Good afternoon and welcome to the automotive school.
Welcome to the last of this term's lectures and thank you very much for coming in such numbers on such a sunny day.
The first we have for some time and it's we've actually had a series that spanned two terms on evolving economic thought,
and it's going to be an extremely appropriate that this is concluded today.
By Eric Vinh, Hooker Eric is director of the Thriving Institute for New Economic Thinking,
and he's also professor of public policy practise at the Planning School of Government.
He's a fellow in economics at Oriel and Extend Professor at the Santa Fe Institute, in addition, before coming to Oxford.
He had an 18 year career at McKinsey, where he was a partner, held leadership roles in the strategy,
practise climate change and sustainability sustainability practise and the McKinsey Global Institute.
Many of you will know him from his frequent writings in the media, and he's also the author of the well-regarded book The Origin of Wealth,
and he's going to talk to us today on the wonderful title New Economic and Moral Foundations for the Anthropocene.
So a small subject in 45 minutes. Eric.
Thank you very much, Joanne, and thank you all for coming in,
it's a real pleasure to be closing out this excellent series on involving economic thought that the Martin School has hosted.
And I'll be building on many of the themes that were discussed by some of the other excellent speakers that have been here over the past term.
I should also note that this is based on a new book coming out, hopefully next year by myself and my co-author Nick Hanauer.
I'm going to start us off with a little quote,
someone once said that it is easier to imagine the end of the world than to imagine the end of capitalism,
Fredric Jameson, a literary critic and I was I was struck by the real truth in this quote.
Think how many Hollywood movies you've seen about the end of the world, you know, with comments or,
you know, nuclear war or climate change, or how many books or novels you've read?
You know, my favourite end of the World Poker is probably Cormac McCarthy is the road.
So we all have this visceral idea of what the end of the world looks like.
But can we imagine how we'd have to change our economic system to prevent that?
What kind of an economic system would we need that would be sustainable with a thriving future planet?
And I thought about why is that so hard to imagine an alternative to what we have today?
And in many ways, just because we're so immersed in it, we're so much a part of the economic system.
It's it's all around us. It's in our heads. It's in our society and our politics that it's very hard to get outside of that and think about it.
So we have to step back and think a bit more fundamentally, what is the economy?
What is this system that we call the economy or capitalism or whatever name you want to give it?
Well, one way to think about it is it's us. It's people.
Economies are made out of people. At the end of the day. But it's not just people individually, it's a set of ideas of collective thoughts.
The historian Yuval Harari has a wonderful phrase he calls the imagined orders that societies always have a set of ideas that they organise around.
And in the economy, we have a set of ideas that organise all these people, all of us, into what we call the economy.
And these ideas are ultimately products of human imagination. They're all invented ideas.
If you look back in history, every one of these ideas up here property law,
productivity, value, corporations, they were all invented at some point in our history.
They're not kind of laws of nature. Part of the natural world.
Their human inventions. Human imagination. So the economy is an imagined order.
But we also know it's an imagined order that has real physical impacts,
that there's a feedback between the two that what we do in our imagined order of the economy causes things to happen in the physical world.
Buildings get built, cars go down, emit carbon. We dig up stuff out of the earth.
We chop down trees. You know, we do things in the physical world.
As a result of the ideas in this imagined order, and they're both evolving over time.
And we've seen a huge evolution over a very long period of time in our imagined order from our hunter gatherer days to
the development of agriculture to the industrial economy and to the modern system of the economy that we have today.
And this, in turn, has fed back to our physical world and caused the shift from what geologists call the Holocene period,
which is the period that humans and a lot of the other life that's on Earth today evolved
in to what geologists are now calling the Anthropocene the age of man or age of humankind,
because we have our imagined order is now had such a huge impact on our physical order.
It's literally changed the planet now.
There's a problem with this imagined order that we have today and that it's failing to deliver on two of the biggest priorities that we have.
So this is my diagram of the failure of the current system in one chart.
So going up the y axis or a set of social indicators of the health of economies,
and I'll show you what they are in just a moment and on the x axis are planetary boundaries.
Some of you are probably familiar with the work by Johan Rockström and others on the safe operating space for humanity or Kate Roberts
wonderful doughnut economics that tries to marry the idea that we need an economic system that is both delivering on human needs,
but is also sustainable from a planetary perspective. And the size of each of these bubbles is the size of the population.
And in this very nice study, they show that there's a set of social thresholds that they summarise in the y
axis and a set of biophysical boundaries that they summarise on the x axis.
And what you see is a huge trade off being countries or economies in the upper right who
are delivering pretty well on the social thresholds but utterly destroying our planet,
crossing many physical, safe operating boundaries. And on the lower left, a set of societies that are having relatively little environmental impact,
but are also failing to deliver on key social thresholds for a healthy society.
You know, this is a trade off that fundamentally has to be broken because we need to be here.
We need an economic system that can deliver on both. It shouldn't be a trade off that we can either have thriving societies or a thriving planet.
Now, let's go back and look inside the imagined order that got us into this situation and try to unpack it a bit and understand it a bit better now.
I like to think of the ideas that we organise our economy around as a set of Russian Dolls nested one within the other.
And so if we start with our biggest Russian doll, the economic system itself and we look inside them, what we see is a set of ideas,
economic and political ideology that informs our politics, informs our policy, shapes our public discourse and media and so on.
And underneath that is a set of economic theories that have been hugely influential in shaping that ideology and politics.
And if you dig into the economic theory you find underneath that a set of behavioural
theories on what human beings are like and how they behave and how they make decisions.
And if you unpack into that one, you get to the little Russian doll at the bottom.
You actually get into a set of ideas that come out of moral philosophy.
And the way I categorise the system we have today is we can give labels to these things.
We can call the current economic system market capitalism or some variant on that in the particularly in the in the developing western countries,
we've had an ideology that can be loosely called neoliberalism that has dominated much of the politics and discourse.
And underneath that has been the set of economic theories historically dominated by ideas from neoclassical economics,
a behavioural model rooted in what economists call homo economics and a moral philosophy that can be labelled maximising utilitarianism.
Now, where did these ideas come from? How did we get these ideas?
Well, they didn't just come down from Moses on stone tablets. They were developed over a very long period of time over the last several hundred years.
So if we look at the the smaller stores,
they really came out of a set of developments building off of work by Enlightenment philosophers in the 17th and 18th centuries,
but really came out of a set of economists called the marginal economists and later the neoclassical
economists who developed their ideas in the late 19th and really through the middle 20th century.
And then that fed the development of a set of political ideas and ideologies that really
came into dominance again in the developed Western countries starting around the 1970s.
And it really split into two broad branches, a kind of more left wing or progressive branch that focussed really more on equity
and issues of social protection and a kind of more right wing conservative branch.
That focus tended to focus more on issues around efficiency and growth.
And then those ideologies were kind of filtered through a set of policies to different forms of organisation of the economy,
as economists have a sort of historical sub branch called Varieties of capitalism.
And we see across the developed world different ways of organising a market capitalist economies from a kind of,
you know, more progressive, more state heavy capitalism, say, in Sweden or,
you know, the other Nordic countries to a more conservative or less state form a la the U.S. But these
kind of varieties or models came into geopolitical dominance through the 80s through 2010s.
Now. If we look at, you know, where most of our debates have been, there's been this kind of big trade off a set of,
you know, economic and political debates between these two branches, more state, less state.
You know, what's legitimate to intervene in markets where the markets deliver better outcomes?
You know, do we prioritise social equity and equality? Or do we prioritise efficiency, growth, productivity?
You know, in a very kind of high level way,
those who've been that's been kind of the sandbox that we've been playing in the set of debates that we've been having.
And they've been very intense fights, you know, very intense debates.
And we're still having them today here in Britain, in the US, where I come from and in lots of other countries.
But the problem is, if you go back to that first chart that I showed you the failure in one chart, both of these branches don't lead to a good end.
Both of these branches are driving our planet over the planetary safe boundaries
and into what scientists are increasingly calling the sixth mass extinction.
So what I'm going to argue in the rest of this talk is that we need to bring the fight back down here and we need to go back down deeper
into the system and rethink things a bit more from first principles to understand how we might start to see our way out of this mess.
Now, I'm also going to argue that this current imagined order that we have is really not built on sound foundations is built on on sand.
One could say that the moral foundations are pretty shaky from a kind of philosophical and behavioural perspective.
The behavioural model will even more strongly say is really pseudoscience.
It's not real science. And likewise, the ideologies have really developed as stories to justify power and privilege.
You know, they'll claim that they claim again on scientific basis, but when you really get under them,
they're really ways of preserving the status quo and power and privilege.
So starting with our little list all down at the moral foundations,
we saw a huge shift in moral philosophy during the kind of enlightenment and into the neoclassical
economic period from an idea that virtue is good to what could crudely be called greed is good.
So before Hobbs invent them, you know there were lots of, you know, philosophical battles and discussions about what it meant to be good.
But there were some, you know, some core ideas that that there was something in human nature about tensions between
the desire to be good in temptation to behave badly and to follow a moral life.
You had to follow the golden rule,
treat other people as you wanted to be treated yourself and somehow kind of restrain or kerb your worst instincts or appetites.
There were also notions that morality was somehow part of character or a way of living or thinking or behaving like Aristotle.
And that also morality was expressed through rules and norms that, you know, people were supposed to follow our camp.
So again, this is, you know, potted hundreds of years of moral philosophy and, you know, one set of bullet points.
So I apologise to any real moral philosophers in the room, but you'll see my point.
But then Thompson Benton came around and created quite a revolution in our thinking this they really turned this logic on its head.
And again, very crudely, they saw human nature, as is a trade-off between pleasure and pain that humans are essentially hedonic,
that they seek pleasure and avoid pain, and that this was neither good nor bad.
But this was just part of how we are, how we're wired. But what matters was the consequences of our actions for the pleasure and pain of others.
So if we're doing something that's causing pain or pleasure, that that defined a moral outcome.
And so then the objective was moral outcomes that maximise the most pleasure and minimise the most pain for the most people.
This is kind of the basic utilitarian principle is the benefit of my version of it and the things like characters and tension rules,
et cetera, don't really matter so much as the consequences are consequential ism of these of these actions.
And this, you know, created a major branch of philosophy that's still alive and well today.
But that philosophy then trickled into economics in a way that I would argue has been quite damaging.
So economists then kind of boil this down into a simplistic model that humans are self
regarding pleasure maximises and utility calculators and rational decision makers.
And this really started around the time of the marginal IST economist.
And part of their interest and reason for adopting this philosophical stance was
because they wanted to turn it into maths and they needed something very simple.
The maths they had at the time was fairly crude, and they needed something very, very simple that they could fit into their mathematical structure.
So this quote from Edgeworth basically says that this conception of man is a pleasure machine.
They justify and facilitate the employment of mechanical terms and mathematical reasoning in social science.
Likewise, they also like the fact that you can just view people as individuals and not have to consider their collective behaviour because again,
they didn't have the maths at the time to deal with things like collective behaviour.
So this quote from Bentham basically arguing that the idea of community is a fictitious body that we're only composed of individuals,
even if we sometimes, you know, think we're in a society and you go straight from Benson's philosophy to Margaret Thatcher's famous quote,
there is no such thing as society. A couple of hundred years later, now Steven Pinker has a wonderful phrase.
He calls some of his earlier philosophical reasoning armchair anthropology or armchair psychology.
And the reason is these as smart is people like Bentham and Harps and Edgeworth were.
The way they came up with these ideas was they essentially sat in an armchair with a drink in their hand,
whatever it was, you know, a glass of whisky or tea or whatever, and said, I think human beings or pleasure machines.
Yes, that's human nature. We seek pleasure and we avoid pain and, you know, write that down and develop a philosophy on it.
They didn't have any data. They didn't have any empirical basis.
They didn't run any experiments, they didn't do any large scale studies.
They just thought this stuff up and tried to reason from first principles in their own heads.
Thus, the phrase armchair anthropology.
Now, this armchair anthropology about human nature, though, led through economics to the idea that not only is greed good, but greed.
Creates prosperity now, most people, if you ask, where did this idea come from and say,
Well, it's Adam Smith, Adam Smith and the invisible hand, right?
Wrong. Adam Smith actually believe entirely the opposite.
And the invisible hand is one of the more misinterpreted bits of economic text out there.
We can go back to that in the Q&A if anyone's interested. But Smith actually held quite opposite views to this sort of greed is good.
In fact, he wrote a whole book on it The Theory of moral sentiments, which was really, you know,
a testament to human empathy and sympathy and other regarding feelings and and emotions.
The actual idea of the self-interest and re-creates prosperity comes from a different set of economists.
Really, the marginal is the folks who took that idea of the maximising pleasure seeking individual turn that idea into a mathematical set of concepts,
world utility, and also created the idea that the objective in society is to maximise the sum of individual utilities.
And this notion of the Pereda optimal, which everyone learns in Econ 101,
that the maximum social outcome is one where everyone maximises their utility without forcing anybody to do anything they don't want to do.
And then this all kind of trundled on to developments in the 20th century, most notably Cantero and Gerard Devereaux,
who showed mathematically that under a certain set of conditions that if you have individuals like this in free markets,
you get this wonderful outcome of the optimal state nearly automatically.
And so this then led to a sort of broad set of ideas that so selfish utility maximising
plus free markets leads to a pretty good state of things freedom and prosperity.
Who could not want that? Now, this then led to a further set of ideas about what kind of a system the economy is.
And again, you know, the motivations for this were not bad ones.
So Leon Walrus, one of the founders of General Equilibrium Theory, wanted to make economics a more mathematical science, which was a good objective.
You wanted to make it more of a science as opposed to the philosophy of Adam Smith and the classical economists.
But he had a bad case of physics envy, and he actually, when you look into the history of this,
he took a specific book guy named Funso, wrote this book on on on the physics of static static systems.
And he literally copied equations out of it and developed his equations for equilibrium theory, and he was quite explicit about it.
He was basically substituting words and concepts in the equation.
So he says, you know, scarcity are here and given scientific meeting like the word velocity and mechanics and the word heat in physics.
So it was an active kind of metaphorical and mathematical borrowing.
And he got out of that set of ideas that have carried on through economics right to the modern day still taught here in Oxford,
in PPE and other courses that economic systems or equilibrium systems that they're optimising,
that they're essentially static and change comes from the outside.
Also again, this idea, there's no such thing as society that is basically a summation of of individuals.
And then also that it's a separable system.
It's somehow closed and you can separate it from other systems like the physical environment or the social and political systems.
And again, this, you know, these people were not dumb. They knew that these were hugely simplifying assumptions.
But given the maths they had at the time, that's what they felt they had to make to make it more like physics.
And this then led to the neoclassical theory that dominated really up until the nineteen seventies in economics and led to ideas of
markets being allocated highly efficient ideas that governments tend to reduce market efficiency unless there's market failures,
that price and value were essentially equivalent concepts.
GDP then becomes the main proxy for welfare and, you know, ideas that growth essentially can be infinite.
Then next came along a set of more political thinkers starting really in the kind of post-war period and up into the 70s
who took some of these core ideas and framings and turned them into what we could think of as political means and norms.
The idea that greed is good, that you know, maximising pleasure and consumption is more of a billion acts of selfishness makes a prosperous society.
The social duty of business is to maximise its profits and maximise shareholder value.
Margaret Thatcher's famous quote again that markets are efficient.
Other institutions are not. So market should be the primary way that we organise society and the value of something in society as its market price.
The idea that because.
If labour markets are efficient and you're paid what you're worth to society and that we have these trade offs, there's no free lunch,
you have to trade off, you can either have more equity and equality and social justice or you can have more growth you choose.
If you're on the left, you choose one. If you're on the right, you choose the other.
And then finally, that the environment exists largely as a resource to be exploited.
Again, these are crude characterisations, but you'll probably recognise them, you know, from our politics now.
I would argue that this neoliberal ideology is really just a story to justify power and privilege.
And we've had stories in our imaginary orders to justify power privilege going right back as far as we can look,
every imagined order has its stories told by the elite to justify their position.
A favourite example is the code of Hammurabi in ancient Mesopotamia, which laid out why the order of the king and aristocracy,
slaves and so on was to just order the right order for society and even went down to
specifying that the value of a free person was x times more valuable than a slave.
And the value of a woman, of course, was much less than a man. And, you know, even put this into, you know, quite specific categories in amounts.
And these arguments always have the same narrative structure, whether it's the code of how Barrabi or neoliberal ideology.
Today that the order today is the natural order, the order today is the best order.
Change will only hurt those it intends to help, and there is no alternative.
That's the justification. Now, inevitably, we always appeal to some source of authority for our current order.
The old days are used to primarily be God to the coat of our morality was handed down by God to the to the king.
Sometimes it was blood and tribe or relations or soil and plays.
Or it's because, you know, the history of the ancestors in this way, so it must be good or post enlightenment.
We start getting appeals to philosophy, science or to our modern God economics.
The economists say this is right, so therefore it must be the natural order or the best order.
Now, just to show you that some more self-aware economists, we understand that they are storytellers in society.
Here's a quote from Ariel Rubinstein, a very respected economist at NYU, says as in the case of a good fable,
a good model can have enormous influence on the real world, not by providing advice or predicting the future, but rather by influencing culture.
Yes, I do think we are simply the tellers of fables. But is that not wonderful?
Now, let me show you how some of these fables work. So an example that myself, my co-author I've done some work on is the minimum wage.
And there, you know, you have a story about, you know, if you raise wages in the market, it's going to be bad for people.
It's going to hurt employment. You know, if the price of something goes up and demand for it goes down, right, if I want a one, raise wages less jobs.
Right? So you have, you know, Milton Friedman noting,
quoting back in the 60s that I'm convinced the minimum wage law is the most anti negro on our statute books and its effects, not its intent.
It will only hurt those it's intended to help.
This wasn't just an issue in the 60s, so here we have just a few years ago as there's been a fight in the US to raise the minimum wage to $15.
Forbes magazine saying, Of course, Black Lives Matter. That's why the $15 minimum wage is a bad idea.
Again, the natural order, the current order is the best order changing.
It will only hurt people. Well, here's the facts the reality and huge number of studies now showing that
basically low wage employment is unchanged by the minimum wage jobs aren't lost,
but the incomes at the bottom of the distribution are significantly increased.
Working poverty is generally reduced, dependence on public assistance is reduced,
and low income African-Americans have been amongst the biggest beneficiaries of minimum wage rises.
So it's been a story now.
I think we need some new stories, new narratives based on more scientific foundations about real human behaviour and how real systems work.
And I'm hoping that will someday look at this quote by John Stuart Mill.
It often happens that the universal belief of one angel of mankind becomes to
the subsequent age so palpable and absurdity that the only difficulty then,
is to imagine how such a thing can ever have appeared credible. We will look back on some of the ideas we've had today and see how absurd they are.
So let's look at some real science, not armchair anthropology.
We're lucky and we've been terrific work on this here at Oxford.
We've had decades of behavioural science across psychology, cognitive science, neuroscience, anthropology,
behavioural economics, all kinds of fields actually looking with real data about how real humans behave and humans sapiens.
Homo sapiens looked nothing like Homo economicas. So real human decision making is inductive.
It's heuristic, it's modular. It's highly adaptive. Our emotions are not a bug, they are actually a feature.
They're very important in helping us navigate the world and social relations and make decisions.
And we are highly, highly social creatures were amongst the most social creatures on Earth.
We can be selfish, of course, but we are highly, highly group ish and we tend to be reciprocal in our social relations.
Highly cooperative, capable of altruism.
Our moral intuitions and instincts are very important, shaping force in our decision making, in our social relations.
We're also, like all other primates, quite hierarchical and we also can be tribal,
which can have some positive side and being able to organise large scale activity, but also highly negative side in terms of things like war.
We also know a lot more about systems than we did back in the 19th century, and we know that the economy is not an equilibrium system.
This is an equilibrium system. It's dead.
In equilibrium system is a system without energy flowing in out of it, without creativity, without novelty, without growth.
It just sits there in a state of equilibrium like the boon here we now have really since the 70s, we had a much better name for what the economy is.
That's what many scientists would call a complex adaptive system.
It's made up of billions of agents or particles. They interact and networks they adapt and change over time.
There's growth, there's evolution and there's novelty creation in the system.
So rather than thinking of the economy as a system simplistic exquisite equilibrium system,
we need to think of it in real world terms as the complex system that it is that it has all these characteristics of dynamism,
non-linear already itself creating self-organising. It's evolutionary also that energy matters.
Economies are powered by energy. They're thermodynamically open systems, and I'll talk about that a bit more in a moment.
And they are embedded in other complex systems, the complex systems of human culture and society,
and they are embedded deeply in our physical environment.
Now we can use these ideas to start questioning and changing our conception of what economic value is so we can
start again with real science and understanding the physical world it one way to look at the economy and don't.
Farmer mentioned this briefly in his talk a couple of weeks ago that we can start with that we take matter and energy from the Earth,
low water, high entropy and like a metabolism in biology.
The economy turns that into higher order, lower entropy products and services.
And it does that by taking in using knowledge from what can be called our physical technologies, such as this laptop or, you know,
or an orchestra and plough, or any other physical items that contain knowledge that we use to organise and build things.
And our social technologies, which are our institutions or ways of organising people to create order.
And just as the laws of physics tell us, such a process of using energy and matter to create order inevitably creates waste waste,
heat gases and waste products which are emitted into the environment.
And this then creates value in what my co-author and I call by solving human problems.
And so we have created an economics metabolism to convert low water to high order to meet our needs and solve our problems.
Now this is a different conception than thinking of humans as pleasure,
maximiser or hedonic that rather one can think of the purpose of the economy is not to just maximise consumption.
Pleasure and growth in GDP or output terms is not just about more, but rather what the economy does when it does, as well as it solves human problems.
I had the problem of I need. I need to eat. So I get a meal. I need information.
I can get it from this laptop. I need to get from Point A to point B. I can take the bus or ride my bike or take an Uber.
So we have created a huge variety of solutions to human problems in the economy.
And it's when we solve those problems.
When you get me from point A to point B or you get the information you need or the calories that you need, that's what creates value.
And our wealth can then be thought of as a stock of solutions to human problems that
it gives us more and better ways to solve these problems and meet these needs.
We can then think of growth not just as about more or stuff that also is better.
Growth is the rate at which we create new and better solutions to human problems and make them available to everyone.
An economy where it's only, you know, the very richest who get the solutions,
their human problems, we would not think of intuitively as a prosperous economy. So how these solutions are made available to people matters.
And by solving problems, we create capabilities and enhance agency. If you aren't getting enough food to eat, if you aren't spending,
if you're spending all your time getting from point A to point B, your ability to fulfil your human potential is very limited.
So this is building on the ideas of what you said in Martha Nussbaum that a key role of the
economy is to create the capabilities and agency for people to fulfil their human potential.
And solving complex problems to meet our needs requires cooperation that prosperous economies facilitate cooperation at scale.
And so where this is all leading is a conception of the economy is really being about supporting this,
going right back to Aristotle, the idea of ammonia or human flourishing.
That is the point of the economy is to support the flourishing of all of us, not just growth in GDP.
And so we can think very broadly of a hedonic economy driven by consumption, self-interest and greed as driving us off the cliff to mass extinction,
whereas preconception of a demonic economy focussed on real human flourishing,
meeting real human needs is potentially leading to a more sustainable outcome.
So putting some of these ideas together, we can start to see in rough form the building blocks for a new thought system.
So starting with a moral philosophy built around our pro-social cooperative behaviours and a real scientific understanding of our moral psychology,
behavioural theories that look like real Homo sapiens, not these cartoon figures out of earlier centuries.
In economic theory, understanding the economy as a complex, evolving system embedded in these other systems of society and the planet.
And we can start to think of a new economic and political ideology that could emerge out of this.
That my co-author and I have labelled market humanism because we do believe that markets continue to be one important social institution,
but they need to be harnessed to these huge human and you demonic ends,
and we can start to envision a path toward a human you demonic economy that supports human flourishing.
Now, we don't have time to go into the details of all that, but I think when you do run through it,
you start to pop out a new set of memes and norms that you know could start being the basis of a new politics.
The first or is bad, let's just say it right out. Greed is bad.
Maximising human flourishing is good. Prosperity comes from solving human problems.
We solve human problems by cooperating. A billion acts of cooperation makes a prosperous society.
Inclusion, fairness and trust are the foundations of cooperation, and thus they are the foundations of growth.
It isn't the big trade off between social justice and growth.
Social justice is essential for growth. The role of government is to foster security and cooperation.
Government is not the enemy of this system. It's a key part of the ecosystem.
But it's not the whole of the ecosystem, that's for sure. So there is a difference from socialist ideologies here.
The role of the markets is to create competitions, to cooperate and evolve new and better solutions to human problems.
This conception markets aren't about efficiency and allocation. They are about creating incentives and competition.
So who can be the best co-operators to solve the most human problems?
That's what markets are good at when they're well constructed, and that's what they're for.
And the social duty of business is not to maximise shareholder value to actually solve human problems.
And the moral duty of humankind is to protect the Earth. Now that's all rather philosophical and nice sounding.
And you know, you may say, OK, where are the policies? We need policies if we're going to change the system, we need policies.
Well, I would argue we have the policies.
We actually have a lot of answers to these big problems and we to a large extent know what policies work and which ones don't.
The problem is they haven't been possible. We haven't been able to do them.
And the reason why we haven't been able to do them is we haven't had the political space to do them.
And part of the reason we haven't had the political space comes back to our Russian dolls that,
you know, the intellectual foundations of our current imagined order give legitimate, you know,
through institutions and education have created a set of political narratives and mental frameworks that
constrain the political space and the policies in favour of the status quo and against transformation.
And so these ideas and policies get shut down.
Whereas my argument is, if we shift our thinking,
if we change the basis of our imagined order and we drive that through our education system through the way we teach courses like economics
and other things and into our institutions that we have the potential to open up the thinking to broader ideas of transformation.
And we will also discover new ideas that we haven't thought of yet. And then we have a shot at actually changing the system.
Now again, you may say that sounds like fantasy,
but I have a reason why I think this is possible because it's happened before and it happened very recently.
There's been some wonderful history is written of the rise of neo liberalism in the U.S. and U.K.,
and what you see is an actually quite explicit effort to do exactly what was on this page or with a different set of ideas.
And they essentially rewired elite thinking primarily in the U.S.,
but to a large extent here as well over a multi-decade period in a very strategic way through education systems,
think tanks, government agencies, training judges through, you know, business schools, all kinds of vehicles.
They turned a set of intellectual ideas into a real set of policy and politics that dramatically reshaped the order,
not just in those countries, but around the world. So we need to do this again.
But with a different set of ideas.
Now, my hope, which I'll close with, is that if we do this, that we will change our imagined order, and that imagined order will in turn changed.
The physical and real order of our planet, that the ideas in our heads,
that we start to organise the economy around start to look more like this than the ones that I showed on the first chart.
So I'm going to close with a warning and a bit of optimism. The warning comes from Isaiah Berlin.
Over 100 years ago, the German poet Heiny warned the French not to underestimate the power of ideas.
Philosophical concepts nurtured in the stillness of professors study could destroy a civilisation.
So are you professors out here with quiet studies? You're very dangerous.
But my point is that the idea is nurtured in the stillness of professors.
Studies hundreds of years ago are still with us today and still driving what
we do and how we organise the system and has created great dangers for us.
Now finally, on a more optimistic note, we are from Buckminster Fuller.
We were called to be architects of the future, not its victims. So let's start architecting a new future.
Thank you. Thank you very much, Eric.
We now have time for some questions, and I'm sure they're going to be many.
Please just be aware we are filming this in live webcast,
and so only ask a question if you happy with that so we can take this one in the middle here.
I think very much to make quick points or questions, one is how do you feel?
We seem to be going the opposite direction now in today's economy from these sort of very sensible ideas to a very strange, chaotic mix.
And second, what metrics would you use to suggest that we're on course for this sort of new direction that
you're looking for because it's easier to measure growth in GDP than solutions to problems?
Thank you. Do you want to take a few questions or should I have you? Well, since you asked two good ones, I'll do that.
But then maybe they'll have lots of people and we'll we'll take a bunch of them. So first, are we going in the right or wrong direction?
You know, it's a very, very mixed story. So yeah, there are reasons to be optimistic in our group.
Here at Oxford, we've been doing a lot of work on the acceleration of renewable energy sources and,
you know, understanding the foundations of what a sustainable economy might look like.
And you can see how we could get there. And there are probably people in the room who've done actually quite detailed work on this.
You can see the path to get there, but the pessimistic part is we're not doing it.
Largely, I believe, because of the things I talked about, our kind of the political box that we work in,
the mental frameworks our businesses work in and all of us on, how would you measure, you know, progress in a different way?
And I actually think progress is a very good word here because we're talking about shifting our thinking from being about growth.
Again, just more to progress, which is about can be more sometimes, but it's largely about better.
And again, this idea of solving human problems. And we do think we you can measure it.
There was a famous paper by Nautilus at Yale back in the 70s that always intrigued me,
where he measured how many hours a day do you have to work to get a little bit of light through history of happiness?
So have you seen this chart?
It's a fantastic, fantastic chart, but it's a great concept because aluminium light is solving a very important human problem.
And your ultimate budget constraint is your life. That's the real budget constraint.
How many years you have on this planet?
And so how much of your life you have to spend to get that lumen of life is a very nice way of actually measuring it a very tangible way.
The value of a solution to a human problem.
And so we're building off of that idea and actually doing some work in our group about how we might measure this.
One idea is you can create just like four inflation measures. We have baskets of consumption goods.
You can think of baskets of solutions and measuring again, you know how much of a human life do you have to invest to get that, OK?
And there's one here. And. Thank you.
Yeah, thank you. It's for what I found really very uplifting because I've been so depressed by
economics for so many years and there is now a chance you've identified it.
Do you think that with the increasing awareness of the climate emergency, which will gather speed,
I think as time goes by, the children who are striking are doing a damn good job.
But there's other things going on and as people begin to change their own expenditure, lifestyle flying,
if all the people who fly for the university stopped, this would have an immense impact on the industry.
And equally in other spheres. But do you think that if we have to deal with that, which I believe we do, this will affect the economy purposefully.
If you take a couple more, thank you. I I thought your ideas are very good, but will a democracy achieve them?
Hmm. Easy questions here within the context of the old economic system,
when a price was put on sulphur dioxide from the combustion of coal that was very effective in reducing emissions within 30 months,
the price of those credits dropped 80 percent. If we put a price on carbon, we could probably get similar benefits.
When people have done that, they've actually reduced them so much.
The price fell to almost zero, which was a separate problem.
So to what extent do you think the problem is a little bit different that vested interests
have prevented us putting in a price on carbon that would solve a lot of these problems?
Yeah, I take yes. I think there's three. Well, first on the question of, you know, are we, you know,
maybe near some tipping point in the climate debate with the young people striking and the growing movements around this?
I'm actually hopeful that we are in a little advertising.
I've got an article coming out any day now in the US Journal of Democracy on on why I think this may be a tipping point and how we can accelerate it.
And the core of that is that climate has been argued historically in technocratic terms, again largely framed by US economists.
The same bill Nordhaus, who did the nice light graph also, you know, framed climate as a cost benefit problem.
That's where he got his Nobel prise for.
And and that's been very hard to litigate in those terms because then it's seen as these set of trade-offs where the young people.
Greta Thunberg has reframed it as a moral question. We in this generation are doing harm to them and their generation.
That's a moral problem. One group of people doing harm to another group of people.
And you know, we've always talked about future generations in these kind of abstract terms.
You know, the climate will hurt future generations.
Well, the future generations are here and they're angry, and that's what the student strike is showing,
and we have to respond to that and they have moral standing. So I think that actually shifts to bring back the bring into it.
The moral element of this could be quite transformative. Now your question then about what do we all do?
Of course, we should all do things individually to the extent we can,
but we are operating within a system that is geared to make it very hard for us to do that.
And so we do need system change. And again, there's many people in Oxford working on on what that looks like.
But again, my thesis is to get that kind of system change in the time where I live, in a time that we have,
that we have to radically change what's in our heads and particularly the heads of the elite
in policy and political circles to a different conception of what the economy is about.
And again, the neoliberal example show that can happen relatively quickly.
They did that rewiring and about, you know, over the course of 20, 30 years building off of the crisis they had and in the 1970s.
And your question, can this happen in a democracy?
I sure as heck hope so, because if if we can't and then, you know, none of the alternatives are good for it to happen in a democracy.
I think we do need these these Bottom-Up social movements.
And you know,
climate really has to become a mass social movement where politicians lose office and businesses lose money if they're on the wrong side of it.
And in this article coming out very soon, I compare the climate movement to the abolition of slavery movement and what helped that
movement become successful and actually turn into a global movement and drive huge change.
Now that leads into finally the question on carbon taxes.
You know, I'd be delighted if we had a high carbon tax today.
No one would be more delighted than me. Would it have an effect? Lots of studies suggest it certainly would.
Of course, the answer depends on how high.
Now that sets, then the political problem is, you know, we've been talking about carbon taxes for many, many decades, and they're still rare,
and most of them are still very low, and they've actually evaded very few tonnes of carbon relative to other measures and what we need.
So and again, it's been framed in technocratic terms, and I think we need to again start bringing the the moral considerations back into this.
And you know, in the article, I argue that if you look at the abolition movement, you know,
they weren't advocating a slave tax to make slaves more expensive, so we use less of them.
That was not their position. Their position was abolition. We have to stop this.
It's a wrong system, we have to stop it, and we're in a very similar situation on climate.
The science is very clear. We have to get to net zero I circa 20 30 to 20 50.
That's not very long from now, and net zero is a very strict condition.
So we largely, you know, my friend Myles Allen is here who works on carbon capture.
Tell me it's not 100 percent, but we largely have to abolish carbon in that timeframe, not just tax it.
So my my policy recommendation is carbon should be illegal after a certain date.
You laugh, you laugh. Yeah, despite this. That's what we need.
Yeah. Given that given that the clock is ticking and given that all the major institutions, governments,
commerce are determined to conserve the status quo because they're doing well out of it, and I think it's good.
What realistically are the chances of making the kind of changes that need to be
made before we're overtaken by global warming and mass extinction and all the rest?
OK. David. Thank you.
There's a little cluster of us in the audience here who come from a background in wildlife conservation.
Yeah. Surprisingly enough from that very different starting point, we've arrived at remarkably similar logic and conclusions to yourself.
But at the very penultimate stage of your futuristic diagram,
there was a humanistic market or humanistic economy bearing in mind that the very most bottom right
hand output was concerning consideration for all aspects of the Earth and its working parts.
How would you react, ungainly as the term may be to swapping humanistic for non anthropocentric?
Yeah, yeah, I just wanted. OK.
OK, this one first, sorry. And we'll come back.
Okay, so one core feature of the line of argument you advanced in your presentation is that elites can be this really powerful lever for change.
But the two countries, which which I can claim a personal tie to India and the U.S. have elected leaders,
you know, precisely because they either are not or do not claim affiliation with with elites.
Right. So how does that affect your your line of argument? Because we seem to be seeing that elsewhere as well?
Yeah. So I'll first address a question from our wildlife friends.
I actually very much agree with you.
Part of human progress or human progress over long history has been expanding the moral circle you know of where it is.
Our moral consideration lie from, you know, kind of immediate family and kin clan to larger and larger entities.
The final step in that is across species.
And, you know, in my final line and here was that, you know, preservation of the environment is a is a moral duty.
And so while we, you know we do need to recover the economy to serving human needs,
human needs are intrinsically bound up with the needs of all of our fellow species on the on the planet.
So now I think you know that expanding of the moral circle is, you know, will inevitably take time.
But I think it's something that we have to do to get to where we need to need to go now.
You know your question about optimism. If we had one hundred years, I'd be, you know, I'd be pretty optimistic, actually.
You know, human history would give you some reasons to believe that, you know,
we can make big changes and have big transformations in our thinking, our intellectual ideas and our values.
But given the time frames where we're facing, you know, it's going to be a close run thing at best.
Or, you know, I you know where we may be cleaning up a lot of messes as we as we rewire.
Sorry, I'm forgetting that it was about elites are elites.
Yeah. Elites who claim they're not part of the elite as well. Don't tell me Donald Trump's not part of the elite.
You know, I think that, you know, elites.
Also, it doesn't just mean, you know, were you born rich because you may not have been, you know, or you went to the right schools,
but you, you know, coming up in any set of political institutions, you become part of that elite as as as part of that process.
And you know, those institutions, you know, whether there are political parties, civil servants, educational institutions, you know,
they have created this, this bubble of ideas and values that you know, all of them and and all of us have been have been living in.
So it's, you know, there's no single magic bullet answer, but rather a multi-pronged approach.
And, you know, we have to start changing the thinking at every point that touches those elites,
whether it's the children out on school strike or, you know, here in Oxford, how we educate our students or how,
you know, in my shop, you know, we're working on policy issues with elite policymakers, you know,
from central banks and environment agencies and try to work through those channels as well.
So we have to hit it at all channels. There's a cluster of hands over the.
Eric, let me congratulate you on what I think is a spectacular line of thinking.
There just I agree with most of it there just two points. I disagree with them.
Let me just limit that to one. I think you're giving the conservative when you're making your life slightly easy with the conservative,
because earlier on in the talk, you seem to argue that order.
The order today is the natural order, and the order today is the best order is really kind of a cynical statement of where we're at.
I do believe, though, that the strength of what some of the conservative moral foundations bring to us is the idea that
orders are really important in order for societies is very hard to establish a later on and you talk.
You then argued that in a modern theory of value, order is actually of a value is virtuous sort of defined.
You know, the economy you'd like to see by being a state of high order and low energy.
So I wondered whether you perhaps this is just an equivocation and you sort of actually, you know,
think sort of there's order one in order to you or whether you, how you how you see that perceive perhaps an incongruity.
Thank you. Yeah. Thanks.
Well, thank you very much. My question relates around how the Chinese model for running the economy fits into those different levels you've described.
And after all, they've got one for 1.4 billion people, which is not a small fraction of human population.
No. Carries on for them.
This is to piggyback on the last question, in fact, so much of the so much for the solutions, I mean,
use this word lightly are relatively easy for the rich world in these small and
shrinking group in the top right of your human developed human flourishing chart.
The real problem? A much harder solution is going to be getting the large growing population
in the bottom left of the top left without exploiting the natural resources.
How can you envision, you know, even if we manage the rich world to move in the direction you want?
How can how can we really get the developing world where you like?
Thank you. Well, three again, three challenging questions.
My colleague Linus asked a very perceptive question about about order, and it might surprise you because you probably thought this is some,
you know, left wing guy talking about overthrowing capitalism up here. Probably my two to my economic heroes are Adam Smith and Hayek.
That might surprise a few of you.
And precisely because of the point that Linus was making so, you know, societies that have low order are not happy places to live.
You know, if you have chaotic social order and low physical order, you know,
you don't have highly ordered physical objects like, you know, like this stuff around.
That's generally what we think of as poverty. And, you know, so one of the highest great insights was, you know,
understanding writing about how economies create order as an evolutionary system
and and what I'm arguing is we need to understand and harness that again,
you know, toward meeting human needs in a way where the energy and thermodynamic and emissions equations work.
That's another way of kind of trying to put the problem.
And and many of the classical economists, you know, in the kind of smithee and tradition also understood, you know,
that social order and in particular in Smith's case based on, you know, moral principles and moral reciprocity is a very precious thing.
You know, when that breaks down, life is never good, you know, so so there is a natural conservatism to this of how do we hang on to,
you know, a sense of, you know, material and social order that allows the kind of human flourishing that we want.
And in Western societies, you know, those top right countries have delivered on a lot better than the many other societies.
But do that in a way that meets the requirements of the planet.
That is the that is the core problem now.
You could then ask, are any other countries doing that? What about China? To your question?
Well, this is not, you know, by critiquing modern capitalism, I'm not advocating certainly for communism.
You know, this is another point where I agree with Hayek.
You know, central planning and an imperfect knowledge environment is not very good at
actually solving human problems and meeting human needs and creating fifth order.
Markets are an essential part of doing that.
And, you know, modern China is in kind of a halfway house between those worlds.
You know, some parts of it are the most market oriented, you know,
bits of economy anywhere in the world and other parts are still very state controlled.
And, you know, China recognises that it is in a unique position.
It cannot. You know, there are there are many economists in China who have been trained in, you know,
Wharton and University of Chicago and places like that and learnt all the standard neoclassical stuff.
But then they go back to China and say, Well, we can't follow that path.
You know, they used to call the Washington Consensus, never work for China.
It certainly doesn't work today that we need to forge a new path of how do you take an economy like that and get it on this track?
And you know, the same is true for the developing countries that there is no model today.
That's one of the hardest things you can't just say Denmark. Let's you know, let's do that.
And there's a whole literature in the development literature about why getting to Denmark as it has is problematic in itself.
But even if you could get there, you know, Denmark hasn't solved this problem either.
If you look back at that chart, actually the country that was the closest left was Vietnam.
I don't know if any of you noticed I.
It's a good credit I need to contact the authors of the study and delve into that a bit.
I suspect you know that it's, you know, still a really relatively low emissions economy.
Not much industry there, but you know, they've made major improvements in their social well-being of their population.
But that's probably the hardest thing is there is no model for this.
We have to invent a new model. And I do believe that the countries with the most capabilities, the wealthiest, you know, countries like Britain, US,
Japan and other wealthy countries and the fast rising countries in Asia are going to have to be the ones that do this.
So again, going back to Buckminster Fuller, we have to be architects of that future.
Thank you. Okay. Normally at this juncture, I'm afraid we don't have any more time for questions are still first hand.
Normally, at this juncture, I would tell you what's happening next week. This was the very last lecture of the academic year.
There is, in preparation, a whole series on food for next term.
So do please check out our website. But I would just like to thank Eric for a really superb talk.
And I know that there will be many people in this room who are eagerly awaiting the book that you said was the source of many of these ideas.
But I think all of us will be hoping that the ideas that you've expounded do find their way to the people at the top,
the elites, and we wish you every strength in doing that.
So thank you very much, Eric.