Revolt of the data points

Libération has a very interesting article about the politics and ethics of big data. It cites some excellent books, such as Eden Medina’s brilliant Cybernetic Revolutionaries about Project Cybersyn in Allende’s Chile, and Alain Desrosières’ classic The Politics of Large Numbers. It doesn’t mention Francis Spufford’s Red Plenty, which makes exactly this point (and is a cracking read too): «La planification soviétique et l’ultralibéralisme se rejoignent ainsi pour asservir le droit à ses calculs d’utilité.»

There is huge interest in using big data techniques to construct better economic statistics (including on my part!). Here in the UK, the ONS is launching a data science campus. The Turing Institute has just been funded by HSBC to look at economic data (although the release says nothing about the work or the researchers involved, so this looks like very early stages). There’s particular progress on constructing price indices using big data, as in this VoxEU column or the Billion Prices Project.

But, as the Libération article underlines, the utopianism of ‘datacratie’ can tip into a dystopian extreme. The technology looks like it can make the utilitarian project of measuring the costs and benefits of everthing a reality, extracting information from every click, every move, every choice. But when the data points (aka humans) realise what’s happening, they won’t necessarily like it.

Bring on the philosophers and ethicists.



The Enlightened Economist Prize 2017 – the winner!

It has been a tough choice, as ever, to pick one winner out of the 14 titles on my longlist. It was a good year and all 14 are terrific books. After days of mulling it over, three contenders became clear. One was Robert Gordon’s The Rise and Fall of American Growth, because even though I disagree with parts of his analysis of today’s economy, it is a brilliant, magisterial work of economic history. All economists should read it. But Prof Gordon has won plenty of accolades for the book already and doesn’t need mine. I really enjoyed also Sam Bowles’s The Moral Economy, on the strengths but importantly the limits of economic analysis based on incentives as opposed to ‘moral sentiments’.


However, the Enlightened Economist Prize winner for 2016 is a book that was enjoyable to read, informed me about all kinds of things I hadn’t known, and is full of insights about the relationship between money and politics, and the nature of property and value. It’s a great example of history helping one think more clearly about the present and maybe the near future. It is Rebecca Spang’s Stuff and Money in the Time of the French Revolution.

Rebecca, if you read this, it means I owe you a nice lunch or dinner if we’re ever in the same place.








Talking statistics in the woods

I just spent a couple of days at an excellent conference, The Political Economy of Macroeconomic Indicators, organised under the new Fickle Formulas programme led by Prof Daniel Mügge of the University of Amsterdam. Authors of several of the wave of books about GDP itself were there: me (GDP: A Brief but Affectionate History), Philipp Lepenies (The Power of a Single Number), Lorenzo Fioramonti (Gross Domestic Problem) and Dirk Philipsen’s (The Little Big Number). We also had with us Tom Stapleford (The Cost of Living in America), Brett Christophers (Banking Across Boundaries) and Yoshiko Herrera (Mirrors of the Economy) and Florence Jany-Catrice (The Social Sciences of Quantification) (and also Faut il attendre la croissance?)

It was also a great conference for hearing speakers refer to other books. I’ve already read Matthias Schmeltzer’s The Hegemony of Growth and  Ehsan Masood’s The Great Invention. Classics were mentioned, such as Alain Delarosière’s The Politics of Large Numbers. There were others I definitely need to have a look at. The New Global Rulers, for instance. Jacob Assa’s The Financialization of GDP. Paul Edwards’ A Vast Machine. I did feel the most orthodox of the multi-disciplinary crowd; the other economists would mainly describe themselves as heterodox, I think, and there were moments when I played ‘neoliberal’ bingo, so often was the term used. Good for me, no doubt.

The woods at the Drakenburg conference venue in Hilversum

The woods at the Drakenburg conference venue in Hilversum


London as another country

Ben Judah’s This Is London has the subtitle ‘The stories you never hear, the people you never see.’ Although only published earlier this year, even that recent past already feels like another country in the nasty, mean-spirited xenophobia of Brexit Britain.

Not that the book is remotely starry eyed about the way immigration has changed the capital. On the contrary, the rich people who feature are the unpleasant rich, Russian oligarchs or Middle East princelings, or, worse, people traffickers. But most of the people he talks to are poor, albeit perhaps a bit less poor than if they had stayed in their home countries. And it isn’t that ‘we’ really don’t see them, because there they are, cleaners, baristas, serving in corner shops, begging on the streets. But the fear of poverty (described so brilliantly by Julia Unwin in her book Why Fight Poverty?) makes it more comfortable to not to pay attention or think about them. To be sure, Ben Judah also goes to parts of the city I’ll never get to, sleeping rough or in a doss house, hanging out in Willesden kebab and gambling shops. 41n4dhn0ul-_sx328_bo1204203200_A bit of a hierarchy of migrants emerges, Albanians and Romanians at the bottom as the nastiest or most desperate, whom none of the others like. The Polish builders – as all of us ‘native’ Londoners know (I’m a migrant from Manchester) – are on the whole skilled and hard working. They wonder: “why do the English wander into expensive sandwich bars and lose more than one hour’s wage for just one meal deal?” They think the English workers are lazy and stupid. Indeed, there are employers who agree. Interestingly, Polish women can earn more than men because they have better English and cleaners earn more than minimum wage. Interesting because it seems to affect the psyche of Polish men. But there’s also an economics question here: why don’t Polish men work as cleaners for the additional £3 an hour?

The book is great reportage and paints a picture of the capital few of its middle class inhabitants will ever see. It was a page-turner, a more or less sympathetic but carefully observant portrait. I don’t think it’s a completely representative picture, though. London is too mixed for the middle class=British-born, white and poor=foreign, black formula to be true any more. Opinion poll and voting evidence seems to suggest the people who live in London are comfortable with how it is. It was the non-urban rest of England that isn’t.

A land built by economists?

Last week I took part in a workshop organised by the National Infrastructure Commission on the economics of infrastructure and growth. It was fascinating, and particularly for illuminating a dilemma for economists thinking about the newly-prominent issue of infrastructure investment. It’s a Good Thing – but how much is needed, and which investments? How should the NIC advise on the choices most likely to increase economic welfare and growth?

There is some well-understood machinery for answering such questions, in the form of appraisals (or post hoc evaluations) using cost-benefit analysis. The trouble is that although the technique, firmly embedded in policy advice, is useful for assessing relatively small changes, it is next to useless in the context of big investment projects that involve externalities such as environmental costs and benefits or network effects, might change people’s behaviour significantly, or might have non-linear impacts which accelerate beyond a point of critical mass. These are, of course, situations that might often arise with big infrastructure projects. And the challenge is all the greater because different kinds of infrastructure will affect each other (transport and communications networks will be complementary, natural capital and flood defence schemes will interact). To cap it all, there is an economic geography dimension to this, and infrastructure will affect the distribution of economic activity over space, which will also affect the distribution of economic opportunities and incomes.

So these questions are difficult, and nobody thinks economics can answer them. What was interesting about the discussion and subsequent emails was the emergence of a basic dilemma. One of the strengths of the conventional economic approach is the intellectual discipline it enforces. Cost benefit analysis looks at the direct benefits of a project to users, and converts them into a single unit of measurement, money (although it could be owls, or happy faces). It is a powerful brake on wishful thinking.

Economics also sets out the circumstances in which wider benefits might need taking into account: when there is good reason to believe that resources are misallocated so the investment might lead to a more efficient outcome (land use in the UK would be an example – the planning system enforces many inefficiences); when there is good reason to expect a project will bring about agglomeration externalities, the additional productivity arising from there being more people in one area because there is a deeper pool of labour and skills, and know how can spread more easily; when there is reason to be confident there will be non-marginal benefits that private investors will not capture; and when infrastructure can act as a mechanism to co-ordinate private investment decisions. The latter is interesting because it suggests the prospect of multiple equilibria depending on which place or project is selected as the focal point for co-ordination.

I would add another complication, which is the scope for small changes in transactions costs or frictions to bring about big changes in behaviour. In some contexts a time saving of 10 minutes will be marginal but in others it might tip a lot of people changing their commuting or house purchase patterns. A past example is the switch from dial up internet to broadband; many economists thought this would be a small change, but it turned out to be revolutionary. The behaviour change point makes post hoc evaluations tricky, because the behaviour is endogenous to the infrastructure choices.

Everybody in the workshop broadly agreed about the basic intellectual framework (well, we were almost all economists) but the dilemma is whether it is ever feasible or sensible to allow consideration of the wider benefits. The case against – and in favour of sticking to narrow, conventional cost benefit analysis – says stick to situations where there are clear signals from market prices. For example, is there a big difference in land prices indicating resource misallocation? Otherwise, there is a danger of the kind of mistakes that have always come with ‘picking winners’ in the past. The opposing case for being more open to trying to estimate wider benefits is to ask: what would the country look like if built by economists? It would be a dreary place of functional concrete boxes in a mesh of motorways. The Victorian infrastructure we still rely on would never have been built if subject first to a cost-benefit analysis. Britain used to be considered a world leader in infrastructure but then the use of cost-benefit analysis spread widely, and now we are clearly laggards.

I’m firmly in the camp that we should be looking to develop new techniques and data to inform a wider approach. The UK economy needs infrastructure investment that will make a big difference to productivity and growth, given the self-inflicted economic headwinds we face. We need faster growth in the great provincial cities, and significant investments that will make a step-change difference in the economic well-being of people around the country in terms of air quality, flooding etc. The NIC faces quite a challenge, but also a tremendous opportunity.

My favourite books about infrastructure are Brett Frischmann’s Infrastructure: The Social Value of Shared Resources; and my colleague Richard Agénor’s (more wide-ranging) Public Capital, Growth and Welfare. Ricardo Hausmann has written about the distributional impact of infrastructure (along with natural capital, the most significant capital people on low incomes have access to).