Author Archives: Diane Coyle

Filthy rich bankers

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“Entrepreneurship in the barbaric wastes furthest from state power is a fraught endeavour, a constant battle, a case of kill or be killed, with little guarantee of success. 

No, harnessing the state’s might for personal gain is a much more sensible approach. Two related categories of actors have long understood this. Bureaucrats, who wear state uniforms while secretly backing their private interests. And bankers, who wear private uniforms while secretly being backed by the state.”

Spot-on political economy from Mohsin Hamid in [amazon_link id=”0241144663″ target=”_blank” ]How To Get Filthy Rich in Rising Asia,[/amazon_link] an excellent, funny and moving novel. It was perfect for my flight, and associated delays, today.

[amazon_image id=”0241144663″ link=”true” target=”_blank” size=”medium” ]How To Get Filthy Rich In Rising Asia[/amazon_image]

Learned ignorance

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“Besides the imperfection that is naturally in language, and the obscurity and confusion that is so hard to be avoided in the use of words, there are several wilfull faults and neglects, which men are guilty of…. [T]he first and most palpable abuse, is the using of words, without clear and distinct ideas…. [T]his artificial ignorance, and learned gibberish, prevailed mightily in these last ages, by the interest and artifice of those, who found no easier way to that pitch of authority and dominion they have attained, than by amusing the men of business, and the ignorant, with hard words, or employing the ingenious and the idle in intricate disputes about unintelligible terms, and holding them perpetually entangled in that endless labyrinth.

There is no such way to gain admittance or give defence to strange and absurd doctrines, as to guard them round with legions of obscure, doubtful and undefined words….Thus learned ignorance hath been propagated in the world.”

[amazon_link id=”0141043873″ target=”_blank” ]John Locke[/amazon_link] could have been reading in almost any modern academic discipline, or listening to pretty much any financial pundit.

[amazon_image id=”0141043873″ link=”true” target=”_blank” size=”medium” ]Of the Abuse of Words (Penguin Great Ideas)[/amazon_image]

 

Look around in anger

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It is a little known – and when known, usually ignored – fact that only about 13% of England’s land area is actually developed. (The figure is from Kate Barker’s 2006 report on Land Use Planning in England – summary here, with link to the report). There’s a quiet literature on those areas that are not deep countryside but not urban and developed either. Michael Symmons Roberts and Paul Farley called them [amazon_link id=”0224089021″ target=”_blank” ]Edgelands[/amazon_link] in their book. Richard Mabey also wrote about them in [amazon_link id=”0956254551″ target=”_blank” ]The Unofficial Countryside[/amazon_link].

[amazon_image id=”0224089021″ link=”true” target=”_blank” size=”medium” ]Edgelands: Journeys into England’s True Wilderness[/amazon_image]

[amazon_image id=”0956254551″ link=”true” target=”_blank” size=”medium” ]The Unofficial Countryside[/amazon_image]

Yet the firm impression of England (I’m referring to England, not Britain, specifically) is of a crowded, suburbanised, ugly place. Maybe the reason is the sheer ugliness of so many provincial towns and cities, so many made devastatingly horrible and unwalkable by post-war mis-planning, veneration of the car, rapacious property development using cheap design and cheaper materials. Owen Hatherley’s latest book, [amazon_link id=”1844678571″ target=”_blank” ]A New Kind of Bleak: Journeys Through Urban Britain[/amazon_link], documents the ruining of British towns (Belfast, Edinburgh, Cumbernauld and Aberdeen are included). Even readers who don’t share his ranty left-wing politics will recognise the ugliness he bemoans in his descriptions of towns such as Plymouth, Bristol and Preston. Similarly, he describes the parts of touristy places such as Oxford and Brighton where the tourists don’t go. The story is the same, anti-human (but always pro-car) planning, cheap and shoddy materials, designs that are bland at best.

[amazon_image id=”1781680752″ link=”true” target=”_blank” size=”medium” ]A New Kind of Bleak: Journeys Through Urban Britain[/amazon_image]

Hatherley’s previous book, [amazon_link id=”1844677001″ target=”_blank” ]A Guide to the New Ruins of Great Britain[/amazon_link], had in its sights what he sees as the continuation by the New Labour governments of a veneration for markets and neglect of public space. Aesthetically, he railed against the jolly colours and frippery of so many new buildings of the 2000s. This latest book takes in the long sweep of architecture and town planning since the end of the second world war. The blurb claims the author looks to a hopeful future, but I must say I couldn’t spot these notes of optimism. This is a bleak, angry book.

The thing is, its descriptions of our ugly provincial townscapes, the dreadful quality of so much modern architecture, the horrible conditions in which so many people have to live – not to mention the high prices they pay and shortage of homes – are accurate. The first chapter here is titled: “Thames Gateway: One of the Dark Places of the Earth.” Yep.

Hatherley projects his politics on to what he sees, but anybody can recognise his descriptions of dreary shopping malls, multi-lane highways cutting through town centres, bland blocks of flats or hutch-like houses made of cheap materials. This is what we’ve done to our land in recent decades. So although the ugly sprawl is, by the numbers, not that extensive, it scars our spirit and helps sustain the dream of a lovely and verdant English countryside in the popular imagination.

Hatherley ends with the argument that the Occupy movement, evidently camped outside St Paul’s cathedral when he published this, might augur a new approach to urbanism and planning. That’s obviously sheer romanticism, although it’s true that Occupy might well be one of the more obvious signs of the ending of the generation-long grip of reductionist market philosophy on public policy. There are signs in many domains of a revival of concern for public space. But I’m a boring pragmatist: Kate Barker’s two reports from 2004 and 2006 were full of sensible recommendations, a few of which were acted on. We need her to update us on what to do next.

Economics, Star Trek and me

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It’s time to come clean. I’ve been a lifelong Trekkie – never to the extent of attending fan conventions in Starfleet costume, but nevertheless devoted. Yesterday I went to see the new movie, Star Trek: Into Darkness, which is excellent. It sent me to a superb 2001 book on my shelves, [amazon_link id=”074562491X” target=”_blank” ]Star Trek: The Human Frontier[/amazon_link] by mother-and-son team Michele and Duncan Barrett. I love this book. They write: “We interpret Star Trek in a historical, cultural context. Much of its preoccupation lies in the nexus of questions about what we might shorthand as ‘modernity’ and ‘humanism’.”

[amazon_image id=”074562491X” link=”true” target=”_blank” size=”medium” ]Star Trek: The Human Frontier[/amazon_image]

They argue that the entire Star Trek oeuvre both embodies progressive 1960s politics and constitutes a reflection on what it means to be human. Over time, the simple rational and scientific optimism of the early series gave way to darker themes, explorations of fragmented identities, mental illness, religion and irrationalism, and the character of leadership. Not surprisingly, given the state of the world, the new movie continues in this more pessimistic vein, while ending with an upbeat reaffirmation of the original Enlightenment principles. It raises the pressing modern question of trust and distrust in authority. I thought the design of the movie was also fascinating – particularly the new versions of the Starfleet uniforms. The working uniforms are very similar to the 60s originals, but the dress uniforms in the ceremonial scenes on Earth are strikingly 1930s and conformist.

As anybody mildly interested will know, Benedict Cumberbatch stars as the bad guy, a rational, calculating genius with a strategic mind. I thought it was interesting that he should turn up in the role, given his characterisation as Sherlock – see my previous post on economists’ vision of ‘rational man’.

Finally, Spock has a simply brilliant line, which will appeal to all economists: “I’m a Vulcan; we embrace technicality.”

It should be the motto of all economists: Live long and prosper!

Robots v aliens

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There has been an awful lot about robots around lately. As well as the links in my previous robot blog post, there was this primer from Robin Hanson, for example. Yesterday I did a talk at COMPAS in Oxford about research questions in the economics of migration, drawing on my experience as a practitioner for five years on the Migration Advisory Committee and also eight years talking to businesses when I was a Competition Commission member.

In MAC discussions, I was always keen to make sure what we called ‘bottom up’ evidence from companies, as well as ‘top down’ evidence from economic indicators,  informed our reports. The reason is that there was always a category of immigration that didn’t sit neatly in the framework of a labour market ‘shortage’. Economists naturally would expect a shortage to be resolved by rising real wages and/or increased labour supply, subject to frictions so it could take some time. But some businesses were clear they always need some immigrant workers, because they operated in global markets. They ranged from law, finance and professional service firms through to high-tech start-ups and engineering businesses. How should we think about their needs, in the context of migration policy?

My suggestion is that economists researching migration need to look more closely at ‘task-based’ models of production and trade. Rather than the conventional models that derive labour demand from a ‘production function’, with firms choosing how much (and what kind) of capital and labour they need to fulfill specific roles in producing the output, task-based models split production into tasks, and allocate inputs to tasks depending on the prevailing wages and technology. When technology is changing rapidly, as it has been, and factor prices change, tasks can be reallocated. In particular, many sectors of the economy, including services, have split their production into stages,some of which can be located anywhere in the world. In the existing literature, this is the phenomenon of ‘global unbundling’ or supply chains stretched over international borders. It can be driven either by low wage costs overseas, or simply by it being more efficient to allocate certain tasks to overseas contractors and workers.

There are some excellent papers on separate aspects of the choices this approach presents to firms – Richard Baldwin and Frederic Robert-Nicoud on trade, Daron Acemoglu and David Autor on labour markets, Ottaviano, Peri and Wright on migration – all building on a 2008 AER paper by Gene Grossman and Esteban Rossi-Hansberg. These need joining up to account for the joint decisions many businesses are taking: do they hire native workers, aliens or robots? Do they locate them at home, requiring some immigrants, or overseas via offshoring? What are the effects of different choices on the level of employment of natives, rather than either aliens or robots? And on their real wages? If migration flows are reduced, what adjustments will businesses of different kinds make in assigning other inputs to tasks – will offshore aliens or robots in fact do better than onshore natives?

All of these are empirical questions so the big problem, it seems to me, is data. The US has a skills database (O*NET) but I’m not aware of one in other countries. The trouble is, if the task-based approach is more useful (more realistic) than the production function approach, it requires quite a significant mental shift. For one thing, wages will be determined by productivity in tasks, so regressing real wages on individuals’ skills will be misleading whenever firms reallocate people with given skills to different tasks. The newer approach fits much better with how I’ve heard businesses describe their strategic decisions over the years. The Acemoglu and Autor survey chapter in the [amazon_link id=”0444534520″ target=”_blank” ]Handbook of Labor Economics[/amazon_link] is a good, comprehensive starting point. The Economist did a brief write-up on the robot aspect a while ago, too.

[amazon_image id=”0444534520″ link=”true” target=”_blank” size=”medium” ]HANDBOOK OF LABOR ECONOMICS, VOL 4B (Handbooks in Economics): New Developments and Research on Labor Markets[/amazon_image]