Can Asia retell Mass Flourishing?

"One was when I was an absolute nobody and was on the job market looking for a professorship somewhere and by chance he was a guest at a dinner I attended. He was absolutely brilliant that night, talking about things he had learnt over his life," he says.

Economics has been accused of being the "dismal science" and its nadir was never greater than when the financial crisis in 2008 seemed to wrongfoot almost everyone.

"I think it is of absolutely no significance that two, three or five economists saw it coming because if you were to rerun it, there would be different set of economists who saw it coming."

Unleashing the power of innovation

Needed: A 'strong' Chinese economy

He says he was never impressed by the so-called "Great Moderation" thinking of the last decade that was underpinned by the notion that economic cycles had been abolished.

"Yes it was almost as though we had reached the end of economics," he says.

"Now we realize we need real flesh and blood economics after all.

"But it has got to be of a different sort. I think economists can understand what happens more deeply than any other discipline but we cannot overstate our claim to do this."

One of the current popular debates in economics has been sparked by French economist Thomas Piketty's new book Capital in the Twenty First Century, which argues for redistributive policies because of growing inequality of wealth.

"I think Picketty has bit off more than he can chew. I don't think he knows enough about economic history to figure out correctly what has been going on.

"I don't think we are threatened by some hideous monster with a voracious need for wealth that is going to eat us all alive," he says.

Phelps believes that a lot of reporting of economic and financial issues distorts the real picture also. "Residential construction activity in the US is only about 3 percent of gross domestic product. If you turned on CNBC every morning you would think it was around 15 percent."

As for China he believes there needs to be many more market reforms including the removal of what he refers to as the "cordon sanitaire" around State-owned enterprises, exposing them to more private competition.

He believes the key to China's future dynamism remains boosting indigenous innovation.