinking.

... And there is a special delight in managing not only to boldly go where no economist has gone before, but to do so in a way that seems after the fact to be almost childs' play.

I have now described my basic rules for research. I have illustrated them with my experience in developing the "new trade theory" and with my more recent extension of that work to economic geography, because these are the core of my work. But I have also done quite a lot of other stuff, which (it seems to me) is also in some sense part of the same enterprise. So in the remainder of this essay I want to talk about this other work, and in particular about how the policy economist and the analytical economist can coexist in the same person.

POLICY-RELEVANT WORK

Most economic theorists keep their hands off current policy issues -- or if they do get involved in policy debates, do so only after the midpoint of their career, as something that follows creative theorizing rather than coexists with it. There seems to be a consensus that the clarity and singleness of purpose required to do good theory are incompatible with the tolerance for messy issues required to be active in policy discussion. For me, however, it has never worked that way. I have interspersed my academic career with a number of consulting ventures for various governments and public agencies, as well as a full year in the US government. I have also written a book, The Age of Diminished Expectations, aimed at a non-technical audience. And I have written a pretty steady stream of papers that are motivated not by the inner logic of my research but by the attempt to make sense of some currently topical policy debate -- e.g., Third World debt relief, target zones for exchange rates, the rise of regional trading blocs. All of this hasn't seemed to hurt my research, and indeed some of my favorite papers have grown out of this policy-oriented work.

Why doesn't policy-relevant work seem to conflict with my "real" research? I think that it's because I have been able to approach policy issues using almost exactly the same method that I use in my more basic work. Paying attention to newspaper reports or the concerns of central bankers and finance ministers is just another form of listening to the Gentiles. Trying to find a useful way of defining their problems is pretty much the same as questioning the question in theory. Confronting supposedly knowledgeable people with an unorthodox view of an issue certainly requires the courage to be silly. And of course, ruthless simplification is worth even more in policy discussion than in theory for its own sake.

http://economistsview.typepad.com/economistsview/2008/10/thoughts-about.html