What -ism is it when you castigate your top 1%
From: Vanity Fair, May 2011
and try to aid your middle class …
… by taking back from those even poorer elsewhere in the world.
From: Asia Development Bank: Asia’s Poor. Financial Crisis? Every day.
2012.04.29 • 09:07 1
What -ism is it when you castigate your top 1%
From: Vanity Fair, May 2011
and try to aid your middle class …
… by taking back from those even poorer elsewhere in the world.
From: Asia Development Bank: Asia’s Poor. Financial Crisis? Every day.
2012.01.24 • 05:09 7
In the New York Times recently Paul Krugman described how academic economists grow up, and how blogging might change that:
“你通过关系网获得这个圈子的临时会员资格 (…); 这整个过程都是非正式的 —— 并且非常不民主，圈外人几乎没有参与讨论的机会。
所以我们现在有以博客和在线工作论文为形式的快速学术交流 —— 我认为这非常好。”
All right, I paraphrase, but not by much.
Readers behind the Great Firewall might not be able to access easily outlets like the New York Times, or indeed many other forums taken for granted in the West. So I write this, in part, to give those readers access to an NYT article by Paul Krugman. (If any English-speaking reader finds infuriating that parts of this entry are in Chinese script, well, that’s part of the meta-subtext.)
But I have another objective additionally.
Scholars worldwide are told there is only one model of publishing and disseminating ideas — that model developed in forums primarily in the West. That model, these scholars are told, is the one they must adopt if they are to progress in their career. The problem is, for a range of reasons, those scholars don’t get to see lively discussion of that way of doing research. Paul Krugman recently presented his views on this (if you are not behind the GFW, you can read it online at the New York Times; if you are, however, you might try to access the PDF file I’ve made not to undermine the publisher’s rights but for your convenience).
To pull out parts of that article, here’s Krugman on how to advance your career:
“You got provisional entree to such a group through connections — basically, being a student of someone who mattered, and being tagged as having potential. You got permanent membership by doing enough clever stuff; the informal rule was three good papers, one to get noticed, one to show that the first wasn’t a fluke, one to show that you had staying power.
And journal publication? Well, tenure committees needed that, but it was so slow relative to the pace of ongoing work that it no longer acted as an information conduit. I presented my paper on target zones at a 1988 conference; by the time it was formally published, in 1991, I had to add a section on the subsequent literature, because there were around 150 derivative papers already out there.
The whole thing was informal — and also deeply undemocratic, offering very little way for outsiders to enter the debate.
Nobody at a top school learned stuff by reading the journals; it was all working papers, with the journals serving as tombstones.
So now we have rapid-fire exchange via blogs and online working papers — and I think it’s all good.”
The working papers Krugman refers to are of course the famous NBER ones, with their prominent and distinctive yellow-jacketed covers.
One reaction to Krugman’s description might, perversely, be that the aspiring academic now realizes ever greater returns to getting into such a “top school” [heck, from here on out, it’s no-holds-barred getting that recommendation letter!] Since the inner circle must, by definition, be small and exclusive relative to the crowd, this classic “economics of superstars” scenario produces a highly unequal outcome. Many writers already disavow a societal organization that produces a top ultra-rich 1% of the income distribution. How much longer will they tolerate it for their own community of scholars? The economics of idea-production might say that skewness is an equilibrium outcome; it does not say that that outcome is optimal.
The other reaction, perhaps the reasonable one, is to be aware that the more level playing field that is now possible, with the new tools for blogging and social networking, gives wider scope and opportunity for idea-dissemination and personal advancement, so that an academic can now focus just on developing great ideas, not any more try to game the system or network needlessly.
But how does the new generation get validation when the old people, apart from those like Krugman, don’t “get” the new tools? That inner group with the yellow jackets isn’t going to just roll over without a fight, even if doing so might ultimately be good for the profession.
2011.12.28 • 07:42 5
Many take as fact that the current pattern of global imbalances — large and persistent trade deficits and surpluses across different parts of the world, eventually unsustainable — is due to China and the rest of East Asia consuming too little and saving too much. Since the global economy is a closed trading system, trade deficits and surpluses across all national economies must sum exactly to zero always. Therefore, that one part of the world saves too much and thereby runs trade surpluses means other parts of the world — notably the US — must be running trade deficits.
However, just because deficits and surpluses are tightly inter-connected does not mean that trade surpluses in China, say, have been responsible for US trade deficits: absent further information, causality could well have flowed in the opposite direction. Moreover, China’s high savings might be dynamically welfare-optimizing for its citizens — for instance, private enterprise in China might find self-accumulation the only way to generate investment funds — and, at the same time, only minimally if at all welfare-reducing for already-rich US citizens. Finally, it might be that global imbalances should best be viewed not as a bilateral (US-China) problem but instead a multi-lateral one.
Be all that as it may, many US policy-makers focusing on US trade deficits and China’s trade surpluses urge policy actions against China to rebalance the global economy. Those policy actions include punitive tariffs against Chinese imports and tagging China a currency-manipulator — and thus moving it yet further from official free-market status. Some observers remark that without such external pressure, China will find it domestically too difficult to shift away from its reliance on export promotion, infrastructure investment, and restrained consumption towards a more balanced growth path (e.g., Michael Pettis, Nouriel Roubini, Martin Wolf).
The problem: To raise China’s domestic aggregate demand, especially consumption. The difficulty: China’s consumption cannot increase quickly enough to compensate for the shortfall in aggregate demand should both investment and exports decline. The danger: a hard landing for China and the global economy.
I want to suggest that such a re-direction need not be that difficult. My proposal: Let China grow rich as quickly as possible. Why might this do the trick?
First, consumption within China is already rising faster than both income and investment, provided that we look at those parts of China where incomes per head exceed US$8,800 (Figures 1 and 2). Of course, China’s current per capita income overall now is only US$2200, less than 6% that of the US. What this suggests, however, is as China’s income grows, its overall savings rate will naturally fall. The right policy is to encourage growth, not adopt punitive actions that might retard that growth.
(I took Figures 1-3 from a term paper that Daisy Wang wrote for my course Ec204 The Global Economy at the LSE-PKU Summer School, August 2011. The underlying data are from China’s National Bureau of Statistics.)
Second, as John Ross reminds us, investment too is aggregate demand. But, third, continuing to increase China’s investment in, among other things, infrastructure and transportation can help further as it allows those western, poorer regions in China (again Figure 2) better to integrate both nationally and globally, and thus become richer through raising demand and productivity.
While many observers make much of China’s high investment to income ratio, it is useful to note that that ratio is high not just because its numerator is being driven up, but also because the denominator remains so low. The right state variable for dynamic analysis in a neoclassical growth model is capital per head, not capital per unit of income. And here (Figure 3):
we see how China still has a long way to go on the upside.
Finally, Figure 4:
However much anyone might doubt those China statistics I used above, auxiliary evidence shows that rich Chinese consumers have no difficulty increasing consumption.
The evidence I’ve described doesn’t of course say that global imbalances can be easily erased through just more economic growth in China. However, the algebraic signs of the required relations seem to me to point at least in the right direction. Careful work to quantify these effects might end up showing that their magnitudes aren’t large enough. But, as far as I know, that calibration has not been done, which makes me wonder why some observers can be so certain that China’s current growth trajectory can only exacerbate global imbalances.
When China becomes rich, that will also dramatically lower inequality in the world — globally, the difference in incomes per head across nations overwhelms that across individuals within a single country. No one I know arguing for a more egalitarian society also says that that push for equality should stop at their nation’s borders and be kept from applying seamlessly across humanity’s 7 billion.
2011.12.23 • 19:13 1
At the turn of the millennium in a building overlooking London’s Fleet Street, Jim O’Neill and colleagues at Goldman Sachs sat chewing on BRICs. Was BRIC just a clever catchphrase to explain where global investment prospects looked promising? Did it make good marketing sense to take a stance explicitly on Brazil, Russia, India, and China — with the risk that one’s views might then get obviously challenged by events? Why not simply dust off a variant of some broad generalization, say, “emerging markets”, and be done with it?
However the discussion went, in the event, the decision was to go ahead and proclaim BRICs the new global growth frontier.
In the decade since, the BRIC conceit has gone from strength to strength. It has figured not only in multi-billion dollar financial investments, but also—and perhaps even more importantly—in geopolitical analysis and international policy debate. The BRIC idea is now familiar to school-children worldwide, from Australia to Argentina — young people who were not yet born when the terminology was first hatched. In the reality (rather than just the idea) driven in part by charismatic leadership in different parts of the BRICs and in part by China’s staggering success in economic growth, poverty reduction, and export prowess, BRICs have robbed the US of its 21st-century unipolar moment, rewritten the rules of East-West global engagement, and reshaped the world’s patterns of trade, the world’s distribution of economic activity, and the world’s landscape of poverty.
Scholars of International Relations, International History, Global Governance, Management, and World Politics likely saw the coming shape of these new challenges far sooner than did other disciplines. Those scholars had grown up intellectually already familiar with Paul Kennedy and the rise and fall of great powers, with the Cold War struggle between East and West, with the promise of the US’s unipolar moment in global history. Such events and ideas had primed those scholars to grasp quickly the significance of BRICs.
In the guest post that follows, my good friend Professor Michael Cox of LSE’s International Relations Department describes a convergence between international relations, history, management, international development, and economics to help us understand the post-BRIC economic and political state of the world. He shows how putting together rigorous ideas from cross-disciplinary social science — something the LSE seeks to do more than perhaps any other academic institution in the world — we get better insight on the global economy. For me, his essay is more than just a description of what the LSE does; his essay establishes why to understand the new world economic order, it is essential to traverse many different social science disciplines.
“A new world economic order? Views from the LSE” by Prof. M. E. Cox, December 2011
Memory can often play tricks on even the most intelligent of human beings, especially in an age of rapid unexpected change when all the normal signposts have been removed or simply washed away by the tides of history. Certainly, for those who have grown up over the last ten, turbulent years, the world today is a very different looking place to what it was back at the turn of the century. Indeed, inconceivable though it may seem now, most of us in the developed West were then in the best of moods – riding high on the back of three great revolutions in international affairs.
The first and most important of these revolutions was of course the final triumph of the market in the wake of the global collapse of the centrally planned alternative at the end of the 1980s and the beginning of the nineties. Initially Poland and Central Europe, then Russia, and finally even ‘communist’ China, discovered that they had no alternative but to join the only economic club in town – the one run by the West, organized on western principles, and according to critics, largely designed to further the interests of the West. Nobody liked to say it too loudly at the time for fear of sounding “triumphalist”. But for many during the heady days of the 1990s it really did seem as if the West was “best” and would, for this very obvious reason, remain the axis around which the world would rotate for the foreseeable future.
The second great core assumption – born of a much longer revolution in world affairs – related to the United States, that most ‘indispensable’ of nations which instead of doing what all other great powers had done in the past (that is decline) did quite the opposite. In fact, the core belief after the end of the USSR was that we were now living in what Charles Krauthammer called a “unipolar moment”, one which he felt would endure for a great deal of time: in part because the US could lay claim to the most efficient economy in the world; in part because it had constructed the greatest military ever known to man; and in part because none of the other powers in the world – China included – had any chance of ever catching up with the United States. A new Rome was sitting on the Potomac and hardly anybody, save the oddball and the eccentric, doubted its capacity to remain the shining city on the hill for many decades to come.
The third important revolution was the one that had changed the face of Europe in 1989 when communism ignominiously collapsed leaving hardly anything behind it except a lot of pollution, many unwanted tanks, and plenty of useless factories producing things that nobody wanted to buy. The end of the Cold War was undoubtedly Europe’s great chance, and its leaders back then – Jacques Delors in particular - enthusiastically grabbed at the historic opportunity. What they created was impressive to say the least. Indeed, by the beginning of the new century, Europe was becoming a serious point of global reference equipped with its own currency, the largest market in the world, a lot of new members (not all of them perfect to be sure), and the outlines of a ‘Common Foreign and Security Policy’ that would soon make it a major player on the international stage. Even some Americans bought into this new vision, including, significantly, Charles Kupchan former Director for European Affairs in the Clinton administration. America would not be the dominant actor in the 21st century he opined. Nor China or the Islamic world. Rather the future belonged to an integrating, dynamic and increasingly prosperous Europe. The next century was its for the taking.
How and why this optimism verging on the hubristic turned into its opposite in the years between 2000 and 2010 has already been the subject of much feverish analysis and speculation. But at least three broad explanations have been advanced to help us think seriously about what Time magazine not long ago characterized as the ‘decade from hell’.
One explanation, favoured by most by historians and social theorists, relates the fall from grace to the much earlier triumph of the West and the extraordinary lack of caution this then seemed to induce amongst most western policy-makers. Indeed, having won so much over such a long period of time stretching right back to the deregulating 1970s through to the hyper-globalizing 1990s, nothing now looked to be impossible. And even the impossible now seemed achievable. The liberation of Iraq? No problem said the all-powerful Americans with their invincible military machine. Constant economic growth? Easily achieved on the back of cheap money and ever more complex financial instruments. Everybody a home owner? Why not, even if it meant a pile up of unsustainable debt? Economic crises? A thing of the past. And the future? Not perfect of course. But at least as perfect as it was ever going to be in an imperfect world. Happy days were here again and nobody was prepared to listen to naysayers like Dr Doom (aka Nouriel Roubini) or his foreign policy counterparts who warned that America’s unnecessary “war of choice” in Iraq would end up costing the US its international standing, a lot of blood, and a vast amount of treasure ($3 trillion so far).
A second large explanation connects more directly to changes in the shape of the world economy. Here, Goldman Sachs does appear to have got it right back in 2001 when it predicted (against the then prevailing orthodoxy) that the future belonged to the emerging BRIC economies – Brazil, Russia, India, and of course, China. But what Goldman did not predict however was the sheer speed with which this shift was to take place and the main reasons why it did so. Goldman recall worked on a twenty five, even a fifty year time line: it also assumed steady growth for all countries in the international economy. What it did not anticipate was firstly the pace of China’s rise and the impact this then had on the rest of the world economy; and secondly what happened to the international financial system in 2008 when the established western economies suffered a series of smashing body blows. It was this ‘Black Swan’ event more than anything else that was to be the real turning-point. Before then the EU and the US could legitimately claim that they continued to represent the future. After 2008, such a claim sounded frankly spurious.
The final reason for the great shift had less to do with economic shifts and more with politics and a marked change in the capacity of governments to manage the world around them. Whether this happened because of a decline in quality of the political class, or because the world was becoming almost impossible to manage anyway, remains a moot question. The fact remains that as the new century wore on it was becoming increasingly clear that the West in particular was facing a set of challenges to which it simply did not have any easy answers. And nowhere was this becoming more apparent than in that once “steady as she goes”, rather unexciting place, known as the European Union. The crisis began slowly but then accelerated most rapidly after 2008 leaving a trail of failed governments in its wake (at least eight fell between 2008 and 2010). Nor was this all. As governments fell and the crisis deepened, not only did belief in the European project begin to ebb, but many began to wonder about normal politics itself. The situation was not much better in the United States either. Indeed, having elected a rather impressive man to the White House in 2008, three years on ordinary Americans were beginning to lose faith in the political process and a belief in that very American idea that the future would always be better than the past.
We live in other words not just in ‘interesting times‘, but in quite extraordinary times where few in the West now appear to have much confidence any longer in the notion of the West; where policy leaders on both sides of the Atlantic realize how limited their options are; where a once imperial America now talks in humbling terms of ‘leading from behind’ and adjusting to a new multi-polar world order; and where few have any idea at all about what the seismic economic changes now taking place in the world economy will mean for either global prosperity or international stability.
Time therefore to take time out to reflect on how these multiple and most unexpected changes will impact on the global political economy and the business world. At least five questions need to be answered – and will be, we hope, in three innovative courses to be delivered at the world famous LSE Executive Summer School in June 2012:
The first question – very much in the LSE tradition of drilling down into core issues – has to do with the basic cause or causes of our current crisis. Here one can pick from a variety of explanations - some broader ones as suggested above; other of a more specific economic character rooted in an out-of-control system of deregulated financial markets, global imbalances, cheap money, extensive home ownership, and growing income inequalities; a world moreover where governments before the crisis either did not seem to understood what was happening, or even if they did, did not have the power or the instruments at their disposal to do much to change the course of history.
The second question relates to the past, present and the future of the world economy. Here the biggest question of all is to what degree is this particular crisis different to those that have happened at regular intervals since World War II? And if it is different, then why should this be so? Furthermore, why has it since proven so difficult to reform a system that has caused so much economic dislocation? Why moreover has it has proven so difficult for the West to get out of the crisis? Certainly, there seem to be very few optimists around in the West just now. Indeed, one of the most striking things about the present crisis is that whereas people can’t stop talking about it in the West, in countries like China and India they wonder what all the fuss is about – at least for the time being.
The third question concerns governance at both national and international levels. There are, as all three courses reveal, many fascinating issues raised by the present economic conjuncture. But one of the most critical has to do with the way in which world manages – or tries to manage – an increasingly integrated globalized economy where states still matter a lot, but where decisions taken by ‘markets’ seem to matter a whole lot more. This in turn raises many more questions, not the least important of which is whether or not governments have very much power at all; and in turn whether they are willing to give up what power they have to construct some new financial architecture which is far more in tune with the modern age?
The fourth question relates to that very simple but all-important issue: who wins and who loses in the new world economic order? The “rest” we are told look set to be winners; and amongst the “rest”, Asia and China in particular seem to be especially well placed to take advantage of the new world in the making. Yet there is still a very long way to go before we can talk of a permanent power shift. Even rising China it is suggested in these courses has to take care. After all, its prosperity upon which many countries in the international economy now depend, also depends on the international economy remaining buoyant and economically dynamic too.
Finally, all three courses question the idea that there are simple explanations of ‘why we are where we are’ today. They are also united in insisting that there is no easy way forward. Nor to continue are they at all certain that the world will become either a more stable or a more equal place in the future. All they can promise is to get those who are trying to make sense of a rapidly shifting global economy to at least base their thinking and their decisions – and those of their companies – on rigorous analysis; one which takes as its point of departure the inescapable fact that while businesses today are confronted with very real opportunities, these are presenting themselves in a world where the economic challenges are as real and as serious as anything we have seen since the 1930s.
Professor Michael Cox teaches in the Department of International Relations at the LSE. He is also Co-Director of LSE IDEAS and Academic Director of Executive Summer School. His main work more recently has focused on the changes in US foreign policy in an age of globalization and the impact of the financial and economic crisis on the balance of power. His most recent books include Soft Power and US Foreign Policy and The Global 1989: Continuity and Change in World Politics, both published in 2010. His next book will be a second edition of his co-edited and highly successful Oxford University Press textbook, US Foreign Policy. This will appear in 2012.
2011.12.13 • 00:02 3
The UK’s Economic Research Council invited me to represent LSE in a panel discussion on near-term prospects for the UK economy. Lord Norman Lamont, 1990-1993 Chancellor of the Exchequer, chaired. The other panelists were Prof John Muellbauer from Oxford and Prof Hashem Pesaran from Cambridge. The venue? The Royal Institution of Great Britain’s Faraday Lecture Theatre, where in 1825 the first of the Royal Institution Christmas Lectures were delivered.
I argued the following.
First, the economic difficulties in the UK or the Eurozone cannot be usefully analysed without looking at these economies’ positions in the world. Second, the UK and the Eurozone have an immediate problem with debt and an ongoing problem with productivity. It is unlikely that Keynesian aggregate demand management alone will lead to long-run sustained growth.
What are the facts on the UK and the Eurozone in the global economy? Time was, the night-time sky was lit up pretty much just by the Transatlantic Axis.
But that was 30 years ago, and the global economy has moved on. By 2010 the world’s economic centre had shifted 5,000 km — three-quarters of the Earth’s radius — from the rise of the east, notably India and China.
As a consequence, hundreds of millions of Asians have been lifted out of grinding poverty; soon these people will be the world’s middle income class.
That figure of the Great Shift East takes in grubby calculations with thousands of datapoints. But its point can be appreciated in many different ways, some more vivid than others (e.g., view from the US).
To be clear, not all Europe needs help in the same way. By the summer of 2011, a distinguished US economist had related to me how he and colleagues were surprised by German economic growth out of the 2008 Global Financial Crisis since, while keeping its traditional high-savings habits, Germany had its export markets — the US, the rest of the EU — mired in ongoing recession. Here, however, might be part of how Germany did it:
The great bulk of German trade remains, naturally, with the rest of the European Union. But the EU is now deep in recession and likely to remain so for some time. Outside the EU? Germany today exports more to Developing Asia than it does to the US. And that gap continues to rise. Exports to China alone already appear as large as those to the US. Part of this obviously stems from US imports sharply falling right after 2008 — but that is exactly my point. China and Developing Asia continued to grow, continued to import from Germany (and elsewhere), and thus continued to keep parts of the global economy afloat throughout both the global financial and European sovereign debt crises.
This is not just because Germany enjoyed a cheap currency. Despite the weakness of pound sterling against the Euro, the UK has not re-oriented its exports anywhere as successfully as has Germany:
What the UK exports to the US remains double UK exports to Developing Asia, and four times UK exports to China. The UK has simply ended up with most of its exports to economies showing no significant demand growth.
Unpack the numbers further by breaking out the UK’s 50 largest trading partners in 2009: the UK had 56% of its exports go to the 10 slowest-growing economies in that group (growth measured 2000-2008). Across these 50, the correlation between exports and growth was -0.32: the UK systematically exported more to those trading partners growing slower.
The problems faced by the UK, or more broadly, by member states across the entire EU, while different in concentration, are no different in character from those in the 2008 Global Financial Crisis: Large entities owe large amounts of debt and are likely unable to pay it all back. Previously, the entities were financial institutions; now they are sovereign states. Quick fixes that seek to get around repaying this debt will undermine institutions of trust and responsibility, those same institutions the West tells emerging economies they must build if they too want to become developed economies.
When the first round of Quantitative Easing (QE1) happened in the US, output there rose — and to a smaller extent elsewhere in the world as well. With QE2, IMF estimates show the impact multipliers everywhere had diminished sharply.
Now? There are those who hope a rescue will come when the ECB unleashes its own QE on Eurozone sovereign debt. Or some optimistically-ingenious scheme involving different-coloured centrally issued Eurobonds, or where the discrimination occurs across member states using some other indicator might work. With luck perhaps. Longer term, some observers look to a fuller-fledged fiscal union, with Germany transferring likely more than 5% of its GDP to the Eurozone’s lesser-performing periphery member states (link: Gavyn Davies, FT, 06 November 2011 ).
But the connection between this re-organization and member states’ fiscal positions cannot be ignored. While all attention now focuses on deficit/debt figures compared to those originally given in the Maastricht Treaty, pretty much totally neglected is the nearly-contemporaneous Copenhagen criteria for EU accession. That list includes — after requiring member states be democracies that obey the rule of law, respect human rights, and protect minorities — the statement that candidate member states need to be market economies able to deal with “competitive pressure and market forces within the Union”.
I’m sorry but I don’t think receiving a perpetual 5% German GDP transfer strong evidence for that capability. (And this is just for EU accession, not even for Eurozone membership.)
Monetary or other financial rescues are short-term; we need them the same way we need to kickstart an engine. But if that engine is worn out or is leaking fuel or in need of a complete overhaul, I don’t see how we are going to get very far with that machine. We can’t mistake a short-term boom fueled by exigent government actions for sustained long-term growth. Again, isn’t this what the West tells emerging economies?
How would I propose to change matters? My suggestions at the event were general and therefore impractical. But here they are again:
2011.12.12 • 16:01 1
In June 2011, I was lucky enough to deliver the inaugural LSE Big Questions Lecture. I chose to lecture on whether the East was taking over the world. I felt these changes in the world matter to everyone, and they are developments with important economic ideas surrounding them. The LSE Big Questions Lecture is targeted at 14 year-old school children in a number of London’s schools — hundreds showed up on the day. The lecture itself was televised for subsequent broadcast. The runup to this lecture involved months working with a production team at LSE: these were months of planning and rehearsing, writing and rewriting, arguing and disagreeing — on analytical content and ideas, on what 14 year-olds might find useful and understandable and memorable, on the best ways to communicate different ideas in economics and facts about the world.
Why did we do this?
As an academic economist, I study growth and distribution. I write about the shifting global economy and the rise of the East. I try to make large things visible to the human eye. I want to be considered a valuable REF contributor to my department and to the LSE.
But I also believe that these are times where economic literacy matters hugely, not least in societies that continue to hold to the ideals of liberal democracies. And there are intriguing large-scale parallels between important events now and those some time ago in history.
In 1825 Michael Faraday — perhaps the world’s greatest ever experimental scientist — initiated (but did not himself give) the first of the Royal Institution of Great Britain’s Christmas Lectures. Faraday went on to deliver 19 series altogether of these annual Lectures, his last in 1860, presenting and explaining to the British public ongoing discoveries in chemistry and electricity and magnetism.
The Royal Institution Christmas Lectures have continued to the present, interrupted only by World War 2. They are delivered to a general audience, notably including young people, with the aim to inform and entertain. From their beginning, these lectures proved highly popular despite the limited nature to early 19th century organised education. Since 1966 the Royal Institution Christmas Lectures have been televised. For many British households, the Christmas Lectures constitute a highlight of annual holiday family viewing. The energy and the ingenuity that go into the lectures are impressive, not least when, say, someone like Marcus du Sautoy, in his 2006 lectures, explains abstract number theory to a teenage audience.
These Royal Institution Christmas lectures provide the strongest counter-example I know to the conceit that research ideas are too difficult to explain to and too abstruse to excite the general public. Most of us just don’t work hard enough at it. So getting to deliver something the LSE Big Questions Lecture would be a challenge. But there was more.
In 1825, London had just become the world’s leading city by overtaking Beijing — vividly demonstrating the steady ongoing shift then of the world’s economic centre east to west. That year, the first modern economic crisis in history occurred — modern in the sense of not having been caused by a war. The stock market crash of 1825 took out in England alone six London banks and sixty country banks, with the badly-overextended Bank of England having to be rescued by an injection of gold from France. For students of central banking, this event became enshrined afterwards in Walter Bagehot’s Lombard Street principles for the lender-of-last-resort role in central banking.
In 1825, Faraday’s scientific discoveries were not centre-stage for the Industrial Revolution swirling about him at the time. That first Industrial Revolution — perhaps the most important event in the history of humanity — was driven by iron-making, mechanisation, and steam power, more than by electrification and chemical processing. But chemistry and electricity and magnetism — where Faraday’s contributions were manifold and central — pointed to the then-future. These would go on to provide the more enduring engine of growth for modern economic progress, not least down to what today still powers all digital technologies, significant among them cellphones and the Internet.
The Royal Institution Christmas Lectures matter in British science for providing the public knowledge into the most important exciting intellectual developments of the time. They gave the British public insight into what was new. Historians who study why a 14th-century Chinese Industrial Revolution did not occur, despite China’s more advanced science centuries prior to that in 1780 Britain, point to how science in England had always immediately connected to commercial application and public interest. This is exactly the same kind of connection that the Royal Institution Christmas Lectures make. By contrast, in China, science and technology were tightly controlled by a scholarly elite, who saw no reason to disseminate their discoveries. During the 18th-century Industrial Revolution, James Watt and Matthew Boulton had announced the English public “steam-mad”, whereas in Sung Dynasty China, time itself was considered the sole property of the Emperor.
I am under no mad illusion that what I do as an academic is even remotely comparable to the achievements by these giants of scientific and technical progress from 1825. But I don’t think I’m half-bad as a lecturer. I don’t shuffle my lecture notes and lose my place in them [I don't use lecture notes]. I don’t mumble into my beard so that the audience has no idea what I just said [I'm ethnic Chinese and we don't grow beards easily]. I don’t put up Powerpoint slides crammed full with text and then just read them out word-for-word [almost all my slides are just colourful pictures].
I believe, as first told to me by my PhD advisor, economics is just “organized common sense”. I’m passionate about explaining ideas in economic policy to any audience that might remotely be able to influence our national and global conversations on improving the state of the world.
So, when asked, I gave the LSE Big Questions Lecture a go.
2011.12.08 • 08:09 4
Bizarrely, some of the most vituperative reactions I have gotten on this map of the world’s economic centre heading east
2011.11.20 • 15:57 0
Who among us wouldn’t prefer that no one giggle in lecture when we say “Victoria’s Secret supermodel”, as we illustrate a point in analyzing demand and supply curves?
I also got to find out that I and Liu Wen 劉雯 (the first Asian model to appear in a Victoria’s Secret show)
2011.11.11 • 00:37 12
Mark Thoma‘s thoughtful article “New Forms of Communication and the Public Mission of Economics: Overcoming the Great Disconnect” (04 November 2011) describes the factors that, through the 1980s and after, led to academic economics disengaging from its long-standing public mission: Addressing the questions important to society.
Once it started to withdraw, academic economics became ever more self-contained and self-affirming. Along that path these developments encountered no reality check or market test. The profession grew to have no way to ask how the questions it addressed might matter to anyone, to anyone that is beyond those inside the profession itself involved in posing and answering those questions. Instead, the profession developed a disdain for those outside it – government economists, business economists, journalists, the general public – who were concerned with matters it considered mundane. Academic economics saw a choice between only two extremes: one, that of super-streamlined professionalism and the other, that of ambulance-chasing opportunism, and it convinced all the PhD students it could find there was only one way to go. The system faced no countervailing pressure to change.
Economics no longer had a public mission; it had turned its back on the rest of society. Thoma’s earlier op-ed from 26 July 2011 pointed out:
“How much confidence would you have in the medical profession if the teaching faculty in medical schools had very little experience actually treating patients, and very little connection to – even a lack of respect for – the practitioners in the field? Would your confidence be improved if medical research had little to do with the questions that are important to the doctors trying to serve patients?
Fortunately, however, this disengagement has begun to turn around, not least since the global economic crisis following 2008 but also, a little before then, through academic economists – top-flight respected researchers – resuming communicating again directly with the public. In Thoma’s analysis, it is blogging – with all the attendant openness, immediacy, and direct connection with the readership (facilitated by a supporting information and communications technology) – that has brought economics back to its public mission of understanding, explaining, and convincing on questions that matter. This does not replace research. But it breathes life back into the latter and suggests why certain kinds of research have genuine validity.
The inroads from there, moreover, have allowed economists again to have the confidence to engage openly with journalists, with policy-makers, and with a suspicious public nonetheless eager to learn. This not only improves research but raises economic and financial literacy. We cannot pretend to value the ideals of liberal democracy if we we don’t think it important that the general public understands better what happens around them.
Thoma’s examples are almost entirely US, and that is appropriate. That is where change has been greatest.
But this makes me wonder if, in the UK in our own headlong RAE/REF-directed rush to academic excellence, we are now following the path that, in Thoma’s analysis, is already old and tired – i.e., from the pre-blogging era. What passes for hiring/firing discussion in many economics departments is rumour mixed with currency: a researcher with four publications in the top 4* journals is worth, in UK government REF-derived funds, £100,000 a year. So hiring someone in that category is, upon amortization, a half-million pound proposition. Some departments might even mortgage an expensive hire like that today, discounting against REF future income prospects. (Does anyone else think this resembles a subprime mortgage deal?) Impact studies might count – so, e.g., if some social scientists developed a new pharmaceutical assembly line – that might raise your REF income.
Engagement with the public? “Sorry, that’s not in the REF. The 4* Americans don’t do that, you see…”
2011.10.14 • 11:40 0
David Pilling’s recent FT column (12 October 2011) makes the important point that fiddling with the RMB/USD exchange rate will do little to repair the economic plight in which the US currently finds itself.
It is true, of course, that surpluses in one part of the world have to be matched dollar for dollar by deficits somewhere. It doesn’t follow, however, that it is the trade surplus in China that has caused the trade deficit in the US.
A large fact relevant here is that (to paraphrase Stephen Roach) the US doesn’t have a bilateral trade problem with China; the US has a multilateral trade problem with over 100 different trading partners.
This article documents how the US trade deficit against China is matched – in trend, in magnitude, in little wiggly twists and turns – by the US trade deficit against other parts of the world.
An observer might even conclude that the problem is not that of a bilateral exchange rate against the RMB but instead of US excess consumption swarming over pretty much all the rest of the global economy.
If nothing else were to change, simply appreciating the RMB against the USD or raising US tariffs against China will only divert US consumption towards more expensive, less efficient producers, thus taxing the US consumer and leaving unaffected the overall size of the US trade deficit.