Monthly Archives: September 2016

Google and growth

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I was disappointed by Douglas Rushkoff’s [amazon_link id=”0241004411″ target=”_blank” ]Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity[/amazon_link], in the sense that my expectations were high and it didn’t live up to them. To start with the positives, it’s a  good read, and I share Rushkoff’s concerns about aspects of the ever-more-digital economy. There’s the inequality at self-destructive levels in many OECD countries. The obscene amounts of money many corporate execs pay themselves. The determination of some of the digital titans to entrench their monopoly power and indeed extend it to more markets. The intrusiveness of online surveillance for profit. The undermining of content creation in news and the creative sector as Google and Facebook vacuum up a large and growing proportion of the advertising revenue. All of that, yes.

[amazon_image id=”1617230170″ link=”true” target=”_blank” size=”medium” ]Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity[/amazon_image]

It is, though, all familiar and Rushkoff doesn’t offer much that seems either new or practical to combat it. In terms of policies, he advocates a sub-40 hour work week and a universal basic income. Both have supporters, both are problematic. He also advocates new, community currencies, enabled by blockchain. Technology might be making it more feasible (although I’m a blockchain sceptic because of the energy requirement), but people have been writing about local and community currenies for decades.

Above all, though, Rushkoff wants companies to change their behaviour, treat workers well, and focus less on ‘growth’. And this was my biggest frustration with the book. He makes no distinction between financial ‘growth’ in the sense of short term profits and share price (so VCs can get their money out, shareholders get their returns and execs cash in their options), and economic growth in the sense of goods and services, often innovative, valued by consumers. Heaven knows, that needs to be sustainable too. But there is a difference between, say, changing corporate law to ban quarterly reporting or share option schemes, and limit financial short termism, and the changes in behavior and policy that would ensure sustainable economic growth. Of course they are linked, including throuhg corporate behaviour. But while bringing about an end to the financialisation would be desirable indeed, bringing about an end to economic growth would be very undesirable. After all, for many people in the western economies, there hasn’t been any economic growth for a decade or so, and the results are not pretty.

I also disagree on one other key point. Rushkoff writes: “The economy is less like a forest or weather system than it is like a technology or a medium. It was created not by God but by people.” Leaving aside divine agency, I’d argue the economy is both – both a natural system of creatures (us) acting in accord with our biological nature, and a system we have some ability to change. It is therefore incredibly complex (in both normal and technical senses). While possible to change its course, this is not as straightforward as saying ‘we’ need to do this or that – adopt the blockchain, introduce a minimum income, report on long term rather than short term profits – and all will be well. Google’s monopoly power is a good place to start, but I’d place more of my hopes on Margarethe Vestager’s use of competition powers than on Google’s executives following this book’s advice to act sustainably.

So in short, a book whose heart is in the right place, but too garbled in its analysis to appeal to me.

Trains and apple pie

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Everybody is in favour of more infrastructure spending now – it seems to be one of the most motherhood-and-apple-pie issues around at the moment. I’m certainly in favour of it. It’s my belief that the UK has under-invested in infrastructure for years, and where it has invested, has done so in such a way as to reinforce the reliance of the economy on one engine, London. I say belief, however, because there isn’t as much evidence as one might wish. The comparisons with other countries are complicated by the differing reliance on public and private investment, as well as assets crossing the public-private boundary at different times. There’s decent macro evidence that economic growth and infrastructure investment are correlated but delineating the causal relationship is much harder, for obvious econometric reasons. Above all, the methods for appraising infrastructure schemes are inadequate. The workhorse tool, cost-benefit analysis, is a methodology for looking at incremental changes, not at big projects that might change behaviour significantly, or involve non-linear effects (such as network effects in a transport or communications network).

In addition, it is hard to take into account externalities and the methods for doing so seem inadequate too. The Department of Transport’s top schemes always seem to be road schemes and I find it hard to believe the pollution externalities are fully accounted for. But the Department’s cost-benefit case for HS2, the new high speed west coast line, has been greatly criticised for delivering the politically-mandated rather than economically sensible answer. I’m an advocate for HS2, as I think it will bring about substantial behaviour change, to the benefit of Manchester as the second (potential) engine of the UK economy, and might also have system-wide benefits if we ever get HS3. But again, this is hard to demonstrate.

Into this foggy context of appraisal comes the latest book in our Perspectives series, David Metz’s [amazon_link id=”1907994599″ target=”_blank” ]Travel Fast or Smart? A Manifesto for an Intelligent Transport Policy[/amazon_link]. David starts, mildly provocatively, “Conventional transport economics has reached a dead end.” He homes in on the appraisal question, saying the normal method looks at benefits such as time saved by individual travellers, whereas it ought to be assessing the prospective contribution to economic development as transport connections change land use. Far less spending on roads, much more on commuter rail and digital management of transport are his recommendations. I don’t agree with everything David says, but think his fundamental argument about the methods is spot on. A must-read for all interested in transport policy – alongside our previous Perspectives title, [amazon_link id=”1907994564″ target=”_blank” ]Are Trams Socialist? Why Britain Has No Transport Policy[/amazon_link] by Christian Wolmar.

[amazon_image id=”1907994599″ link=”true” target=”_blank” size=”medium” ]Travel Fast or Smart? A Manifesto for an Intelligent Transport Policy (Perspectives)[/amazon_image]  [amazon_image id=”B01EYRKJFK” link=”true” target=”_blank” size=”medium” ]Are Trams Socialist?: Why Britain Has No Transport Policy (Perspectives)[/amazon_image]

National wellbeing

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I just read [amazon_link id=”1118489578″ target=”_blank” ]The Wellbeing of Nations[/amazon_link] by Paul Allin and David Hand, a very nice overview of the issues in going ‘Beyond GDP’. It came out in 2014, about the same time as my [amazon_link id=”0691169853″ target=”_blank” ]GDP: A Brief but Affectionate History[/amazon_link], so unfortunately I’d not had chance to read it before writing mine. In the couple of years since, the momentum behind the agenda to go ‘beyond’ has certainly increased. This book is a very clear, and rigorous but non-technical explanation of the scope of the issues, and the state of play. As Allin and Hand describe, there has been a good deal of work on looking at alternative ways of defining and measuring ‘wellbeing’ directly, and at wider approaches to assessing whether or not society is progressing.

[amazon_image id=”1118489578″ link=”true” target=”_blank” size=”medium” ]The Wellbeing of Nations: Meaning, Motive and Measurement[/amazon_image]

I am more cautious than they are about any survey-based direct measurement of wellbeing. There seems to be a lot still to understand about the psychology, and about how people’s judgements are formed. After all, we don’t just introspect, we’re also influenced by social context – have we just read an upbeat book about progress? or rather, just read the execrable Daily Express? I’m more with the programme when the book looks at how to (greatly) improve what we do now. For instance, report net national income per capita, not total GDP. Include income distribution and environmental measures. As they note, there are already statistics on many indicators that would give a richer picture of economic welfare. Jones and Klenow have a very nice recent paper on a single summary measure of aggregate economic welfare rooted in economic theory: it calculates a consumption equivalent measure combining income/leisure, distribution and life expectancy. This omits questions of environmental sustainability but good progress is being made on environmental ‘satellite’ accounts and natural capital measurement.

There are some important questions not addressed by Allin and Hand. They describe a proliferation of approaches to measuring wellbeing and indeed call for a thousand flowers to bloom. In my view, if there is no narrowing down of the options, the existing standard of GDP and the conventional national accounts will be far harder to dislodge. A new focal point is needed. (I have a paper on this out soon. Others – like Ehsan Masood in [amazon_link id=”1681771373″ target=”_blank” ]The Great Invention[/amazon_link] – call for a single index for this reason although for different single indices.)  The reason is not tidy-mindedness, but rather the role that official economic statistics play in holding governments to account.

The other question ignored by all of what you could describe as the pro-wellbeing literature (not that I’m against well-being) is innovation. In disparaging GDP growth as a metric, they overlook the fact that GDP growth is not mainly about more shoes, food and vehicles of the same kind, it is mainly the introduction of innovations, from small changes in variety to profound new technologies like the smartphone or the personalised cancer treatment. GDP doesn’t measure these well, and there is a fuzziness as between quality change potentially reflected in prices and real growth, and unmeasurable consumer surplus. But innovation is a huge contributor to wellbeing and people will continue to like ‘growth’. No-growth is a non-starter outside authoritarian and autarkic polities.

These caveats aside, I really liked the book and it is well worth a read if you’re interested in this territory. As many people are – statistics is the new rock and roll.