Economist Diane Coyle is the Bennett Professor of Public Policy Cambridge University. She co-directs the Bennett Institute where she heads research under the themes of progress and productivity. Her work has touched innovation, technology and intangibles; sustainability, inequality and measuring beyond GDP.  Her latest book, Cogs and Monsters is published in October 2021.

We discuss the challenges of the current narrowness in economics both in terms of the diversity of  people it attracts and the paucity of wider ranging interdisciplinary thinking.

Diane’s 1997 book (The Weightless World) was prescient over many technology, innovation and intangibles trends but sustainability was a missing hole. We discuss sustainability and what she felt she missed and what she got right.

Diane critiques degrowth ideas while noting the challenges which catalyse that type of thinking.

We chat about measurement challenges in an intangible world and how while GDP might have measured more usefully in the past but that in the present it misses many areas of value. In passing, Diane critiques happiness indices and elements of the human development index. 

We address the UK’s productivity challenges (but don’t expect we have solved it?!) and conclude it is not only a measurement challenge.

We discuss inequality and “superstar earners” across all sectors and possible solutions.

Diane over-rates / under-rates:

• Universal Basic Income

• A Job guarantee policy

• Industrial Policy

• Arrow’s impossibility theorem

• Running the economy hot.

• The New Zealand Prime Minister 

We discuss minimum wage and tax policy. Win-win investment ideas and end with what a productive day looks like and advice for would-be economists. You can follow her on Twitter here and her blog can be found here.

PODCAST INFO

• Apple Podcasts: https://apple.co/3gJTSuo

• Spotify: https://sptfy.com/benyeoh

• Anchor: https://anchor.fm/benjamin-yeoh

Transcript (unedited, typos likely)

Ben Yeoh (00:03): Hey everyone. I am super excited to be speaking to Diane Coyle. Diane is the Bennett professor of public policy at Cambridge university, and she co-directs the Bennett Institute where she heads research under the themes of progress and productivity. Her work has touched innovation, technology and intangibles, sustainability, inequality, and measuring beyond GDP. Her latest book, Cogs and Monsters, is published in October 2021. Diane, welcome.

Diane Coyle (00:32): Well, it's great to be here talking to you. Thank you.

Ben Yeoh (00:36): Great. So is there such a thing as a radical centrist and perhaps are you one?

Diane Coyle (00:45): Well, that's a difficult question to start off with. I don't think of myself as being left or right party political at all. So I suppose that ticks the centrist box. Am I radical? Well, I hope so but particularly if that means thinking in new ways about how to solve some of the challenges society's facing, which are big and complicated, social scientists causing wicked problems. What we've been trying so far very obviously hasn't worked. So I suppose by kind of deconstructing it, I'd have to answer yes to the question.

Ben Yeoh (01:23): Great. And so you've worked with Jason Furman reviewing competition markets but did you know he is also a fairly prolific book reviewer, which is another thing you might have in common with him?

Diane Coyle (01:37): I believe he reviews on Good Reads--

Ben Yeoh (01:39): Yeah, he does review [on Good Reads] 

Diane Coyle (01:41): --Which I don't use very much and I review books on my blog. I read many more than I review. The blog is about economics and business books and technology and a bit of politics and I read lots of fiction and pop science and other things too.

Ben Yeoh (01:56): What's brought you to review so many books on your blog? Is it kind of just a way of remembering or are you trying to kind of reach a wider audience with your reading?

Diane Coyle (02:05): It's a bit of both. It's a bit of a service, so people who might be interested in reading some non-technical economics and business books can get a quick readout on what I think about them and if they know anything about what interests me that might help them. So it's a bit of that, and it's a bit as you suggest remembering myself, what it's all about. So it's a short note. I mean, obviously if it's a book I'm going to use in my work, I've got much more extensive notes on it and little stickies from the pages and these are quite short as they have to be blog posts and people can seem to find it quite useful.

Ben Yeoh (02:40): Yeah, I do particularly, and to me it also gives a glimpse of the kind of breadth of your work and thinking and I think this breadth is notable as I observe you've been critical of some of the narrowness of certain economic thinking, both in terms of output and thought, but also where economists are drawn from and like finance, economist seem to be fairly white, fairly male and not working class. Whereas you have working class roots and have kind of this kind of more broad outreach. As economics as a social science, how big a problem do you think this is and do you have any ideas on what can be done?

Diane Coyle (03:23): There are two big questions in there. I think one is about economics and one is about joining up thinking across silos more broadly than that. So starting with economics, as you say, it has become a very socially narrow subject, particularly, I think in the Anglo-Saxon world and I'm less sure about the kind of sociology of economics in other countries. I think it's a little bit different, but not much because it's a very international subject and you're not a social science if all your people are drawn from quite affluent white male, people asking the research questions, deciding what they think is important. You just don't know what questions to ask if everybody comes from the same background, that diversity of background is really important for social sciences. And a little bit of the problem with academic subjects more broadly but not entirely. There are some other subjects, computer science could be one or philosophy is actually quite male dominated and posh as well. And so that narrowness is a real problem and I think it maps on to a narrowness in a way of thinking about what good economics involves. I'm a really strong defender of economics. It's a very powerful mode of analysis. It's very empirical now and it's driven by logic and it has some really great insights, but it's very focused on maximizing models and a certain limit about how you think the world changes and very, very little looking outside the subject. It's really hard to understand how markets operate if you don't know anything about the sociology of markets or even the ethnography of markets and after the financial crisis, there was some great sociology published on the financial markets, economists had ignored them.

So there's all of that. How does it change? I think it's partly the good things that the professional associations are doing to go and talk to people in school and communicate better and put a lot of emphasis, particularly on women economics, but now more broadly on people from different minority groups or different kinds of backgrounds. But I think the subject itself has to accept a wider definition of what a good economics is about and it's not just the same top five journals doing the same kind of narrow small questions study with limited range of technique. Open economists don't even rate qualitative research techniques when they're equally rigorous and it's just a different form of data, really. So that's all the economics bit. I'm rabbiting on a bit, but I'll just go onto the other bit, which I feel really passionately about and that's joining up knowledge across silos because the university have become very departmentally siloed and all of the promotion prospects depend on publication, which is in disciplinary journal, but it's really hard to address global warming, loss of biodiversity grotesque income inequality, conflict. Any of these subjects, you can't do that just from one discipline. So everybody's sort of burrowing away, plowing their own furrow to mix the metaphors and we're not going to make progress and all of that money that gets spent on research will not deliver all it could if we don't manage to find ways to work together across subjects. And so our Institute here, the Bennett Institute is all about interdisciplinary working.

Ben Yeoh (06:59): Yeah, I think that's really valuable. I see this in my world of investing that too many, particularly of the older generation, but even now I'm taught sustainability investment techniques, I'm taught about thinking about intangibles. It was all sort of a very standard, let's do an accounting model, let's do a DCF discount and see what comes out at the end of that and therefore have missed all of these, let's call them extra financial capitals as well. And without people kind of challenging and thinking about them, it's quite hard to get that into a sort of mainstream thinking and techniques. I was rereading your, I think, 1997 book The Weightless World and it showed a lot of great foresight on many of the technology and tangible innovations we've had today but it seemed noticeable to me fast forward to today that there weren't so many words on sustainability and the environment. So I'd be interested in reflecting back what you feel you might've got most right and maybe some of those trends which are continuing and maybe what you think about what you might have missed and what, again, that is important for today and thinking about the longer term.

Diane Coyle (08:14): It's a real coincidence you should raise that because I was thinking about it as a gap in the book yesterday. I was rereading a book by John Urry and Scott Lash called Economies of Signs and Space and it's a sociology book that came out a few years before my book, The Weightless World but was on exactly the same territory about how digital was changing society. And I read it after I'd published mine, but they did pick up on sustainability actually and it does feature in there. As you say, I completely missed that. I think I did get some things right about the way the world of work might become more precarious and you couldn't use companies to deliver government policy so easily, or the welfare state would have to change its structure. The geography of the agglomeration economies, the way that things were clustered together, and some of the potential for digital currencies, which is, I guess, just starting to take off big time. And so there are quite a few things I think I did identify as a future trend but with that one huge exception and I suppose I just had it in a separate bucket in my head having talked about how hard it was to cross silos. It's just quite hard to join things up and I didn't do it.

Ben Yeoh (09:41): And you think obviously from those comments, that is probably going to be one of the major themes for the next decade or two going forward.

Diane Coyle (09:50): It'll have to be when you see what's already happening in terms of weather events and the financial world as you know better than I do is starting to pick up on this with things like bank of England and other central banks getting in on taking account of climate risk or hopefully biodiversity risks as well, which also matters a lot. My colleague Matthew Agarwala  has done some work on climate adjusted Sovereign [bond/debt] ratings. So the finance world is getting there, I think but I worry that people aren't really getting their heads around how big the changes need to be or will be. If we see these kinds of extreme weather events every year, we are going to have climate refugees, we're going to have conflict and all of the spillovers that implies for us and it's very easy for policymakers to do some small fixes, but not to realize that there's going to be a big change in the world and they need to do big fixes. So that's one of the things that preoccupy me at the moment.

Ben Yeoh (10:50): Yeah. It's not an intersectional challenge. I mean, sticking with sustainability wider and the climate challenge. My observations are there's a multitude of economists who backed some form of carbon price in either a tax or a cap and trade continue to remain less popular with the public and thus with politicians but given those intersectional challenges that we see everything, I talked to a lot of people and they kind of think is this the best that current economic thinking can do with some of these challenges. Obviously there is research and happening and more than that. Would you point to anything else that you think economists are offering in terms of the climate challenge, or do you think without some sort of carbon price in that market mechanism, a part as a sort of underlying foundation, some of these other ideas are not going to get through.

Diane Coyle (11:44): I think we have to throw everything at it and one tool won't be enough. So, of course, I think a carbon price could be a powerful tool, but we'll have to see government step in and mandate things or ban things and we'll have to see businesses changing their practices and figuring out quickly how not to use plastics in packaging and how to move away from using any internal combustion engines in their transportation. All of those things have to happen. So it's a question of how do you align all of that on a big enough scale that you tip things toward a different model of production and consumption in the economy? One of the most powerful things I think is, and this is very nerdy, it's about economic statistics because that's the way you understand what's happening in the world and my colleague here in Cambridge.  [ Dasgupta] did a review for the treasury on biodiversity where he just made a really powerful case that the big failing of economists has been leaving nature outside of the economy. We've not put it inside what we call the production boundary, so we haven't counted it and there's not enough data on all of these things that are going on. We're just getting to the point where statisticians are measuring natural capital on an aggregate national scale and being able to track what happens with that. 

UN is accepting it which is great, but we've got to step up gear and measure in detail, what are the climate damages, what are the carbon impacts of consumption as well as production, what's happening to biodiversity in different ecosystems with all the implications that might or might not have for human health and the food system and joining up those dots again as you're saying, Ben, because seven million people die each year from pollution, WHO says, which is more than who has died during the pandemic to date. And we haven't been paying attention to the costs of pollution, the human capital costs, the economic costs of that and so we've got to bring that into our thinking about how we run the economy and the statisticians can do it, I think.

Ben Yeoh (13:58): Yeah, I agree. I mean, we've only just really started tracking particulate matter, these small PMI, 2.5 type things. And I think WHO you know, the limit, they actually don't give a sort of limit of what they think is healthy because they kind of think all of this particular matter is probably damaging. I wonder, there's a little bit of pushback I hear on natural capital in the sense that people worry about whether the economic trick techniques are sort of sophisticated enough in the round to sort of measure and deal with this. So you feel they are and is that intersection, I guess with say systems biology or ecology there that actually the picture we paint is probably good enough, you don't want to get into this case we're going to seven decimal places where you've got the kind of order of magnitude of things right? Or is there still research which needs to be done in terms of getting these techniques robust enough that we feel that we can have some sort of natural capital accounting, because then I think if that feels robust, there is no theoretical reason that might not start to flow into corporate accounts of some sort, which obviously financial accounting, but if there was some natural capital accounting and accounts, then that's something where investors and other stakeholders can then start to hold businesses somewhat accountable to, or could even vote certain ways with a business model. But it's so absent at the moment that it's very hard to know where to start.

Diane Coyle (15:26): That's really interesting because I often get a different kind of pushback, which is that you shouldn't be trying to quantify and put a monetary value on things that are intrinsically valuable to which my answer is that if you don't do some kinds of accounting, you're putting a value of zero, which we know is the wrong answer. And I suppose I'd give the same answer to your question, which is we probably don't have the right answer, but it's a broad brush one better than none. I think it is. There's obviously a need for more data and more granular data and there are definitional challenges about that, particularly with ecosystems and biodiversity but the big problem it seems to me it's not so much technique as integrating different disciplines and the climate and the economic and political changes, for instance. I talked about Matthew's paper with his co-authors and they run a climate model and look at GDP impacts but what ideally you want to do is say, well, this means that the countries in the middle east are going to become uninhabitable. So what does that imply? What do the people there do? And what are the social and political spillovers from that? There's a really nice Paul Krugman article from years and years ago, where he talks about why he became an economist and it was about the idea of psycho history in the Asimov foundation trilogy and that takes you towards that grand ambition of integrated knowledge, which is probably complete nonsense

Ben Yeoh (17:01): We can aspire to the science fiction world or the solar science fiction world. Another debate I kind of hear around this comes from, I guess so-called de-growth thinkers such as maybe Kate Roth or Jason Hickle and it seems to me that many other thinks that de-growth is very challenging because of the idea of lifting the poor in a country, or even between countries, between richer countries or poor countries, or the poor within richer countries. Where do you see the role for growth and is therefore a de-growth economy, anything we can learn from that, or is it going to go down the wrong path because of the challenges about raising people up from poverty?

Diane Coyle (17:48): A couple of weeks ago, I took part in a round table with African economists who were very critical of the growth for exactly the reason that you just explained. They don't see it as a model for their thinking at all, so they were pushing back a lot against those models and so on. So there's definitely that. And I think some of the de-growth advocates don't really articulate clearly what the implications of their approach are, but I have a different objection to it, which is a kind of misunderstanding of what economists mean by growth. And as we were talking about the weightless world, there has been a separation between growth of material used in the economy and creation of value in the economy but if you say to me, we want to keep GDP as it is or reduce GDP, it's not saying to me you can't buy 5 handbags, you can only have one. It's saying to me, actually, we can't invent a vaccine because that's valuable and it would add to GDP. A lot of GDP is ideas, it's services. So I think it really requires a much more sophisticated understanding of what growth is and how that translates into economic measures like GDP. So I'm not a fan of de-growth while at the same time completely respecting the imperative to do something about sustainability.

Ben Yeoh (19:14): Yes. I think Mark Carney said something similar - he was challenged [on growth]  as in, do you think you can have sort of infinite growth and that type of thing, and his reply is that, well, you could have carbon light growth, you can have physical capital, not intensive type of growth and talking about sort of the digital world you can have things on Fortnight. You're buying digital clothes to show off where it's not necessarily physical clothes.

Diane Coyle (19:44): And of course that uses energy, so there's no physical cost, but that's the kind of calculation you need to make. In the end thermodynamics will kick in. So infinite growth and that's because it's not possible.

Ben Yeoh (19:56): Sure. Yeah. But perhaps a long way out or not. That kind of brings me to thinking about this aphorism, which we got two halves of already, which is what gets measured gets managed. But then there's another one, which is this idea that not everything that can be counted really counts and then the opposite about some things which are really important, but are really hard to count. And your book on GDP seems to me to argue that GDP did measure something fairly useful in the last 100 years, 200 years, and maybe going back, but as the world has moved much more intangible and we've had to address ideas like natural capital, social capital, human, intellectual, and the like, that current thinking about what GDP encompasses is somewhat inadequate. So where do you think that what we're measuring at the moment is getting it right and where do you think we're really falling short?

Diane Coyle (20:58): Yeah, I do, as you say, see the gap between GDP and what we might care about in terms of economic wellbeing or welfare is growing and making the GDP less and less useful. There was a paper by an economist called Vegra Licas who taught me at Harvard many years ago and he calculated what proportion of the US economy he thought was unmeasurable, or hard to measure. And it was, I think it was something like 43% in 1994 and I redid the calculation and I think it's something like 23% now is easy to measure and therefore 77% is hard to measure. And it's because ideas are creating so much more of the value and that might be because it's in services and the quality of the service really matters. And so the price there is a signal of quality and you can't use it to calculate real GDP in the same way all those quality changes and all the electronics goods that we buy all the time. There are new goods, like new vaccines, and it's really hard to figure out how to incorporate those. So just generally the way the economy has changed makes it hard to do this deficient that we always do between here's the pounds or dollars amount spent in the economy and here's what we think about it in real terms or volume terms, because although it's called real, it's an abstraction. GDP isn't a natural thing anyway and that abstraction that we use and we get the growth figures, 9.2% or whatever it is each quarter, it's very hard to interpret what it means now, I think.

Ben Yeoh (22:36): And so there's a lot of talk in the media and, I guess, economists about so-called UK productivity challenge or the global productivity challenge but I guess there's been some pushback about how much of that challenge is really a measurement challenge, partly measurement, and how much it's been based on some causal factors which no one quite understands. From your point of view do you think much of it is a measurement challenge and what do you think are the root causes of it in your opinion?

Diane Coyle (23:09): So there are definitely measurement issues to think about. That doesn't mean that there are no headwinds against productivity. [There is a] hangover from the financial crisis, demographic change the time it takes companies to adopt new technologies and there are lots of historical examples of how slow that can be, and it's now being called a productivity [challenge].  So all of that's real if I can use that word. It doesn't mean that GDP is getting worse at measuring what GDP measures, but that's different from what you might be interested in measuring. And so we might become much more interested in measuring a different meaning of productivity. If I can think of an example, I'm trying to think about time and productivity now because in services and actually a lot of manufacturing, productivity gains have been about saving time, doing routine things faster, or squeezing out unproductive time from processes and logistics system but there are also services where time spent will increase the quality and therefore arguably the productivity, the service. So if I'm getting a blood test done, I want it to be quick, no time wasted. If I'm in intensive care, I want to have a dedicated ICU nurse who can spend all their time looking after me. So I'm playing around with this idea about is there just a completely different way of thinking about productivity than taking GDP and doing some things to it to calculate what the productivity level would be. But that's a very long-winded way of saying, I think there is a puzzle, I think there are some good reasons to believe in it. It's not all about measurement, but that doesn't mean the measurement questions aren't really interesting because they're about concepts really.

Ben Yeoh (25:04): And I think that you've been relatively critical of some happiness indexes as a sort of alternative and there's some other things out there like a peace index you've got human development index and things like that. I'd be interested in what currently you're thinking might replace or supplement some thinking around GDP and whether you continue to remain slightly critical of what sort of perhaps happiness economics or some of the claims that happiness economics makes versus GDP.

Diane Coyle (25:39): I am still critical about them. One reason being that they're kind of black box theories, that you can do econometrics, regressions that show you that well-being measures, stated life satisfaction measures are positively correlated with various things. But there's no kind of theory that has been tested about it. So you can certainly advocate cognitive behavioral therapy for mental health reasons. That might be a really good thing to do, but if the person suffering the mental health problems is living in a dump flat with no money, then it's not really good to solve the problems for them. It's also the same challenge as with GDPs, you're trying to reduce a complex assessment of how things are going into one number and the thing about GDP is there's a whole load of economic theory about how you combine things to get that one number. And a lot of the alternatives are just quite arbitrary and the human development index, for example, has some really unpleasant implications about how you value life in different countries, just because of the way it meshes together incomes and life expectancy. And then the other issue I have about some of the happiness advocates is that they're kind old fashioned utilitarian. It's doing it top down to people. We will do happiness to you. There's that flavor about it that I just, as a [Inaudible:00:27:05], I don't particularly like.

Ben Yeoh (27:10): Great. Yeah, that's food for thought. Yeah, I think that's right. So I studied some neuroscience and experiments in psychology, and there was always this more suspicion about if you couldn't tie it into a kind of testable model or a theory about what was coming about, it's all fine to have your empirical data and something else, but it's so much stronger when it is actually backed in something biological or real world in basis.

Diane Coyle (27:38): Well, we might get there, but I think it's not there yet. There's a lot of strong policy claims being made.

Ben Yeoh (27:44): So circling back to Jason Furman we've had at the start. So you've been interested in competition policy and part of the review and I guess one strand of thinking is that we have some of these mega corporations or particularly technology corporations and they're stifling competition much harder to these tech startups and things like that and therefore that's bad for consumers. And then I guess they argue that they don't have as much, I guess, what is it vertical sort of competition so these startups can't happen in a sort of horizontal place, and yes, they might buy them up, but they're still appearing and going and aren't we giving so much value to consumers by providing our products and some of these for free or for what the things like that. And I think the review tended to sort of say, no, actually there probably is an issue with sort of competition and fluidity and dynamism and that would actually be better for the economy and consumers. Have I kind of read that right from your point of view, kind of now a couple of years down the line, post pandemic where a lot of companies kind of have been very helpful, but it has been quite concentrated as well? Has that changed your view?

Diane Coyle (29:05): These are clearly services that people really value. I started a piece of work with co-author David Nguyen looking at what people say they would need to be paid to give up different free services. We included parks, but we will set it to online shopping, search, Facebook [ ] and we managed to run it in February 2020, May 2020 and February, 2021. So the timing was very lucky and people state high median values for a lot of these services, particularly search and personal email, they stand out compared to all the others but parks as well. And they changed in the ways that you'd expect with a lockdown. So online shopping became much more valued by particularly older groups of people. So, they are highly valued and as a policymaker, you should interfere with that cautiously. So I'm not a fan of the idea that you break up these companies, because a lot of the value that they deliver to people is that they have the network effects and they link up all kinds of different things. But the issue is can people with better technologies get into the market in the way Google took over from Yahoo or Facebook took over from My Space. And I still think, no, they can't now. So personally, I think data access is one of the barriers to competition and finding some way to make the services more interoperable seems quite important. If you think about it, we can all text each other, use SMS and mobile calls because the barriers were not engineered in and they have been engineered in social media, for instance. 

So thinking about that and thinking about rights of data access seems important to me, but also scrutinizing mergers much more and thinking about the whole raft of things; kills zone acquisitions, the things that might make startups hesitate to go into a certain area if they think Amazon is going to get into it ahead of them and all of those things need looking at. So all the competition authorities, EU, US, China also, and the UK are looking at ways to tackle this and I don't see it as a settled view about the right thing to do. So, things will get tried and we'll see how it goes. I don't know what the chances of success are. Do I think Google will not be a big and powerful company in 10 years time? I suspect it will be.

Ben Yeoh (31:46): Maybe touching on thoughts on inequality maybe just through the lens of share of capital, labor and potentially pay. I know there's been commentary and you made some comments as well that senior management pay at a lot of companies has really escalated, particularly when you look at it as multiples of average worker pay. On the other hand, you also see this across all sectors of children's book authors at the very top also making more money sports people, footballers. So it seems to be a cross sector wide phenomenon. And I'm actually often asked to think about sort of these pegs, we have these concepts of fairness as well. On the other hand, some of these companies are now just sort of an astonishing number of a trillion dollars of market cap, and they would claim if you're increasing that 10%, you're making a hundred billion dollars of value. So to get 1% of that value might seem reasonable, even though it might not seem that reasonable to a worker. So I was wondering what you're thinking about inequality and what me might want to do about that and whether, I guess this is a side effect of that capitalistic incentive route and is there other ways of sort of modifying that, which doesn't destroy the incentive system as well, or do you think it needs a more thorough examination overall?

Diane Coyle (33:15): I think it's become socially toxic that there are people who do earn so much money and I'm very skeptical that an individual makes so much difference to corporate outcomes that they deserve 1% of the gain and there's been an upward ratchet. And in my consultancy days when I tried helping companies write their annual reports, you would see the remuneration committee say, well, we want to attract the best people so we'll pay in the top quartile of our peer group. And then the next year, everybody does the same thing and the next year everybody does the same thing and so it just doesn't reflect. So it's supposed to be about incentives, but it's not really, it's just about the structure of the way that they fit the incentives and the other pernicious effect of it all is that stock options plans give companies an incentive to buy back and that means they're not investing in better products and new activities, but all in all, I think the system really is problematic. As you say in your question, the superstar phenomenon pushes the other way and it's a genuine phenomenon. The way I think about it is there's a Milton Friedman essay from the 60s where he talks about why inequality is perfectly acceptable and he goes through all of these thought experiments. So somebody who spends a long time training, do they not deserve higher pay? Well, most people say yes, of course they do. Somebody's got a particular natural talent, they're brilliant actors. Do you resent them becoming a movie star even if the economics of technology of movies mean that they're getting so much more money than Betty Davis used to back in the day? And people don't really mind that. And you get through this list and it's all very reasonable and then at the end, he says, but if it becomes so unequal that it's socially divisive then you tear up all of those things and you fix it. 

So I think if Milton Friedman said inequality can become too divisive, then we should probably take that seriously and there are people who lead lives that are so totally separate. They've got no idea how the rest of the community, how their fellow citizens are living. I think it's really unhealthy and many rich people seem to think that they don't owe society. Why should they pay their taxes? So they've become a kind of group part and it seems to me really unhealthy. What would you think?

Ben Yeoh (35:58): Well the counter arguments or some of the counter arguments, I guess, are that-- Okay, I'll say one thing that it seems to be when you ask people, people mind less about entrepreneurs than they do about corporate managers, although even there is a thing. So we mind less about the Richard Bransons and the Jeff Bezos of the world because like you pointed out, like a sports person, they kind of did it all themselves as opposed to someone who's come up, not the founder or put their own life in risk capital, but came up as a manager. So there's a kind of interesting question about does society view those people differently. CEOs and very market-based people would also sometimes argue that, oh, we are worth more than 1% because when we leave, we see our stock price goes down 5%. That would be one argument and then the argument people make with the stock buyback is that actually you're meant to do stock buybacks and dividends after you've done all of your productive investment in long-term R&D and things like that. There's obviously counter arguments about maybe there was not long-term or short term enough, but at least that's the argument there. I think, to the points that you alluded to, because the problems are across so many sectors and also non sort of corporate as well as corporate maybe I think you alluded to we simply kind of need higher taxes that people actually pay and actually there is an increasing amount of people, I think even in senior managers to do on a lot who would be prepared to do that. And interestingly, circling back to something that Jason Furman said recently. 

He was saying that higher taxes is one of those areas where he doesn't think it'll particularly help growth or productivity or anything, but the fairness aspect was the fact that it should be, he thinks broadly neutral to where he's seeing growth and productivity would be a positive and that would allude to your point that you were making via Friedman that that sense of fairness means you don't get those divisions because the systematic second or the point around-- aside from the people and the structure, which again, that's what you allude to is the social contract or the social capital. And there are signs trust has gone down, maybe social capital is eroded and to the extent that this sense of fairness is eroding that then on a systems level a little bit like a lot of these things we're talking about sustainable and climate, on the systems level that can be and continues to be actually quite troubling and maybe destructive. And so you do have to lean against that, even though you can look at the individual case and that seems fair, but I don't know whether you can just do it through the corporate arm when you have the issue across non-corporate and you see it within inequality. So actually maybe we should just do these higher taxes and then we actually know from my reading of it, again, I'm not actually a trained economist, I do this from a [investing] lens, but things like investing in education, investing in our children, investing in our natural capital, all of those are kind of win-wins on a long-term basis that get really high returns, whether they're social returns or financial returns. 

So it seems as capital allocation, it's not that we lack good ideas for where we could put that tax money, we have them. So that would seem to me to make sense, but the actual pressure on individual company votes, which is the lens that we see it, is currently quite fraught because of that. And therefore, I do think this is something where the system, and by that it will probably have to be government needs to notch it a little bit harder than just trying to let the-- Well, no markets are completely free, right? There's social contracts and regulations. It is not something that this form of market can actually solve by itself.

Diane Coyle (39:52): Yeah, I agree and I suppose if that doesn't happen and you're pessimistic, we're in the world of [Thomas Piketty{?} ] or [Walter Schiedel] where the thing that does bring about a reversal and an equalization is some kind of catastrophe, more of [a disaster of some kind] and if we want to avoid that, maybe we should try doing something else.

Ben Yeoh (40:13): Yeah, exactly. Fall of the Roman empire (ref: to Scheidel book and cf. Four Horseman]and all of that. Maybe, just touching on a couple of other of your experiences, I'm kind of thinking boards and maybe BBC and also investor Chronicle. I was thinking about your work on the BBC at that very high level. Maybe you can give us a glimpse into what boards actually do and the kind of challenges they have managing big complex organizations where you have some see-through, but you obviously won't have everything. I mean, the BBC seems really interesting to me, public good. When I have a glimpse on social media, it seems to be attacked from both the right and the left. It seems to me that maybe they're doing a kind of balancing job because they can attack from both sides and you've got the strategic board, which has got a lot of different challenges to handle. Can you give a glimpse of what that is actually like and how hard it is?

Diane Coyle (41:13): I can try, it's a big question. I think the BBC is a really important institution in the UK for social and cultural and educational reasons, the public service broadcasting that it does, but also as an industrial policy and I think this is underappreciated. It's got a great engineering department. It started out as a deliberate industrial policy to make sure this country had a foothold in the emerging radio industry and it has through investing in R&D, through training a lot of people who work in the industry and laterally through providing a market for all kinds of broadcast content, but also bringing new music to the audience and commissioning classical music. So we're one of the few net exporters of music in the world and I think that industrial policy that nobody talks about through the BBC is part of that. Having said that I found being on the BBC trust the predecessor to the current board and dealing with the management just unbelievably frustrating and I think it's for all the reasons that you're hinting at about non-executive roles and it's partly an information problem because you can set up all kinds of processes and board packs to try and make sure you know what's going on. You're never going to know what's going on in the same way that the executives are and that's an inherent challenge to which you can only make sure that you talk to lots of other people outside as well. Part of the process for me was a kind of formal approval process that involved working with Ofcom and talking to industry stakeholders. 

So I heard all the complaints that they always made about BBC being too dominant in the market and the Ofcom perspective, which is very different. But that's one of the challenges. The other though it just goes back to the previous bit of our conversation is that these are really clever, really highly paid confident executives and we were part time [Inaudible:00:43:23] public sector much, much, much less well paid non-executives. I think my pay for it was something like 20, 30000 pounds a year. I can't quite remember, but that ballpark order of magnitude difference. So that correlation is quite challenging as well and you've got a confident board who've got something that they want to do and they're going to advocate for it and they're going to present the information to you in a particular way. You've really got to have a lot of courage to say no, so you can ask questions, but stopping something happening is really difficult. I think our big success was having huge fights with the BBC management about their executive pay. And it's a difficult thing because they are in a very competitive market where people are really highly paid, so they can't cut it too far, but they were overpaying themselves. It was an attitude with the political climate. We had a standup rouse, but we won that one. And I think that was one of the merits of that governance system, which was much criticized, it was kind of [Inaudible:00:44:38] and in the end they got scrapped and replaced to the unitary board. I doubt they have stand up fights between their non-execs and their executives and I doubt Ofcom gets into that kind of detail. So I don't think that could happen again.

Ben Yeoh (44:54): That's fascinating. So the first part was probably one of the best articulations of a defense of the BBC that I've heard. I think it's very interesting that I don't hear that many people defend the BBC as articulately as that and plus you can see it [in iplayer]  and all of these other things and from my work in theater world, I know people going to BBC learn a lot of skills and then move into private sector or film or wherever and much, much more valuable from it. In that sense, they are definitely providing training and R&D. But to your point, there are these and I think BBC kind of epitomizes it in a sort of public way, but this problem with non-execs and boards and compensation and all of that-- It did bring to mind that there is a comparison actually within Sweden where you have Swedish domestic, more local CEOs or senior management. Their pay is decided at a lower level by their boards and sometimes it's more boards as well. But where you have Swedish companies, in fact, generally applies Nordics, which are much more global in nature. So they make the claim that we could go to an American company and do this job and get paid 10 times more. They have much more trouble, but where you feel like either because it's purpose driven or because no, we're only selling something relatively more domestic, they actually have less of this issue and then some of it is cultural. They're much more prepared to say, okay, well, if this is the medium worker, I will cut myself at X because I don't really need another 10 million Swedish krona on that. Great. Well, I thought we'd do a small section of overrated, underrated, and then finish with maybe a couple of pieces of advice if that's good for you. So you can pass, you can say things are correctly rated or not. But overrated or underrated then UBI universal basic income.

Diane Coyle (46:53): Overrated. Seems to me it's a neoliberal answer to a neoliberal problem. The problem is people are being employed on precarious contracts, low wages, minimum wage is not enforced, all of that stuff. Pay them properly, make labor market regulation work. But you can't buy a good school with your individual basic income. You can't buy a bus service that will get you into work. So I'm not a strong advocate of universal basic infrastructure, give people good schools, good hospitals, and good transport.

Ben Yeoh (47:28): So do you find it strange that so many people who I think would consider themselves progressive or therefore left leaning or maybe even anti market do something, which I think it's-- I don't know if it's Peter Thiels' actual idea, but he's definitely a proponent of that quite libertarian Silicon valley bent on UBI.

Diane Coyle (47:48): I find it absolutely incomprehensible, I must say. Yeah. You know why it's so popular?

Ben Yeoh (47:57): I think so there is the libertarian bent in Silicon valley. Actually in the US, this is my own personal pet theory, as they see something akin in the way that their disability benefits work. So their disability benefits are almost like very low substandard, higher barrier UBI cause if you can claim them, you often never go off them. So there's a certain way of doing that and I feel that through that lens, they felt well, this is a way that the welfare could work. Plus they have this culture of this sort of the individual, you give something and you can make it go for you and therefore they've come to that and also because Silicon valley that kind of Californian thinking is this sort of little bubble in itself. I don't know if you've been to San Francisco recently, but you could see these pictures. You've got some of the richest people in the world and they walk past a sort of homeless and homeless drugs and housing and all of that infrastructure problems. So there's a particular-- and we all suffer it in our hometown, so I know. I live in London and I will walk past similar, I am sure. But as an outsider, you can see even in a degree and I think that is something which does discolor our thinking.

Diane Coyle (49:21): If it demands to make the benefits system work better and be simpler, then it's hard to argue with it but you know, that's not really universal basic income.

Ben Yeoh (49:31): No, I agree. But I think that's where their thinking is. That's my pet theory on it. Anyway, it's probably much more complex than that. So maybe moving one step on UBI this policy idea of a job guarantee.

Diane Coyle (49:48): Underrated because there are lots of things that need doing in public service and if you're paying people unemployment benefits, then the marginal return on paying them a little bit more to do a job. It seems like a no-brainer to me.

Ben Yeoh (50:05): Yeah. And there's a lot of, in my view, what we would call it soft skills to actually turning up and being at work, which is very valuable to future employers and it's also very valuable to yourself, actually, both mental resilience and these other soft skills that you need to sort of go, oh, I have to turn up on time and do whatever this is. Maybe it's planting new flowers in our community gardens. So something where you have the incremental, although I do think a kind of upskilling general idea program might work similarly, but I guess they're cousin ideas. Okay. Overrated, underrated the idea of running the economy hot, which is topical at the moment.

Diane Coyle (50:51): I'm not sure I really know what people mean when they say that or how they would--

Ben Yeoh (0:56): I guess they're meaning, particularly in the US it's this fiscal stimulus where you might be giving people fiscal money, as well as monetary stimulus by these lower interest rates so that you are trying to maximize where you are with employment and everything else and maybe even cause inflation or these nominal inflation in order to kickstart or continue growth. I think that's kind of the cluster of ideas, but like you say, people say slightly different things about it.

Diane Coyle (51:28): Yeah. Well, I'm not a macro person. I find it a little bit mysterious sometimes, but to know that you're running the economy hot, you would have to know what the speed limit or what its capacity is and I don't think that's known, and I don't think it's a fixed number. It depends on all kinds of things, including what demand is.

Ben Yeoh (51:50): Sure. Okay. Industrial policy or a government actually having an industrial policy might be it, but industrial policy overrated or underrated?

Diane Coyle (52:01): Well, underrated. Since Thatcher and Reagan, we have dismissed the idea of industrial policy. It gets called picking winners and people stop thinking about it but there are all kinds of what we call in a jargon horizontal policies, including competition policy, including skills and apprenticeships, infrastructure, investment that can be industrial policy. The key is you've got a government that thinks strategically about where they want the economy to go, what the economy's strengths are and where those strengths are and we don't have that. We have a [UK] government that thinks about the next tweet, if we're lucky.

Ben Yeoh (52:40): Yes. Arrow's impossibility theorem?

Diane Coyle (52:48): Underrated or overrated, underrated, I think. But I don't think people think about it very clearly. And so, you obviously know that it says you have these few kinds of vanilla assumptions about people's choices, and it turns out that mathematically that says that you can't aggregate for society across all the individual choices. And a lot of economists go, that's really smart and clever, what a fantastic theory. Okay, let's now ignore it and let's decide that we can calculate the improvement in social welfare that will come about for policy A, B and C. And so I think that means that it's underrated because they don't think about the implications which for me are more about what some would call the restricted domain, what's the scope in which you are thinking about whether a policy is an improvement or not, and who is that affecting? And so it goes back to what we were talking about earlier, Ben, about it's so hard to have one number that tells you what the answer is and I think Arrow's impossibility theorem is in effect saying there's not just one number.

Ben Yeoh (54:07): And that would hint to, I guess, some of the themes we talked about thinking about things in a more pluralist way, and also thinking about these interdisciplinary things, because one number, whether that's happiness or GDP is not going to give it to you. And therefore trying to maximize that one number is certainly not going to give it to you. And the last one on this is the New Zealand prime minister Jacinda.

Diane Coyle (54:35): She's probably accurately rated, don't you think?

Ben Yeoh (54:38): Well, I think she might still be underrated. I think she's slightly underrated in her own country and I wonder whether she will be-- So strong female leader with a lot of interesting ideas and why I might think she's still underrated is because she's pushed through this idea of what do they call it, the New Zealand living budget and therefore to me, one of the first sort of substantial-- Okay, it's a smaller economy and it's got its own special quirks, but it's one of the first attempts to put in some of the capitals we talked about, calling them capitals or whatever, natural capital or health, social, and other things in a way of forming policy, but by putting it kind of for treasury to think about, or whoever's in charge of that part because of what we've talked about is I don't know whether treasury has been thinking about this enough because of everything that we said, because of their training and because of where their data comes and therefore if they can, or she can prove that something about that is going to increase the welfare of her people that will end up being a pretty, I think, significant jump in thinking about how governments can think. And therefore I go underrated. I'd be interested in what you think about the New Zealand living budget and that whole area.

Diane Coyle (56:03): I think it's a really analytically rigorous good framework and to be quite interesting to see how it develops over time and also whether, if any, political implications it has. But I was going to ask you, if you think as a small country, a scale thing here in that it's easier to take these approaches in smaller places, like Scotland and Wales or some English local authorities, Iceland? They are all quite small and I just wonder if there's something about the kind of cohesion you can get in a smaller place that makes it more feasible to try these kinds of policies?

Ben Yeoh (56:42): I think so as you could probably even add, [ ] Taiwan, South Korea, Singapore but to me it riffs on something to do with that trust and social contract where if that remains strong, I think you can do it potentially in some larger countries. Obviously Scandinavia is a little bit larger, but I mean, if we think about the UK, I wonder whether if we're prepared to do things by less central planning, so devolve a little bit more localism and that localism-- I mean, they're still quite big areas, big economies, but they might be more New Zealand style and you have that to be able to set that. I kind of think at least in theory that they could therefore work. So I guess that is a little bit more federal now and maybe there's a little bit more like Switzerland. I mean, maybe that's going to be really hard in places like India, Indonesia, China, Russia, US, but I kind of feel like the UK, which sits slightly in between that, has a chance of enacting some of those things. And it still, to me, I know we talk about a more polarized society in all of this, but I still feel I've traveled around the country and even into Wales and Scotland quite a lot over the last 10 or 20 years. There are still things about Britishness that bind us together. Our love of the NHS, the underdog sort of quirkiness, other aspects of British culture, which although were quite hard to sort of define, I think people do put their finger on it. 

So to me that means there's enough social trust and cohesion even whether you want to be multicultural or not, which is foundational to let some of this happen. But perhaps we need to push forward a little bit more in terms of innovation. Well, I guess it's innovation within the government, right? And that's what New Zealand have done and I guess the problem is that some of it won't work out. By its nature some of it will have to fail and if you can fail and then pivot, that will be good. But at the moment, we're stuck in this thing where we dare not try anything new and therefore in this kind of slow and steady-- Well, I guess if you look at it, some of these metrics, GDP or HDI [Human Development Index] , the UK has got this slow and steady decline, although from a very high base. So I kind of would like to remain cautiously optimistic with some of those inklings coming through. So maybe with a final couple of questions. So, maybe because he's on the record on some of this we can say coming back to Jason Furman again, he suggested a few things which he feels can help growth, productivity and inequality. So there's kind of a win-win things. And I was wondering what you would have thought about them. So he names, I think education and investing in children. He would also name enabling work which I think solutions to getting people in the workplace, but particularly females, minorities and that more competition and more fluidity or dynamism. So people moving cities, I guess that's a particular US thing but see there's some in the UK. Would you disagree with any of those points and would you add anything into your own policy recipe?

Diane Coyle (1:00:06): I think I might disagree with getting people to move around more. I think people just quite like to stay where they are and although we've had that sort of pattern of mobility that you leave your small town and you go to university in a city and then you go and work in London, that one kind of mobility. Most people want to stay where they are. So we've got to make things work for where they are and that's why I think geographic policies are really important. So that's the one thing I might disagree with and even the US is not that mobile anymore. Are there other win-wins? I mean, I think there's a lot of investments that would be win-win. So I think that you could call it investing in natural capital, but reducing air pollution and the health benefits of that. So all of that stuff, that's definitely a win-win and particularly the kinds of green technologies where government coordination can de-risk markets and make them grow faster than they otherwise would and therefore that stimulates the private investment and that's all good dynamic win-wins as well. So I think there are plenty of them, they just need doing..

Ben Yeoh (1:01:19): And then, he's got a smaller category of what you call “win neutral” or “win, tiny bit lose” but you're losing so much tiny that the win makes more up for that. And he puts higher taxes and minimum wage in that bucket. Although I guess they have enacted at least one of those. Would you agree with those and would you add anything else in that bucket? I guess this is the kind of fairer society we're looking at, some of the extra capital things more.

Diane Coyle (1:01:53): Minimum wage, I don't think you can say in generic terms it's going to either have positive or negative effects. It depends on the context of the labor market in which it's being applied and there is obviously a level of minimum wage that will reduce employment. But equally there are increases in the minimum wage that will increase demand and through the multiplier effects have positive outcomes. US minimum wage got to be so low that they're in that territory I think, going to $15 minimum wages seems to be wholly beneficial once you abstract from the effects of the pandemic on employment levels. So I don't think I agree with that. I've forgotten the other one already. I'm sorry.

Ben Yeoh (1:02:38): It was higher taxes.

Diane Coyle (1:02:40): Higher taxes, so they're efficiency costs of increasing taxes but that says you design a tax system as well as you can and there are going to be trade offs and you're going to have some inefficiencies and that's just too bad. If you want to have any public goods, you're going to have taxes and given that, I think in general, private and public sector in the UK in particular have under-invested for a long time, then we're going to have to raise taxes

Ben Yeoh (1:03:11): And on the natural capital, whether that's biodiversity or sustainability, what do you think should be highest on the policy agenda?

Diane Coyle (1:03:22): Well, COP26 and some global action finding a way through the politics of that. It's obviously really important and then actually paying more attention to biodiversity questions and that cluster of issues about land use, zoonotic diseases, soil quality, agricultural productivity, all of those but for understandable reasons have been kind of second order to climate change but actually we need to think about those as well.

Ben Yeoh (1:03:52): Sure. A lot of it seems to me that actually economists or economic thinking does have some of the answers, but the sort of what we would call it, the political economy or the political leadership is not really following any of that and therefore there's this growing gap. So it kind of almost seems to me that some of this is now a political economy question, or maybe it always has been obviously that it's intersectional.

Diane Coyle (1:04:16): I think it always has been but the politicians were, I suppose, more like economists previously in that they thought they were right answers to problems. But as an economic analyst you're saying we've got this great policy, if only the politicians would implement it, then your policy is not a great policy. You've got to incorporate that.

Ben Yeoh (1:04:40): Yeah and I think this is the point and we lead it to that. This is why I think I see the climate assembly and that kind of work is very important because you have to bring your people along with you. There's a lot of things which only exist because humans caused them to exist in their mind, call them into subjective thoughts and if you don't put that into your calculus, you don't have a policy because that is only a kind of idea.

Diane Coyle (1:05:06): That's right. And we have a lot of language for it; multiple equilibrium focal points in games, narrative, economics. We've got the tools to think about that but it somehow doesn't get translated into what should this government do in this place at this time.

Ben Yeoh (1:05:22): Right. And so final two questions. One is what does a productive day or week look like for you with the work that you do? And the second question is, do you have any advice for maybe say young people thinking about being an economist or particularly if you're not from a kind of middle-class background who would think of being economist as potentially the job to do, what would might spark in a young people's mind about why this would be a great thing to do, or your observations about the career that you've had?

Diane Coyle (1:06:03): Oh, well, a productive day I try to make them all productive I suppose. It's very busy and I've just in the past, a few months really for the first time in my career, apart from a six month period as acting chair at the BBC trust, have somebody to look after my diary for me and that's made me so much more productive. So that's been fantastic, but it's always a mix and some of the most productive moments are walking to work or walking in the Botanic garden or walking the dog and the thoughts are jostling around in your head and something falls into place. So that's good and every day needs some of that, just not thinking or doing anything in particular, but letting the thoughts run around in your head. That's productive day. Economics is a great subject, it's intellectually powerful, it's interesting. You don't have to be an economist to study economics and enjoy it and get a lot out of it. The downside is that lots of places still teach economics in a mathematical way that's too mathematical. I think the math is important, the empirics is important, but they overdo it and that's the downside. 

But I think my advice would be if you're interested in big challenges, how to make society fairer, how to make sure that there are enough jobs, how to bring about climate sustainability, then it's one of the most powerful disciplines that you can study to think about those kinds of questions. And although economists have a bad reputation for being selfish or all about the money, actually, most economists are really highly motivated by what can we do to make things better and that's the driving force in lots of what we do. I've done pretty much everything you can do as an economist. I've worked in the private sector. I've worked in the treasury. I've been a journalist. I've been a consultant. I've done public service roles and I've done academic stuff. And so that's the other benefit that you can do all kinds of other things, all kinds of variety of things with this pulpit that you get from studying economics.

Ben Yeoh (1:08:16): Great. So with that final question I'll say thank you very much.

Diane Coyle (1:08:22): It's been really interesting chatting to you. Thank you so much for inviting me on.

Ben Yeoh (1:08:27): Great.