Thank you very much for joining this webcast with Diane Coyle to talk about her wonderful new book.
We've really got a fantastic opportunity to discuss her new book with Diane.
It's a book which I think is overdue in the sense that economics really needs to think about whether it's fit for purpose and what to do about it.
And the book is a wonderful and very easily accessible basis for thinking about these issues, so it's superbly written.
It's, I think, will make sense to economists and economists alike, which very few things that economists write do.
And so I encourage you to look at it.
There's a click button underneath the images, which allows you to get a 30 percent discount through Princeton University Press.
But it also is an opportunity to ask. Questions will leave about 20 minutes at the end for Q&A.
So to put your questions and ask the question in the bottom right hand corner and if you have any things specific for Diane,
I'm sure she'll get back to that. Diane is the Bennett Professor of public policy at the University of Cambridge,
and she co-directs the Bennet Institute and heads research there under the themes of progress and productivity.
She's written many books, and her latest was published on the 12th of October a few weeks ago.
She's a director of the New Productivity Institute,
a Great New Addition initiative in the UK to try and get to the bottom of why productivity has been slowing down and what to do about it.
She's on numerous boards and trusts.
She served as vice chair of the BBC Trust, a member of the Competition Commission, and on the Migration Migration Advisory Committee.
Many, many different things.
And she comes to Cambridge from having been a professor of economics at the University of Manchester and was she was awarded a CBE in 2018.
Deans also been very involved with me in Econ dot org, and I want to thank her for her tremendous contributions as a as a trustee of that initiative.
And no doubt we'll get on to discussing what it can add shortly.
So let's begin by asking Diane why she wrote cogs and monsters, what the title means and what the book contains.
Thank you for the very kind introduction and the invitation to take part in
this conversation today and thank you to everybody who's who's listening in.
I wrote the book because I'm a big fan of economics and it has many critics,
and my feeling was that some of the criticisms were missing the mark and in particular,
missing things that I do think need to change about economics today.
And there are really three aspects of that. One is something that's been in the news much more since I started writing the book,
and that's about the lack of diversity in economics as a profession.
One is that about the very peculiar attitude we take towards values or ethical judgements when we're talking about economic policies.
And then the third is my strong feeling that we need to change our benchmark way of thinking about the economy that instead of starting from
assumptions that make markets the automatic way that you start thinking about solving economic problems and you add complexities to that version,
we need to flip that and start with the complex world that we have now and figure out what kind of institutional
framework and what role of first state and for markets should be involved in addressing addressing the challenges.
So just to start with the first of those that diversity question,
and these are all links with each other, so I'll come back to the way they linked later.
But I think it's now pretty well understood that economics is a very male dominated subject,
and the proportion of professors of economics or female is something like 15 percent.
And it's somewhat higher at less elevated ranks of the academic profession.
It's quite a bit higher in the government economic service, but also low in in areas like the city.
And so there's something about economics that stops females applying to study it and staying in the profession.
The pipeline gets narrower all the time.
The figures are less good for people of colour and for people who come from low income or non-traditional academic backgrounds.
But obviously they're pretty poor as well.
And this makes economics like subjects such as computer science or mathematics or parts of engineering in it's very narrow.
Social base as a as a discipline, and that's a problem because we are social science, we're meant to be studying society.
And with a narrow social base, they're going to be questions that we miss.
There's going to be data that we don't gather issues that we don't understand,
and it should be a concern to the profession that so many people are selecting out of being economists.
It has become much more of a concern. And so the American Economic Association, the Voodoo Economics Society, have initiatives to broaden that base,
go into schools, sell the joys of studying economics and what's an important subject, all of which I completely applaud.
But I would like economist also ask Is there something about the way we do economics that is putting off lots of people?
And part of that is about the culture in some departments.
It's quite aggressive and that has been well rehearsed in some research papers and in the media.
And so that's something that can be changed relatively quickly if people want it to change.
I don't think it has changed much yet. But then there are issues about what we think is important in economics that
also affect people selecting out of the profession that I'll come back to.
So that's so that's one issue.
If we've got less than half the population being economists, we've got less studying less than half the questions that we ought to be.
The second issue I pick on and pick up on in the book is the way that we insist often that we can separate positive and normative questions.
We can separate objective questions of fact and evidence from questions of values and ethical choices.
And you see that in the similes that economists use to describe themselves.
Keynes said we should be humble like dentists. People often say economics should be like engineering.
Esther Duflo, in one of her recent keynote speeches, said that we should consider ourselves to be plumbers.
So all these are very humdrum, practical professions. And there's an objective situation.
You figure out what it is. You can look at the evidence and find the best thing to do.
And I think this is really misleading. It dates back to Lionel Robbins essay on the significance of economic science,
written at a time when logical positivism was the philosophical fashion and this insistence that only
objective questions to which you could apply evidence allowed you to make meaningful statements.
And this was carried over into economics and led to this protocol that we separate what is and what,
what is and what ought to be, and we can address those separately.
Milton Friedman emphasised this, and Keynes had taken the same position, so it's really deeply embedded in how we think about what economists do.
And there's obviously something good about that.
We we want to be impartial, we want to be objective and we want to use evidence as effectively as possible.
But it means that we actually ignore the fact that quite a lot of the way we think about economic policy has values baked into it.
We have this concept of efficiency, which rests on assumptions about people having fixed preferences,
maximising the utility subject to budget constraint and a theory of improvement.
Operator improvement is called that says things are getting better.
If you can make one person better off and nobody else worse off.
And so we rule out being able to comment on distributional questions and using the word
efficiency is very confusing because it makes people think that it's like engineering efficiency,
that it is a matter of fact. And actually it's not. It's an ethical concept,
and we're hiding that in the way that we talk about something like cost-benefit analysis or or competition
policy or any of those areas of policy where economic efficiency becomes one of the criteria.
And the language confuses even the economists ourselves.
I think we forget that actually, we are making value judgements all the time when we are talking about in public policy domains,
what is it that's going to make things better? What are better economic outcomes?
So I want us to combine the attempt at impartiality with a recognition that actually
we're part of society and the way we approach evaluating challenges and policies,
has ethics and bedded in it. And we need to talk about that more explicitly.
The final area that I talk about in the book is what's the basic benchmark?
How do we start thinking about economic policy challenges? And we have a set of theorems that tell us that if you make certain assumptions,
constant returns to scale competitive markets, perfect information lack.
Of externalities, goods that are rival, that is that if one person uses them, the other person can't,
then you can show that market outcomes give you the best economic sense, the best possible outcomes.
Now, of course, we know the world isn't like that. So we start with this benchmark and we add complexities.
We say this assumption doesn't hold and therefore we need to address this particular market failure.
And we've got this socialised into us from our undergraduate days and through graduate study that this is how we start to think about things.
But the economy is nothing like where we start with the benchmark.
Increasing returns to scale are everywhere. They always were in the old material economy, but even more so in the new digital economy.
Asymmetries of information people some people know much more than others about a given context.
Preferences shift all the time, or there'd be no advertising trying to change our preferences.
There are pervasive externalities, environmental externalities, all kinds of other externalities.
So I would like to start with a benchmark that says, here is the information environment for this situation.
This problem that we're considering here are the power relations.
These are the institute, the economic institutions that are involved.
This is the structure of production and the economies of scale that we have here.
Given this context,
what kind of institutional framework would deliver better outcomes for people having thought seriously about what better outcomes mean?
So I want us to flip that benchmark and think automatically about dynamics and social influences on each other and information sets and so on.
So let's flip that benchmark.
This means changing methods as well, because you can't solve those kinds of problems analytically the way that we're used to doing the economics.
So we have to use, we have to introduce a much wider range of methods.
But it also opens up to us a much wider range of interesting questions, from climate change to inequality to how to tackle power in digital markets.
And if we do that, then to go back to where I started, then we have a version of economics that looks much more interesting.
It's much more about the big challenges that we face in society today.
It speaks to people's experiences, and I think it would be much more attractive to have a wider range of methods,
a range of big questions that we can ask and a much more value rich and informed conversation about the economy as it is and not this
sort of strange textbook economy and narrow range of methods that we so quickly get socialised into when we are trained as economists.
So that's a quick nutshell summary in the book, and I'm sure you've got lots of things you want to talk about.
Thank you so much.
Yeah, there's so much in the book I do want to talk about, but let's just start about how we got to where we are with the economics.
You know, it never used to be like that when you read what we regard as the sort of fathers or grandfathers of economics, Smith and Bill Marx,
Ricardo, particularly male, and they were totally involved in the whole breadth of economics and the ethical basis of foundations.
And yet we find ourselves today having lost all of that and basically having this engineering ambition or physics envy, as some might think of it.
Some some have argued to me that this is basically power, that that it's a deliberate attempt by small groups of people to narrow it,
to not talk about inequality, to take out the distributional questions.
And there are some that almost talk about a conspiracy of the people that have grabbed hold of the
key journals and creative economics as it is funded by by powerful lobbyists in the U.S. who wanted,
you know, who want to basically pursue the Reagan revolution is a how do we explain this economics having got so lost and going
down this this warren of a narrower and narrower and more and more male dominated more and more engineering approach?
It seems to me that it's a mixture of things,
and there was certainly some intentionality on the part of free market economists to capture policy and the Pellerin Society,
the Chicago economics department, I think, had a clear ideological or political agenda in the kind of economics that they did.
And when I was a graduate student in the early 1980s, that was a very dominant in the real business cycle models.
The assumptions about rational expectations had become quite quite dominant, and we were all very excited about it.
But I think that that speaks to the other reason that the profession became this way,
and that's actually that it's a self-fulfilling set of techniques that make that quite exciting if you can muster
them and do give some really interesting insights and they've been good things as well as bad things about that.
If you think about the recent Nobel prise and the empirical micro applied micro empirical approach, is it that recognised?
That's been a really useful set of developments, I think, to have a logic of thinking about the microeconomic context.
Lots of areas of social policy and developing the data and the techniques to understand that better
has been the positive side of the trends that you know that you're alluding to in your question.
But then I think it becomes a question of the sociology of economics and the reward structures,
the fact that to be appointed and promoted into a good department, in a good department, you have to publish in these quite narrow range of journals.
To succeed there, you've got to do quite a narrow range of techniques and addressing a certain kind of question.
And the environment is a great example there because there are loads of economists
doing fantastic work in environmental economics and ecological economics, but they haven't much been published in those top five mainstream journals.
They've they've been published in field journals instead. And yet that top five is the gateway.
And so there, I think it's not conspiracy. It's just the way this what some people call a priesthood of the profession has has developed
and reinforces itself and cements its position that makes it quite hard to overcome.
Yeah, that's going to be my next question.
And, you know, I think you and and I and so many others that we work with on ordained economics departments for this reason and as our core,
as I call homes and and and these narrow journals still do control.
So so we are where we are and we don't like it.
We think that economics can be and should be much more. Where do you see the sort of key signs of what can be done?
In your book, you were diagnosed as the problem,
but where do you see progress being made and where do you think the Israeli prospects of transforming?
Well, in your introduction and you mentioned the Core Economy programme, and that's getting on for 10 years old and its origins,
huge team of economists internationally developing this fantastic resource because
we all felt that what people are taught as undergraduates matters a great deal.
And you forget really, once you've been in economics for a long time, how weird it seems when you first start.
What? Why are these strange utility cuts or what is the production function is very odd way of looking at the world.
And then once you continue your studies, you get used to it very quickly and socialised into it.
So the idea, of course, is as a first year programme that takes real problems, thinks about social structures and economic history,
history of thought and empirical techniques, and puts those at the centre right from the start.
And that's because a lot of people will only do undergraduate economics and that.
But then we'll go onto very influential positions in business, in the city, in public policy.
And we would we wanted the comic, the economics that comes to their minds to be a different version.
So that's one of the answers. Obviously, it isn't. It isn't sufficient.
There's a broader question about how universities overcome disciplinary silos.
And I think many universities now recognising the big challenges such as climate change in the news so much
now and recognise that they need interdisciplinary approaches so the structures are starting to shift.
And I think that would actually help economics get out of its trap because economists are human.
They're all interested in these really important questions.
I think many of our colleagues in street economics departments are somewhat frustrated with the straitjacket they find themselves in,
particularly younger people. And and this will give them a way of navigating around that and starting to address some of these interesting questions.
Having said that, I don't think as a quick there's a quick solution and there's the old line about I think that there's almost certainly Keynes
saying that it takes a succession of funerals to change the nature of discipline who was considered for those that are interested.
Chloe Kong's website is C.A.R.E. Dash Econ dot org.
Really worth looking at? Free online? Layers and layers and layers of interesting economic analysis.
And also as a public policy. Dimensions fit and it's in multiple languages.
So massive progress in making economics accessible and focussing on issues like climate change or inequality that are of of concern.
So. It is the tool kit that economists.
Need to have in order to be able to get into economics departments and so on.
Part of the problem so you really increasingly have to be very good at maths in order to be an economist in the economics department.
Is that part of what's limiting the gender diversity, but also the sorts of people that apply him and become successful as economists?
Because people in the humanities, for example,
find it very difficult to to get into economics is is do you think it's become over mathematical, over formulas?
I think that's more of a problem in graduate degrees, I have to say.
And girls that do at least as well at mass, at school level, as well as boys do.
So that's not a barrier and the kind of algebra and calculus and the statistics that you do at undergraduate level.
And I don't think that's a huge barrier, but it's when you get into graduate school and find that you have to understand some topology,
which has proved an equally general equilibrium theorems that don't actually mean anything.
It's a neatness exercise and that kind of mathematics, I think, is over the top.
Paul Romer has this word for it. He calls it messiness, which is maths that you don't need.
It's sort of decorative. It's macho maths proving that you can you can do this stuff, but actually it doesn't illuminate the economic problems at all.
But I do think a wider range of techniques ought to be recognised and as a bit of movement on big data,
a number of economists are starting to look at a bodies of language as a source of data.
So pattern databases, for instance, or the text of newspapers to understand what's happening over business cycles,
and that's that's very appealing to economists who've been trained in this mathematical way.
I'm now, as you said in a politics department and have learnt much more about qualitative methods.
And it was a light bulb moment for me to realise that actually, that's data as well.
It's just a different kind of data.
And you have megabytes of data when you have transcripts of interviews and you can analyse that in a very systematic way.
And I think we ought to be thinking about marrying the qualitative and quantitative much more,
particularly for subjects like understanding productivity, where the data, the quantitative data you can get is quite limited.
And or what you can deduce from that is quite limited, but you can learn more by marrying the econometrics that you can do there with case studies,
going into businesses and talking to them and doing a tailor made surveys or transcripts of interviews,
all of that would give extra insight to try to understand the causal links determining productivity.
The economists of a couple of weeks ago had a front page, at least in the UK, saying Instant economics and talk,
and then this feature article on what it calls the real time revolution in economics.
I mean, my own sense that this was, well, that's very exciting.
It's slightly overblown to think of this as a revolution that's a substitute for economic insights,
but I'd be fascinated what you what you make of this? It worried me a bit, to be honest, the idea that.
Somehow, you can understand what is going on in the economy instantly through having,
I don't know, some kind of fantastic dashboard of real time indicators. I found it a bit reductive.
And would worry that people would interpret the data that you could happen to get
in that Real-Time way as a complete picture of what's going on in the economy,
because some of the data that's really important is slow.
You can't get real time data on the incomes of people who are living in poverty or on homelessness,
which are big economic problems that we want to be able to tackle.
So it is very exciting and there will obviously be a lot of insights for people looking at the business cycle,
macro issues like interest rates from being able to access instantaneously transactions, data or satellite data tracking ships or whatever it is.
But as a whole, that that's just quite a narrow part of what we want to understand as economists.
And I would be a bit worried if all of the energy went into real time data without thinking about how
does the data match up to the full picture that we want to understand is just bits of the jigsaw.
Mm hmm. No, I agree with you. You're very effectively articulated.
What I hadn't in my mind but felt uneasy about, and it's a study that's just garbage in garbage out.
Masses of data don't give you insight.
Although they do and and the article cites that they might help you to make better decisions on, say, when to raise interest rates or something.
But that's because you have a model behind it already that that's a factor you you focus
very effectively in the book on the digital economy and how that has new demands of us,
but also raises very clearly the tensions between individual and society choices and needs.
Could you could you say something about that? Yes, it's 25 years next year since I wrote my first book about the digital economy.
So I have done a lot of thinking and research on this.
And I mean, to give an example of the the kind of challenges it brings and thinking about individuals versus the collective, think about data.
And we have a lot of public debate now about the privacy issues relating to data and a focus on on on personal data,
which is being accumulated in large quantities by big tech companies.
That gives them a market power advantage because they can use the data to improve the services and to raise more revenues,
and that enables them to get more customers and get more data.
And so they've got a positive feedback loop than they can entrench and increase their market position that way.
And obviously part of the transaction, and I think people are probably pretty aware of this now is that we're giving over data in return.
We're getting fantastic free services that we use a lot and value very highly.
There's also the downside to that, which is concerns about loss of privacy.
And there's another downside that's less often talked about, which is that the data that's accumulated and sits in corporate silos and can't
be used by anybody else data is what the economic drag is and non-res look good.
It's not used up and it's not depleted. If different people use the same data,
it's a public good and we could get public benefit if other people were able to access some of the data that's now sitting in the corporate silos.
Because data really isn't a piece of property like a book that you would buy and you could sell it to somebody else and hand it over.
It's a crystallisation of part of relationship, and the valuable information that you get usually comes from comparison of different bits of data,
even something quite personal, like my temperature or my heart rate.
The information content of that comes from knowing what the population of what you saw or what the safe bounce of on that.
And so in terms of the policy debate, I worry a bit that we're not teasing out the full complexity.
We're focussing on one trade off, but there are other trade offs and we want to achieve different kinds of targets.
We want data privacy and security, but we also want to get the social benefit.
We want that to be shared widely. We want to address market power by big tech companies and create the conditions for market entry.
So this is really quite a complex area and yet with a very generalised debate and quite a simplistic debate about it.
So this is an area that I'm working on very actively at the moment trying to understand even could we put a value?
Can we get a sense the scale of the potential benefits from making data more public?
This tension between individual and societal interests associated with decisions and how
economics doesn't externalise the spill-overs of these decisions is utopian in that context.
But equally, I presume one can think about it in the context of energy and climate change or taking antibiotics and antibiotic resistance,
or even whether we should wear masks or not. How we how we think about individual decisions and collective outcomes.
Absolutely. And economics has logical individualism.
We start with the individual and their choices, and then we add on the externalities.
But actually, the externalities are cool because we live in societies and everything we do pretty much affects other people.
So that's another example of wanting to flip our starting point and start with the social influence.
And is that I mean, that flip is that is a revolution in economics, right?
I mean, it would it would require a different framework and logical basis.
It worked. It worked and and different kinds of techniques as well. And I think we're quite far from that.
When I when I took, I've been talking about the book to colleagues who are economists, and very often they'll say to me, Oh, yes,
but there's this fantastic paper that so-and-so did in econometrics addresses exactly this question,
which sort of misses the point about changing the benchmark completely and the revolution that would involve.
And I think, I mean, within economics is now such a vast field, and there's so many brilliant economists.
Is there a group or a sub field that you feel comes closest to?
Where you'd want is behavioural economics, for example, or environmental economics?
Do you feel closer to where you would want the heart of economics to be?
That's a good question. I'm not sure it's sub fields so much as parts of sub fields.
I might add development economics to you, where scholars are more likely to think about issues of culture or religion,
for example, which are obviously very important.
But behavioural economics itself is a great example of some behavioural economists who are thinking very deeply about questions of ethics.
And what does wellbeing really mean and what are the ethical implications of nudge policies, for instance,
or the paternalism that involves and others who are actually treating it as like conventional economics,
but with a slightly different set of assumptions? And so even within behavioural economics, I see that divergence in approaches.
Would it be just economics, something that that sort of takes externalities pretty centrally?
That's that's very true. Yes. But what's what's your answer to you up to that question?
Well, yeah, I I think that it would require a very radical doing that one could do it pricing, for example,
if you price carbon, that's what the Stern Stiglitz Commission says, which is something like $70 a tonne.
Are you then somehow capturing social needs and create just load that on as a normal tax and an economics framework?
Was this something more radical you need to do? To think about this.
And that's sort of what what I what I can't get my head around because we don't know what the radical alternative is.
So it sort of comes down to pricing externalities and valuing them properly.
So I agree with that. But I would also think about Martin Wiseman's classic paper on prices versus quantities and sometimes actually
quantity quantity regulation is a more effective tool than and of changing prices through attack through attacks.
So there are some conventional bits of economics you could bring to bear and thinking about it.
And I also think and and this is something which many economists feel uncomfortable with, that one needs a deep ethical basis.
So, for example, you could say a wage below a certain amount is just not acceptable.
You know, the discussions on living wages, for example, or regulation becomes a much bigger part of that.
But you just won't allow it in society where you won't allow a certain level of pollution or you insist that everyone wears a face mask.
I agree with that. And we've presumed since the Thatcher revolution that economic efficiency was the main value.
But when you recognise that that's an ethical value,
then you can have a debate about whether whether it is the top priority or whether other things should be top priority.
Yeah, let's do this a lot more. I could come back to it with maybe one final.
So your your titles of your chapters are so evocative.
I encourage people who are writing books to look at some dance titles because most of the time is a body,
but not as the one core policy in wonderland. I love that and I love the one rats and humans.
So we've talked about rats and humans and the rationality and not the rats.
But what? Why is the chapter called Policy in Wonderland? I can't remember.
You talk about good policy not being sort of relevant to society and the mismatch between what economists are doing.
It's kind of like and what's needed by policy makers. It's come back to my mind.
So the image is the croquet game and Alice in Wonderland, where the mallet turns out to be a flamingo and the ball turns out to be a hedgehog.
And so it's a reference to the frequent failure in policy economics to recognise that you're an operating as part of a system.
You don't stand outside the system and your instruments are not given. There will be behavioural reactions to the changes that you make.
And it sounds a really obvious point, and sometimes it's recognised in devising policies,
but surprisingly often not including in behavioural policies and nudges or interventions that become popular,
like removing the distinction between pavements and roads.
They have an effect on people's behaviour for a while and then if what you just and you revert back to the original situation.
So that's that's the source of that title. Yeah, good.
Let's see what we have in the questions. So.
How does ecological economics fit into the core econ approach?
All right, well, that's the question about core,
but won't you take it as a broader question how you weight where you see ecological economics fitting in?
I suppose this is a question about where do we stand,
where should economies stand on economic growth and the and whether that is just the extent to which we recognise intrinsic value in the environment?
And my view on this has always been that, of course,
there's intrinsic value and we need to do a much better job of recognising typical tipping points in ecosystems or water systems and so on.
And but having said that, if you don't apply the lens of economics to nature, you are putting an implicit value of zero there.
And so I would always put a value or defend putting values on ecosystem services,
for instance, bringing to bear the tools of economics on the environment.
And when it comes to growth.
There's a moral aspect to this, which is and the need for at a minimum, the need for honesty that if there's going to be zero growth,
that's a request to many people to reduce their standard of living from where it is now,
but also a misunderstanding about how growth has been changing.
Because the material footprint of GDP growth and even the energy footprint has been declining in rich countries,
including when you take account of imports, it's not just that imports.
And that's because the economy is increasingly intangible. The value that we assign increasingly goes to intangible things.
And if you take the example of vaccines, fantastic Oxford triumph and much of that was about ideas,
not materials, and much of the work involved people sending emails to each other with genetic code involved.
So if we're going to have zero growth, that means taking something away so that we can have vaccines.
So how does how does zero growth accommodate innovation in the changing character, the economy?
But it's a really important debate, and I would love to see more conversations between, you know,
ecological economists and the more conventional if you like environmental economists
because I think we stand a much better chance of getting the action we need,
both by individuals and businesses and by governments if we understand those different perspectives, much better.
Mm hmm. Absolutely. I mean, as someone who's worked a lot of developments,
I get very nervous with these zero growth discussions because you basically condemning people to permanent lives,
no matter what redistribution you do,
per capita incomes would remain way below anything that we would ever regard as acceptable in many countries unless you have growth.
And I also struggle to understand how you would transition to a zero carbon economy without new investment,
which is very sizeable and purchase of new electric vehicles, for example, and electrical grids, et cetera.
So I must say I've never. As much as I'm committed, I'm sure I'd like you to.
To trying to reduce our ecological footprint, it doesn't to me, it implies zero growth, it might imply the opposite.
I agree entirely, but I think it's also important to recognise and honour the emotional attachment to reducing the damage that we're doing to nature.
Yeah. And you know, a question that has come up, which is related to this is as an ecological science student,
I'm aware that discipline incorporated several economic models and methods to its core,
and any such borrowing and models of methods happened before core economics and ecological sciences or evolutionary sciences.
And we could see a healthy exchange between economics and psychology.
So it's a question about the extent to which economics borrows from other disciplines and particularly the ecological sciences,
have angles about economics and psychology. There's been long interplay between biology and economics.
But Karl Marx drew from Darwin, actually, I believe, wanted to dedicate just capital to Darwin, but Darwin declined the honour.
Game theory is another example of a lot of borrowing between. That was from economics to evolutionary theory.
And what interests me about this is it really appeals to my sense that economics is a humans.
And so. Ultimately, we will be aiming for consistency in the understanding of how humans behave across economics,
psychology, evolutionary theory, biology all the way down to, you know, our basic biochemistry.
So, you know, I'm not arguing for a single, unified science,
but I think there can be really interesting borrowings at the borders between these different, these different human sciences.
Coming up to science, neuroscience will be another one. Yeah, so in the context of your role as director of the Productivity Institute,
so one of the theories about why productivity is slowing down is because.
Knowledge is becoming too complex, and it's increasingly difficult to join the dots between all these different disciplines,
which are becoming more and more siloed and deeper.
Is that a problem we can be a journalist, can one really learn from neuroscience or learn from some other subject,
which one has a very shallow knowledge of in a meaningful way?
I think it's that old Isaiah Berlin distinction between foxes and had foxes and hedgehogs.
If I've got the animals right and I can never remember which is which, but you need a few of both and there will be a team.
Yes. Absolutely, a team. But but it's it's really interesting working at borders, I work a lot with engineers and computer scientists now.
And the conversations that you have just incredibly hard work because you've got to
learn language and understand the ambiguities that come from using the same word things.
But it's also incredibly interesting and really informs just really influence work.
Well, one example in my own research was looking at the price of telecommunication services and working with telecoms
engineers to understand what the right volume unit was to apply to telecoms revenues and derive a price index for that.
And we couldn't have done that without understanding better the engineering and how the compression was working.
Hmm. And there's been a growing number of Nobel prises in these these interface fields, but they do ask questions.
We have a little bit of time. If you post them in the Ask the Question section, I'll read them out of me.
This interdisciplinary approach, of course, is what informs the Oxford Martin School, which is where I am.
And certainly the view is that you can't solve a real world problem from a narrow discipline because all of them are highly interdisciplinary.
But it does come down to having teams.
What is the ambition of the Productivity Institute, partly to work in an adequately interdisciplinary way where it's needed?
Another example might be the interface between political science and economics when thinking
about what's the right level of government to be taking different kinds of policy decisions.
And is the UK too centralised? And should more fiscal powers or decision-making powers be devolved?
So it's partly that, but it's also importantly involving people around the country in the academic work,
both to get academics to pay attention to the issues that businesses and local authorities and civic organisations and
unions raise and have research questions that feedback the other way so that people in different parts of the country can,
you know, identify a particular sector that's important to them or a particular barrier to productivity
growth and get research commissioned to address that question and learn from that.
In the east of England, around Cambridge, we've got, for example, great tech sector and biomedical sector,
but also a very large agricultural sector and very important infrastructure sector with the ports and thinking about,
for example, what's the impact of labour shortages in agriculture are going to be on productivity?
And will the government's dream of a boost to productivity from a shortage of labour and able to be realised?
And what would that take? What kind of investment does that involve?
Those are the kinds of practical questions that we very much want to start addressing.
So we have regional forums and they meet at these quarterly and commissioning their own research.
And again, I think this is a sort of parallel to the work between disciplines.
The work between different economic actors, including researchers, is also an important part of what we hope to contribute.
Good luck with that. It's such a crucial question, which has proved rather intractable,
so one one question that come in is can you please share your quick view on complexity economics?
It's interdisciplinary, has been applied in policy, central banks and research.
Is it the major system tool to flip economics or in the way he's suggesting or not as much as you would hope?
I've only had a bit of exposure to it, and it's really it's really interesting to see how strong the empirical results are you
that you get from applying the lens of complexity on employment and industrial structure.
And one of the obvious takeaways from it is that you can't pick off economic problems one by one.
If you're worrying about productivity, then you can't fix it by saying, Oh,
we will just concentrate on one part of the economy or we will fix transport, and that's enough.
This is a structural problem, and a big part of the policy challenge is going to be aligning enough policy
changes and that you can change the kinds of outcomes that the the challenge,
I think, is understanding. What's the theoretical model that's driving this?
What's what are the causal relationships? It's a very strong, if you like, reduced from empirical results.
And I find it very attractive.
But I haven't myself figured out what I think the underlying causal story in the economy is is driving complexity results.
So I'm in the territory of thinking we need to try lots of these different tools.
Another one might be agent based modelling or qualitative methods, so let's try them.
But I'm not ready to say there's any one thing that's going to be the answer to how we would economy.
No, I agree with you and started a group here with John Farmer and others, which is doing complex economics and agent based modelling.
And of course, with growing computer power, the ability to somehow simulate economies is growing and that that is exciting.
But but the conceptual framework and where it will end up,
I think is is going to be my view is going to be complementary to a lot of other other work going.
And I also think it's incredibly useful to understand systemic risk, the nodes and networks and not analysis.
So that's that's sort of the butterfly effect of globalisation.
Understand pandemics or financial crises or cyber crises, I think complexities.
Will you book your book about that in his written? Yeah, thank you.
The butterfly effect of globalisation, but it's based on its complexity economics book.
So another question is how is the political dimension policies of economics being integrated into this new economics,
e.g. deregulation or laissez faire relationships to markets?
How is? Yeah, what's the risk, I guess, between politics and the transformation of economics?
So very interesting question. And you could answer that at two levels.
One is that there's always a kind of interaction between events in the world and the way
economists think about those events and the politics and the choices that politicians make.
And there's a sort of cycle loop there that occurs.
But the other way I've thought about this is that very often you hear economists recommending a policy and they tend to be called structural reforms,
which is code for really difficult and nobody wants to do them.
And the reason is that they lose politicians would lose the election if they implement this kind of reform.
So, for example, pension reforms or Social Security rules often fall into this category.
And to me, that's that's a copout. That's like saying, you know, this would be the best policy if only the politicians would implement it.
Well, if they can't implement it, it's not the best policy.
And I think those political economy considerations need to be embraced as part of the economic analysis.
Yeah, that's right, and Bruce, I hope that answers your your question and the question from Susanna, how do you think changes in economic discourse,
for example, moving towards multi disciplinary approaches might affect the value of emotional or correlated labour?
That's a very interesting question.
I thought a bit about unpaid labour, what is technically called household protection in the context of digital changes,
because some of the technologies are moving activities out of the market economy into the household economy.
And one example might be doing your travel agency yourself online.
Save time working in and travel agents. You save the fees that you pay to them.
You've got more choice and you can tailor it better to yourself, but it's your labour that you're putting into doing that.
Another example of those automatic checkout machines in the supermarkets now where they have gone from a sort
of low tech kind of capital equipment and paid labour to a somewhat higher tech kind of capital equipment,
an unpaid labour, which is ours because we're doing our own checkouts.
And you can see with Amazon stores, that's evolving even further to higher tech, physical and intangible capital.
And no labour, because you don't need to checkout, you just walk out with it.
This is really interesting evolution to track in terms of who's bearing the burden of labour
and where to the financial rewards go and what's what are the other factors of production,
the capital assets that need to make that happen. So that's a very indirect way of saying we don't think enough about unpaid labour haven't done,
obviously, since GDP was created in the production boundary was set to exclude unpaid labour in the home.
And there's quite a debate about whether that should be done in the late 1940s and early 1950s.
And the pandemic, of course, has raised this question again, making even clearer as if we ought to, you know, if we needed it,
how important the labour of care is and how much that gets taken for granted in policy decisions that are made.
I don't know if there'll be a fundamental change in views about it and the
statistics that help us understand unpaid labour in the home are a bit patchy.
I would like to see regular time use survey so that we can track this much better and
think about how we might want to assign value to all of that labour that people are doing.
And it will become more important as the population, ages and more care is needed.
But we just don't really have the statistics to do it yet,
so I keep urging anybody I talk to is just tickle circles or indeed the Treasury who finance the onus that to say that we need this,
we need much more. We need much more investment actually in collecting data to understand what's going on in the economy.
So it's a public good and it should be part of our national infrastructure.
And you make that point in your great little book called GDP a brief, a brief by the fiction of history or something.
I recommend that book, which talks about what we measure and what we don't.
The. And there's no other questions.
So that's just sort of go the full circle to to when we started with with your book, which is.
Economics today, what it is and needs to be. And if if if you could wave your magic wand and make economics change.
Well, the three things you would do if you were the head of an economics department and you and and had real power to hire and to fire.
Gosh, that's the difference which never occurs in the real world, of course. Just good question.
So I think one thing that economics departments could do would be to talk to
each other enough that they can break out the tyranny of the top five journals. There are fantastic other journals.
Other disciplines have a list that they recognise as the best ones, but it's much bigger.
Why can't we have a top 20 list? That would be a really good change,
and we could include the top environmental and development and health economics field journals that would immediately,
instantly broaden the work that gets recognised in the economics departments.
Another. Thing would be to really police culture in seminars and in classrooms,
because there just is a very aggressive kind of culture in some in some departments and some seminars.
I remember going to a conference in Toulouse a very long time ago and with psychologists and cognitive
scientists and economists and the economists piled into each other in and other speakers in their usual way,
interrupting being quite aggressive. And the psychologists applauded politely whenever anybody spoke,
it was eye opening to me that you would applaud people after a conference presentation and things have moved on since then.
That was a long time ago, but there's still that the culture needs the culture needs policing and particularly, I think,
when it comes to PhD students and particularly those who might be less confident, you know,
whether it's women or people from low income backgrounds, that there's a lack of confidence.
They're doing a page. It's really hard and you've got to nurture those students and make sure that they exist in a welcoming culture.
That's two things I can't think of a third. Maybe you could think of a third yourself.
And the third is I'd vote for you to be the head of the department because that's I mean that that's really going to happen.
Are we going to have different sorts of people who do fight these battles more more aggressively?
This has been wonderful. I encourage you all to get this book and the 30 percent discount today through Princeton University Press.
Just click on this green toggle underneath images, and it remains for me to thank Diane.
I enjoyed this very much, and I hope you did too, and that the participants did and also encourage you to look at the Oxford School website.
This has been recorded.
I should have said at the beginning before people ask the question, so I hope everyone's comfortable with that and send it to others.
But also look at the many, many other really excellent talks on the Oxford on School website.
The events coming up all the time,
including one that I'm chairing in a few weeks time with Azeem Azhar on his new book Exponential, which is very, very interesting.
Not an economist, but someone who really understands very deeply where technology is growing.
So if you're interested in maths, encourage you to look at that and of course, to look at Diane's material,
which sheds much, much needed light on the problems of economics and how we can solve them.
Thanks so much to you for participating, and thanks so much, Diane, for writing the book and for being with us today.
Thank you. I really enjoyed that conversation and thank you, everybody. It was by lots of great comments in chat as well.