The Great Economists Debate: How can their ideas help us today? | London Business School

good evening I'm Linda you I'm adjunct professor of economics here at the school I'm delighted to chair this great economist debate now it's it's to mark the publication of my new book the great economists thank you Andrew I can't do that myself and I thought what better way to celebrate great economist than to have a conversation with two current great economists and that's what we're planning to do this evening so let me introduce the current great economist that I have here on my panel firstly up to my right John Kay he's a leading economist with just absolutely wonderful insights I actually don't think I need to introduce John maybe will be familiar with him through both his work and his writing for the Financial Times a lot of his research is on the intersection of economics and business his career has been just stellar it has spanned academia he's been a professor Dean at Oxford London Business School can claim an affiliation with John he's been working with think-tanks company directorships consultancies investment companies and to my left is Andrew Scott I don't really think I need to introduce Andrew to this audience almost everyone here will have had either the pleasure being taught by Andrew or read his textbook macroeconomics which is what I use in my courses and is widely used but but I'll just give him a bit of an introduction so andrew is another leading economist professor here of economics he was previously at Harvard learn school of economics Oxford he has also a rare distinction I think for academics which I should which I should say that John has also written some really well sold books you know so I'm with two people who are rare Andrews book that he wrote with Lynda Gratton here at the school at the hundred-year Life is a best-seller and it is absolutely a superb book so the idea of this evening is that for about 30 35 minutes or so we are gonna have a conversation on the big economic challenges of our time and I'm going to get our current great economist to answer some of the big questions that I posed in my book and the other thing to say is I will give a slight edge I would give us a short introduction to each of the big economic challenges and where the idea originally came from for trade theory or or whatever the topic is and then we'll open it up to a conversation and then there'll be a time for Q&A for about 20 to 25 minutes after that the first topic that I thought we would try and tackle is should the government rebalance the economy so we have heard about the march of the makers this idea that the British and American governments have been trying to move the economy towards making things once again towards the manufacturing away from services and should the government be doing this and the idea of the market developing in the way and that it has stems originally from Adam Smith who is the father of economics he's the first great economist that I write about he is the one who came up with the concept of the invisible hand this idea that without government action supply and demand would determine prices and quantities in an economy what he would have made of rebalancing the economy I think would have been maybe a little bit of a struggle but the fact that the British and American economies are predominantly driven by services he might also have had a slight issue with because he believed the services sector was comprised of buffoons and opera singers and Adam Smith in general was a bit skeptical about governments being too active in the economy so the quote that picked out that I think best encapsulate some of his news is there is no art which one government sooner learns of another than that of draining money from the pockets of the people so that's what the idea of the invisible hand and more kids being efficient comes from so let me ask her great economist today John should the government rebalance the economy no but let me spend a bit because if we're attributing all this to Adam Smith we should recognize that Adam Smith is not actually the kind of rabid free-market ear that he's been represented by right-wing forces of the twentieth centuries being Adam Smith who was skeptical about government intervening in the economy Adam Smith was skeptical about absolutely everybody there isn't a single group who emerges well from the wealth of nations particularly I'd remind you what's the professor's Linda who he says have given up even the pretense of teaching in the tradition of Oxford he was largely self-taught and this goes on he denounces merchants he denounces the rich as I say he denounces everybody so you have to see it in this context of general skepticism and if you look at in the invisible hand quote in the context which most people don't it's not saying something that everything will automatically rebalance itself it's actually saying that you don't need to have protectionism because people will tend to buy products from own suppliers anyway which is not quite the way people who haven't read anything of Adam Smith on that phrase interpret it the other thing we need to notice is in Adam Smith's day the idea that you might export services was ludicrous in Opera he quoted opera singers as you've mentioned the idea that you could export opera in 1770 was utterly ridiculous if you'd said nowadays you would have opera performers globe-trotting around the world due to people flying from around the world to go to operas at La Scala that you would have people listening to recordings of opera everywhere in the world he would have been amazed I think there's something we'll keep keep coming back to in the in this evening because although many of these people of ideas that transcend their time their ideas were formed in the particular time thank you John Andrew should government rebalance the economy so there's sort of two words rebalance here one is the balance between marketing governments and others between services and manufacturing and you know I don't think there's any necessary superiority about manufacturing compared to services what you want is an economy that provides a good standard of living for everyone which is about being high productive and as you talked about in the book much of manufacturing all the money you get from manufacturing is actually services anyway that near the pharmaceutical companies with their R&D they also you know that design etc so we are a service based economy of course it's interesting of to to see how technology would change that because you know it's not Manufacturing is a small part of the economy not because we don't produce much manufacturing it's just increasingly low value what we produce because of productivity growth and you know what's makes the service sector such a source of value add is it's been hard to get productivity growth so it can be very interesting with robots providing more and more a subject for people which I think will help British manufacturing and technology and AI improving productivity in the service sector and reducing value in some sectors to see what will happen going forward but I think there is a way in which rebalancing may be required and John's written on this as well we had a financial crisis because the financial sector got very large as part of the economy and I think we still have to have a discussion on what size financial sector we want and I'm not sure the regulatory agenda has been finished there and then I think you know as John said Smith was cynical about everyone and of course he's writing at a time as well where the state had been majorly rent-seeking and was then beginning to recede and you'll begin to see the growth of business of trade and so that was bringing about the beginnings of prosperity and as John says all these great economists were rising in their time and you can see why he was focusing on the market and the government should keep out of things um but I think another thing that comes through time and again all these economists is their writing they're great economists cuz they're solving an issue that's particularly acute at that moment in time and they're providing a new insight a new way of thinking about it and every time we have a new technology which changes the means of production that changes who grabs the means of production the first people to exploit it our business it's a people want to make profit from it and then that creates some challenges for other groups in society and for society as a whole and so the initial response to technology is to exploit it financially but then start to regulate and change the regulation and I think that's a little bit what we're seeing at the moment with the Facebook and Cambridge analytic are the rise of monopoly power we are beginning to see a government saying I need to change regulation or reregulate so I think we will see something of a rebalancing because of that you know what's behind a lot of this I think of it as manufacturing fetishism yeah is the idea that real work is hard manual labor performed by men and the record manual labor performed by women it's not real work and the kind of jobs that most of us in this room do which are rather pleasant intellectual relatively well-paid are not proper work and we have something in our in all of our minds which is evolutionarily generated I suspect that has this kind of thought and we just need to get over it Wellford indeed so let's move from a Scottish economist Friday in the 18th century who Adam Smith founded the Classical School of Economics he had adherents like David Ricardo who with the father of international trade but not everybody agreed with a classical economist so the next question that we are going to move to is by a 19th century economist at German Karl Marx so Karl Marx rejected the idea of the classical economist and market economy he grew up in Germany which also saw the advent of industrialization the time that Adam Smith was writing about which occurred first in Britain and then laterally in the continent but he saw industrialization in a very different light Adam Smith viewed industrialization as the route of prosperity Karl Marx viewed capitalism and industrialization this way he wrote in the Communist Manifesto May the ruling classes tremble at the thought of a communist revolution the proletarians have nothing to lose in that revolution but their chains and he also wrote has the bourgeoisie ever affected progress without dragging individuals and people through blood and dirt through misery and degradation now Karl Karl Marx never lived to see communism take hold and spread in the former Soviet Union and then laterally in China and he lived most of his life in exile in fact in London and he died here um in disappointment because during his lifetime some of the best thinkers of the day had never heard of him his work was only really read in in Germany so often disappointed in his lifetime for instance with the French Revolution in 1851 when Louie Napoleon Bonaparte titled himself Emperor Napoleon the third much as his uncle Napoleon Bonaparte had Marx wrote history repeats itself the first time is tragedy the second time as farce so the biggest communist country in the world which is biggest in population and the second biggest in terms of the economy is China so can Communist China become rich Andrew can the Chinese economy get rich under the Chinese Communist Party or can Communist China get rich there there's two separate questions there because clearly the sort of economic policies that are in place in China would not be ones that standard Marxism would say what communism senators to issue said communism and not a market economy and clearly China has got a market economy it just got from a Western perspective very unusual interplay between States companies and individuals and that that I think plays into the second question which is more of the institutional side can a state-led a single-party state become rich and we can't see it anywhere in the world where that's happened so that's an empirical statement so the question is is it theoretically possible and then you know the theme that goes throughout but to my mind is very interesting looking at all the economists is their focus on institutions and rent-seeking you talk about north as so really bringing together those strands but it's their right the way and you know I think if the Communist Party carries on the way it is it will carry on in degrees of rent-seeking which of course we see in the West you know the financial crisis showed to serve some rent-seeking happening in the West as well but it's hard to imagine how China as a whole couldn't fully reach the same GDP per capita that you see in the US and other Western countries in its current form well I think you answered android square Linda's question briefly and Roeper saying the China is in common this in any relevant sense so that's almost the end of that and I looked so I think it's on page 71 of your book Linda where you were very interesting wanted to remind everyone I read it and we did a very interesting list to what Marx thought a properly organized economy would look like and I read that list and asked where would Amazon or Apple or Facebook fit into that list and the answer is they wouldn't and couldn't because the the the economy Marx was talking about was one in which industrial put it in dust really duction was industrial production and there was the capitalist who owned the mill or the steel workers and there were people who went to work there and for better or worse our economy just isn't like that anymore so if you ask could the state own the means of production or Facebook I don't even know what that question means the state could own Facebook I suppose but I think it would be the end of face what China is doing something similar actually at the moment so yeah what I thought was interesting about the Marx one is that you absolutely got to include Marx as one of the great economists in terms their impact but in terms as John says the ten things that make a successful economy he sort of he'd fail the class I mean he he isn't and and you know that there have been attempts to sort of translate that's the invisible hand into a state planner and you can absolutely do that but the Marxist system itself it's still very hard to generate an intellectually consistent and coherent system from it but I did also think in reading through it that marks and Schumpeter with the the two perhaps both most about the really big issues about today because Marx is writing at a time when technologies upended the political system and some and there's inequality and that that sort of dialectic that he borrows from Hegel you hear from Piketty the great leveller book this idea that there's an inherent instability in capitalism that growing inequality will eventually lead to a crisis is beginning to becoming stated more and more whether it's true I don't know but well Marty always believed that communism couldn't coexist with capitalism though in his view capitalism leads to crisis probably through inequality without what he laterally decided and that would lead to revolution and then that would lead to communism so I think if China became rich he would say oh yes an unequal rich China it's right for a communist revolution maybe the number up but I'm an economist that's actually fine but you make a very interesting point that actually the internal inconsistencies were found to be in communism rather than capitalism which I thought was a nice point but what new quote seedlings are Marx are saying could economies become rich without dragging food people through a degradation accept cetera we know the answer to that question now and it's yes so moving now to the late Victorian era the latter part of the 19th century Alfred Marshall the Cambridge economist started the English neoclassical economics school he introduced the idea of marginalism so he was the first one to do supply and demand diagrams bringing you back memories of Andrews textbook and there are lectures and but like many of the great economists in the book they tackled the questions he didn't just focus on the narrow equilibrium concepts in fact a lot about Alfred Smith after Alfred Marshalls work looked at and the role of government in redistribution what can be done in terms of poverty and that's a very Victorian perspective and it's a debate that we still have today so one quote from his that I think captures this kind of balance between being and neoclassical economists but still thinking there was scope to intervene in terms of social justice is this one and he wrote the function of government is to govern as little as possible but not to do as little as possible so the question posed here is is inequality inevitable in a market economy John well we can answer that question pretty briefly by saying yes as well but let me go you're very very sure you wouldn't need a chapter 20 questions to which she would come give us these great economist graphic more difficult questions anyway they were but actually everyone is talking about inequality at the moment a discussion which is largely data free apart from pic ADIZ book which is data rich but argument free to my mind if you want to understand Piketty i think you have to remember that a central fact which is the richest person in france and probably the richest woman in the world when he wrote was liliane bettencourt who was a sly old woman with a very large amount of inherited wealth and actually going back to Marx the time of Marx and Marshall that was largely still true then the people who had large amounts of wealth had it either in the form of land agricultural land typically all they were the people who owned the plants we were talking about a moment ago now apart from Liliane Bettencourt was now dead it isn't like that anymore if you ask who the richest people in the world are today you come up with Jeff Bezos what is Jeff bees Isis or Mark Zuckerberg wealth based on its a capitalization of the expected future profits of Facebook and and Amazon that's a very different form of wealth to the one we were talking about a century ago and it's a form of wealth that has very different social implications now I am concerned about inequality but I think we need to focus on income inequality which is probably what really matters and we need also to ask what has really happened and what has happened in Britain over the last 25 years is that peat people at the bottom and the top of the income distribution have benefited relative to people in the middle and that is also what has happened around the world in terms of global inequality as well but there's been a spectacular reduction in global poverty mainly as a result of growth in China and India and Southeast Asia more generally but at the same time largely as a result of financialization of our economy and the knock-on effect of that on corporate executives the top as it were 1% of the income distribution has done very well and that's the dominant phenomenon of our time and its implications socially economically politically are really quite complicated thank you Andrew a big topic I mean John gave us a one-word answer to is capitalism inevitable to priestly inequality and said yes Piketty gives us free but increases that was known as a message it was a right is inequality inevitable yeah and and of course bigger D gives also a three-character reply which is that R is greater than G yes it would slightly more insightful than yes but may not be true you talk about Marshall so Marshall is about people get paid their marginal product and of course if skills differ across people then people's marginal product would differ you're gonna get inequality so then I guess from that perspective the question is that fair in a social sense it may be fair in an efficient sense I think what's really interesting in the case of a Facebook that John's talking about is actually I don't think marginal productivities thing to look at here and I think that's one of the big shocks we've got with this intangible capital and this sudden creation of a big new source of wealth which has changed the distribution of income and you know the economics of Superstars etc I think is creating some real challenges and it's interesting I think yeah these great economists all came up with an answer to a current problem I do wonder what the new tools or the new models will be that economics have come up with to address some of these issues with a technology where capital and labor are being redefined and marginal product seems to be not such a key product since the and rubrics we've just been comparing Marshall and Marx and Marx would have defined income distribution by reference to differences in marginal productivity and Marx would have looked at it in terms of bargaining over economic rents and on that front I think in a modern economy Marx has a lot more to say I agree and I think you know that that's what's interesting too about the capitalist because no market economy exists without a government the very action of exchange requires a legal system that is enshrined in some sense by the government and when you have a state then you start to get different bargaining powers between different groups and I you know the extent to which current inequality is being created by shift of bargaining power rather than a shift of Technology is I think something that is politically very interesting and obviously chimes in with the rise of populism I think this one of the one of the parts about this debate is also if there is a level of inequality that's too high what can you do about it and the debate is is has a political dimension and it's about how much you redistribute and whether you redistribute so there's an old political joke in the United States that I think captures this debate quite well so it goes something like this if a Republican sees a drowning man he'll throw a rope that is too short and say the rest is up to you a Democrat will throw a rope that's too long and let's go of his end and so is it about self help which is a very Victorian concept or should we be thinking harder about redistribution and what that means as Andrew suggested in a kind of economy where you have to read to find capital and labor which actually brings me nicely to the next question which is what drives innovation so Joseph Schumpeter so this is the other big genomics school of thought it wasn't just the neoclassical economist or the Marxist it was also the Austrian School of Economics writing at this time during the first Industrial Revolution and Joseph Schumpeter like many of the Great's what didn't just create this concept of creative destruction he was also interested in what creative destruction said about capitalism being the engine of capitalism and like some like the other Austrian that I'm gonna mention in a moment Friedrich Hayek and the Austrians were not known for being concise and and they were bit they were a bit less less witty than than others so in fact I'm Friedrich Hayek as students at the LSE asked him to lecture in German because his English was so hard to understand so Joseph Schumpeter for the German and easier time so in terms of Sir Joseph Schumpeter the quote I'm going to use is actually from Winston Churchill because I think it actually captures what he was trying to argue for in his best-known book published in 1944 which was called capitalism socialism and democracy so he equated creative destruction with capitalism and the capitalist system pushing back against socialism which was gaining currency at the time so Winston Churchill said the inherent vice of capitalism is the unequal sharing of blessings the inherent virtue of socialism is the equal sharing of miseries that relates to the what we just talked about but I want to focus on this idea of what drives the innovation John what drives innovation today and could today's innovations like some the ones that you've mentioned really lead to the same kind of progress that we have seen through the previous Industrial Revolution I I would I would think so and we really know I think the basics of what drives innovation which is its entrepreneurship based on scientific and technological advance now having said that that doesn't tell you how you do it but it tells you what the basically what the sources are and Schumpeter as you say I think it's an immensely fertile book it's one of these it's a big book which is capitalism socialism and democracy it's a it's a big book in the sense that there are lots of interesting and provocative ideas in it but it doesn't add up to a coherent whole really and if one asked the question which is is it isn't sense fundamental to his argument is he won't believing that innovation comes from big business or small business I'm not care what the answer to that is because there's a lot of emphasis on entrepreneurship on the one hand but there's also a lot of emphasis on the capacity of large monopoly businesses to innovate now I think we now have a better idea of the answer to that which is I've thought a bit and written a bit about the history of the computing industry essentially how did the that information technology revolution that has changed all our lives happen and the answer is it didn't happen with the big companies like IBM and Xerox which interestingly played a significant role in the underlying development of the ideas but did not play a large role in the effect of commercial development of them that was done by the entrepreneurs at Microsoft at Apple and Intel and so on and I think that's a pointer to what other essentially did the drivers of innovation mmm entry Wow I mean John's been an entrepreneur and studied entrepreneurs so I I got little add I'm a macro economist and it's certainly from a macro point of view and possibly a micro point of view entrepreneurship always seems like the ghost in the machine to me it's sort of we know it's important but actually sort of grabbing hold of it is it's a bit of a wool of the wisp and analytically so you know there's obviously two parts of it as John said there's the Entrepreneurship and there's the exploitation of knowledge and your question is sort of can we expect technology to continue to grow I think the answer surely is yes I mean there's that fantastic Isaac Newton quote you know I was standing on the shoulders of giants if every generation is as smart as the previous generation they inherit that knowledge and they add something I think you know it's sort of interesting to me seeing perhaps different types of knowledge because you know we've got this massive stock of ideas and Paul Romo sort of once said well the more ideas you got the more you can combine them in different ways and exploit things and I think what's interesting about you know the web is the ability now to sort of combine bits of information he's a lot greater than it used to be so do wonder if we may see less pioneering deep research in one area and we may see a lot of innovations coming from just combining things in different areas and I certainly as an academic specialization is a way to go but we've got in technology now that enables you to learn very easily and quickly across a range of different topics I think that's a big question and we might want to come back to it when we talk about Bob Solow and yes yeah and in fact I think we should move on the interest of time so we can fit in just two more before we open it up but let I think naturally moved to do we face a slow-growth future we've talked we've already hinted that that's actually one of the big debates of our time and a lot of the slow growth future has to do with technology although not wholly because the Robert Solow who is the author of the neoclassical growth model he wrote his articles in the 1950s and he said that growth is comprised of capital labor and technology but in 1987 he made this observation which became known as the solo paradox the computer age is seen everywhere except in the productivity data and he also said I always thought the biggest difference the computer made in my office was that before the computer my secretary used to work for me and afterward I worked for my secretary so let me turn to Andrew just to follow up on what you were saying before do we face a slow growth future do we have technologies to which are economy-wide in terms of productivity improving are the inventions of today comparable to the electrification the internal combustion engine of the First and Second Industrial Revolution this quote is getting at so there's the question do we face a slow-growth future and you know if I give no numbers and no dates I can answer both yes and no to this question it's nothing about four times you give a forecast or update been a post three rows of forecasting first always never give a number second row would give a number never give a date and the third role of forecasting if you give a number in a date you never come back again so it's clear something's happening to productivity growth actually before I go down answering that question about productivity graphing what's really interesting of course again seeing things from the scope of history and the great economists is GDP is a very modern concept and for most of these great economists they weren't thinking of GDP yeah and so you know one of the big issues right now is is GDP capturing some of the welfare benefits that we're seeing where has it ever captured some of this welfare benefits and I think that's a really important distinction because I think we are seeing substantial improvements in longevity and health as well as sort of consumer surplus that aren't captured in GDP so we may well see continued growth in welfare even if that's not being captured in GDP then there's a homework question what's going to happen to GDP growth and I though I clearly the impact of a big financial crisis has lowered investment rate and I think that's lowered productivity growth so now if the crisis is finally behind us and we start to see growth an investment we should see some of these new technologies being installed and starts to have an effect and then you know is is as big as electricity I Gordon writes really well on just how wonderful the benefits of electricity well no I mean and you know he's what kind of relentless with it but it's it's true that was a big big boost and this technology may be good but it is it as good as that but it's clear that technologists always sort of overestimate how quickly the stuff comes through it takes a while to happen and you can all see there's something coming down the and it would be extraordinary where that not to raise productivity in GDP as well as some of those other welfare benefits you know Andrew it's interesting you raise this question of GDP is a relatively modern concept it is a modern one but it's not that modern and the way we measure GNP was largely developed in the nineteen forties by two other great economist James meeting Richard stone working for the British government and they're working for it during the war and the question they were trying to answer was how much physical output could the British economy produce because that was the question that was critical to waging a war and that structure has dominated the whole of the whole of the development of economic statistics since since then it's one of the reasons for the neglect of services James Mead once told me that they discovered they'd forgotten hairdressing at some point and he turned to stone and said how often do you get your hair cut and how much time and then he rang his wife and said how often do you get your hair cut and how much do you pay and that was the basis for the estimate of hairdressing in the first British national accounts so what is well measured clearly so we shouldn't take all of these measures too seriously but the big question now and you've mentioned what I regard as a debate between two other great economists which is Bob Gordon on one hand and Joel mercury on the other and the Gordon view is that the century from 1870 to 1970 was just amazing and we will never have anything like that again and there's a reasonable case to be made for that and Gordon makes it at considerable length and one thing that brought that argument home to me was when I discuss an article from 1966 that said what technological innovations will make an impact in the next two years and where I learned from that was they had underestimated a bit how much difference information technology would make but everything else they overestimated what would happen in transport what would happen in materials what would happen in pharmacology we've had much less innovation than they anticipated that now that raises the question where are we now and the mo care view is to say we really haven't seen anything else yet in terms of the impact of information technology that we've seen it in the areas that are closely related to information technology in in terms of Facebook and the mobile devices everyone has but we're starting to see it the driverless car is the epitome of something that is made possible by information technology but automobiles are not about information technology we know there's going to be huge data driven and analysis driven progress in healthcare again it's not information technology but it's driven by information technology and that's in the sense that this will have the impact that electricity had not after the immediate discovery and commercialization of electricity but 50 years later the big developments were in the 1920s really not the 1870s there are so many more questions but I want to open it and now up to the audience you'd like to ask a question please as I say introduce yourself and let me know who you like to answer or both panelists can answer any big economic questions you have on your mind in the back one of my lovely students microphones come around hi my name is Ron I am Linda's student from the Executive MBA global Asia program I'm also an entrepreneur my question to both of you is you've mentioned that the current way GDP is measured it might not be completely accurate so how would you now measure or suggest GDP should be measured I would go on measuring GDP exactly the same way we do now because you have a great advantage about being a statistical series in a statistical concept that is comparable across history and across countries I would at the same time want to look at a great many other measures of economic progress yeah I mean GDP tells us something and either two standard criticisms of GDP it doesn't measure very well what it says it's measuring which is the value of economic activity and I think the Saskatchewan seas do a fairly good job of trying to change that and a lot of problems there around services but particularly the public sector but we do as John says have some international standards to help us learn something and then I think the second criticism of GDP is lots of things it doesn't measure which it doesn't pretend to it's about you know about welfare rather than the output of goods and services and I think that's where the supplementation I think is needed and it's sort of strange I mean German had a fetish of making things and manufacturing but polish makers had turned GDP into something of a fetish you know it's a measure of economic tivity done in the marketplace bump that's kind of it but we make a lot more of it than perhaps we should and people ask people like you Andrew is it important that GDP growth which was expected to be not 0.5 percent in the last quarter he has actually not point four percent yeah and if you knew anything about the construction of GDP at all you would know that that is an absurd question yeah I mean clearly it matters you know when the economy growing up 4% on average compared to 1% over 10 years you can see that as a difference and when you have a recession you can feel it but yes the sort of the variations a quarter by quarter in the measurement error I mean that it is over scrutinized and anything is over scrutinized you find lots of flaws in it so I actually think he does a reasonably good job what it tries to do but it's problems come from everyone trying to make it a lot more than it actually is ok this was a final assignment question for me have been turned in on Monday okay just occurred to me well you can have to gripe me and Joan as well now that's okay another question not related to an assignment the undue advantage hello - I'm Jasmine Jones I did the ember' here some years ago so you can ask a question about in a sermon you've done before I'm not sure this question was around - just go with what does I think of the introduction of a universal basic income will it happen should it happen and how much would it be great question John Wright it won't happen it shouldn't happen and the third part of the question doesn't arise and if you go to my website as Linda recommended you will find an explanation a fairly detailed explanation of why these things are true basically either the level of basic income is so low that it doesn't serve a useful purpose or it's the cost of it is so high that it's not manageable so frankly I don't find it a very interesting debate I agree with the punchline actually I think someone somewhere will probably introduce it but as John says at a level that doesn't solve the problem so therefore I have all sorts of other supplements on top of it but I think someone somewhere will introduce and say hey this is great everyone's going to get something but I it's got to two parts to it the my one is it's a way of trying to solve the inequality challenge that we discussed the other is sort of the Digital Athens story that we're gonna be so productive with technology that we can just sort of sit around and do nothing I'll get a basic income and that would take care of us I don't think it's always inequality problem and poverty problem if it's universal it has to be targeted and I don't think we'll get into the digital Athens world to that extent yep question here and then here so hi there my name's Nick thank you very much for a great talk I wanted to come back to a question that you raised earlier about whether communism can deliver prosperity and of course this kind of depends on your definition of communism and also your definition of prosperity but if you look at China under Deng Xiaoping they raised the standard of living for more people more quickly than at any time in the world's history that surely must quantify that at that particular stage of economic development possibly kind of communism with Chinese characteristics or things helping thought would be able to deliver that do you agree that at this kind of particular point in time a strong central government with sharing the means of so what was a big change that danger being brought in compared to an asset um what would you say that that was the trick yeah well what was the change introduced Serban ism or market forces so you're right Mao had let's say a very kind of evolved definition of communism absolutely then helping what he brought in was the market forces it was the balance of that with the communism which allowed it to impact so many people so at that particular so nomic I mean it's gonna be so you're saying China's communist today I'm saying that it's communist with Chinese characteristics then those starts get semantics if the question is do free markets bring about prosperity without government intervention I think the answer is clearly no I can't think with a single country that doesn't have a strong role for a government and in fact most of the countries that have problems with lawlessness are bad places to do business I also can't think of a country that's rich that's gone down the pure communist route without market forces so the question is what is the balance between government and markets and does an early stage of development is there an important role for the government in pushing the economy forward absolutely and I think that's what you can see clearly from from China you know there's not really a case of a country's become rich through pure deregulation and this is the challenge of a successful economy getting that balance between a market and the government structure is it communism and communism in Chinese characteristics that that seems to be seems very very semantic but I would say if you really think of communism North Korea's most obvious case right now and I wouldn't say that's a poster child for communism if you want to say China's main feature is communism I'm not sure that's true I think under mousy term that would be a stronger statement but it is an interesting balance and the role of the state has clearly been massively influential in China's growth and that has to be a lesson we learn from China's growth ya know there's a class of problems that I call in my mind the chaeri question and this comes from quite a long time ago when I was asked to do a piece of work on why the chaeri market in Britain had declined and I came to realize quite quickly that the problem was not to explain why it had declined the problem was white had ever been so large in the past and the sherry question is relevant to a whole variety of problems because the question the interesting question is not so much why China's recently grown so quickly is why China's economic performance was so bad for so long and if you go back to when all of this begins to the late 18th century then it was touch and go whether an industrial revolution happened in Western Europe what happened in southeast China well we know the answer to that we know that the answer is a lot to do with the kind of things Douglas North wrote about which we haven't really had time to touch on about the effects of institution but the Chinese economy will grow rapidly if you judge just don't mess it up through political dysfunction as it has been messed up for most of two centuries we have time to just squeeze in one last question so my question would be for each of the speakers given all the great economists in Linda's book or perhaps more broadly who would you pick as your favorite economists and why can't pick yourself it's a tough question if I look at the ones in Linda's book which at least narrows the field a bit I think I have to go back to Adam Smith because where he wrote about so many things so well in an original way and very few people have have managed to replicate that breadth and depth and humor since then it's a horrible question I think there's there's two ways on so one is sort of who to create a shape from nothing is an extraordinary intellectual thing and Smith does that brilliantly and Marshall twos insights I think was superb but I have to say I'd cook a bit weakness for the characters and I think early in Fisher sounds just extraordinary fantastic but I think I probably have to go for Keynes because you know this was this extraordinary figure who just thought that ideas should change the world and his role in life was to try and save capitalism and in some ways he is one of the most influential figures of the 20th century up there with you know the Mao tse-tung's and the Stalin's of this world in terms of how he shaped the economy and he just did it with an arrogance and a wit that is just staggering I mean to write a book and call it the general theory is fairly ambitious so I think I probably might like to have a drink afterwards with okay I think yeah and Keynes really does have a characteristic that you would really enjoy a dinner party with Keynes yeah whereas Schumpeter and Hayek our I think a different kettle of fish altogether and I doubt if one would emerge feeling I think one weird feeling bruised from an evening with Adam Smith a lot of these really great economist were not really very nice that's actually well I think the the great economist that I've picked in this book either ones who first came up with a similar idea around markets growth development and quality of growth so in many ways I think my choices are this baker's dozen and and like John and Andrew have have said when the fascinating things about the grades is their lives their colourful lives their personalities and the thing that really struck me about some of my favorites in here is how hard they were on themselves so Joseph Schumpeter used to grade his work effort every day end up with a mark of 50 for the week Adam Smith was so disappointed with his life's accomplishments that he wanted all his manuscripts burned after his death Irving Fisher who was seminal in he moving the headquarters of economics from Britain to America he never gets included in books like this normally because he also predicted in 1929 October of that year the stock market was on a permanently high plateau be warned Andrew and yet his work was really am seminal but I'll answer your question in a different way I think the if I had to choose the great economist if this book were to come out in a few years time so in other words moving away from the earlier vintage I'm sitting with two great economist who I think no seriously thank you very much and let me also thank Marta who has been a fantastic event organizer her and her team are just superb in putting on these events she's got a great series of events called big ideas which i think is going to be just absolutely fantastic so I hope to see many of you there also huge thanks to Chris who I think has single-handedly just elevated so many of the the events and the work that the school has done and thank you so much to all of you for being here current and former students and Friends of the OBS your questions are just absolutely as Andrew said horrible difficult challenging that's what we like thank you again [Applause]

Channel: London Business School

Views: 30,384

Keywords: Economists Debate, Adam Smith, David Ricardo, Robert Solow, Douglass North, John Kay, Andrew Scott, Linda Yueh, London Business School, LBS

Id: HUi0KBkd3RQ

Length: 53min 16sec (3196 seconds)

Published: Fri Jun 08 2018