Abridged Video Interview:
Unabridged Audio Interview:
Subscribe and Listen on: Apple Podcasts | Spotify | Stitcher | Google Podcasts | YouTube
You can find all our Economics and Beyond audio podcast episodes here: https://www.ineteconomics.org/perspectives/podcasts
Transcript:
Rob Johnson:
I’m here today with Mike Spence, a Nobel laureate from 2001 and the Co-Chair of the Commission on Global Economic Transformation at IINET, a professor at many different places, based in Milan, Italy and a tremendous, tremendous partner and ally in opening the world’s eyes to technology, China and many other things. Mike, thanks for joining me.
Michael Spence:
Thanks, Rob. It’s good to be with you.
Rob Johnson:
So we’ve got, as I said to you moments ago, Jerry Lee Lewis, A Whole Lot of Shaking Going On. We got pandemics, we got climate change, we got nervous people, we got feelings about how technology affects democracy. I always like to start with the whiteboard where you can paint the picture. What do you see, Mike? What’s right now at the top of your concerns?
Michael Spence:
Well, I mean, I always like to, Rob, start with things that we can be fairly sure of without being over confident about. We know we were in a digital transformation for some time now. We know we experienced an acceleration in term of its scope and to some extent its pace as a result of breakthroughs in computing power, artificial intelligence, learning algorithms and so on and then we got the pandemic. Now, I think if we stay on the same track, we can pretty sure that this transformation that we were involved in is going to proceed at an accelerated pace, not just because of the forced acceleration in the pandemics, but more looking at slightly longer term, but because the forced acceleration in the pandemic also produced accelerated adoption, which carries with it experiments that wouldn’t have been conducted, discoveries about how to use the technology that wouldn’t have occurred at the same rate. They would have occurred, but they wouldn’t have occurred at the same rate.
You can see that happening all over the place. You can see it in healthcare, including primary care. You can it in what they’re calling telehealth. It just would have taken, not ages, but a long time before the medical professional and their patients got around to thinking that you really didn’t have to go to the emergency room or the office or the healthcare provider every time you needed to have a chat with some of the medical staff. You can see it in education. Educational institutions were forced to adopt. They’ll revert to some extent because frankly online is awfully useful, especially when offline is prohibited or dangerous, but it’s not a substitute for in-person. On the other hand, it is a compliment to in-person learning. What we learned by being forced to use the technology, and education is another sphere where adoption, for a variety of reasons, tends to be slow. These two sectors are not unique by the way. I see that coming.
Now, so that seems pretty easy, but we know then there’s this host of challenges that you and I have talked about and opportunities that we’ve got to contend with. The list is so long, I mean, we could use up the next day and a half talking about it. I think one of them, at least in the developed countries, is dealing with the transitions in work, the skills required and so on. This is literally idiosyncratic and not totally aligned with the way i think the majority of the writing runs in this dimension. This is usually perceived as either a big problem because we’re not going to able to employ people, but that’s not the majority view. The majority view is that we need to facilitate and help people make fairly large changes in the skillset they bring to the marketplace through programs, through engagement of companies, through shifts in the educational system, et cetera. I think that’s basically right and there’s a lot of very good people in government, in the non-profit sector and in business working on it, frequently in partnership.
I don’t think it’s going to be pretty and I think it’s going to be harder because of this acceleration we just talked about, but we’re moving in the right direction. I think the real crack in the foundation of this is the very, at least in the United States, is the very high level of inequality. People don’t have buffers that help them make these transitions that inequality and those buffers declined and got… I mean the inequalities increased and the buffers declined in the pandemic economy, even though the government has tried to buffer that shock. And in fairness, that was true even the previous administration, at least to some extent, but you can’t buffer it completely, but the going in initial conditions were very high levels of income and wealth inequality and that just makes this transition scarier for people and harder to get done.
If we had built out institutions that had effectively dealt with managing inclusive growth, and this has been talked about a lot by us, by lots of people, then we could deploy those institutions or adapt them and we would have households sitting there with more resources to invest in their future than we do now. To me, the big underlying challenge… I don’t mean to minimize the transition in work, but the big underlying challenge, I think, is to deal with this rapidly and effectively as we can with the income and wealth inequality using multiple instruments, social services, high quality, free, expanding those to help people in this particular set of challenges, tax system. And even then, reversing the trends in wealth inequality is going to be a Herculean challenge because, as you and I have discussed, I mean, the wealth is held in a highly concentrated fashion. The investment opportunities at the upper end are much larger at the upper end of that spectrum, are much larger and much higher returns.
Just think about it. People with skinny little balance sheets are investing in stocks where they may or may not do well. They would have done well if they stuck with it in the recent past or bonds where they’re not going get much of a return at all, unless they’re traders. The average person can’t trade effectively in these markets and generate return that way. You start to get into things where the returns really are quite impressive, but those are the ones where that require liquidity, a lot of them, and that’s just not accessible to these people. That’s turbo charged by the Jim Basillie effect, which is the intangible assets are being created and dominate now the value creation in the public markets and they’re being created by relatively small numbers of people and those assets are owned by small numbers of people. Those are all very powerful trends that are running in a different direction.
I think in addition to the… We need a multidimensional assault, I guess, with government leading the charge, but with engagement from basically the rest of us to deal with this. I think we’re going to have to deal with wealth, investment opportunities, post-tax income and public service delivery all at once to get the job done.
Rob Johnson:
And where some people, even progressives, are quite cynical about this is that they see the role of money in politics creating a situation whereas the wealth concentration increases, governance serves fewer and fewer people. Things like what used to be called tax evasion is now tax avoidance. If people are allowed to keep their legally offshore and then say we can’t afford it back home to build out the infrastructure, the health systems and what have you. There’s a cynicism that really accelerated during the time of the great Financial Crisis where people really feel like government is captured and that, I think, you and I could go through a whole menu of sectors where things are being exacerbated or difficult. And through that whole menu, there is a common thread, which is the role of money in politics and large scale money in politics has been allowed to commodify social design. I think that’s an earned-
Michael Spence:
Yeah. No, I couldn’t agree with that more. I like to try to simplify things. I agree with everything you said. I think somehow with leadership or fighting the political battles, we have to get to a point where money isn’t the decisive factor in elections in America. There are a variety of ways to do that, but, I mean, putting limits on how much you can spend is the way most of the European countries approach the challenge, but we’ve to consider… And I couldn’t agree with you more, by the way. If we don’t confront that challenge, then the chances of what I would call a pragmatic and level headed progressive agenda diminish when you get around to doing it because the interests then are front and center. You just have to ask a simple question: can somebody get elected to an important leadership position in the United States now not without a massive amount of financial backing from somewhere? I think the answer to that is no.
I mean, I may be wrong, but it seems to be no, so then the question is where does that financial backing come from? The answer used to be wealthy people in business, now it’s wealthy in business and other aggregated interests, but also we now have this intranet, the small donation channel. That’s an arrival of some importance probably because it’s become big enough in a number of campaigns. Obama, I guess, was the pioneer or his campaign in raising money this way, not that he didn’t have the other kind as well. I think we need the political scientists to sit down and say, “Well, where are we?”
Rob Johnson:
Perhaps the Sanders and Elizabeth Warren campaigns would be worth studying, not because they succeeded, but because they plowed in that pathway that you just were painting the picture of. That’s good.
Michael Spence:
Yeah. I mean, I’m with you on that. I was just writing something that somebody asked me to write on the Washington Consensus. This is a little off topic, but it relates to this. The Washington Consensus has taken a beaten for all the wrong reasons over the years. First of all, John Williamson is a smart and sensible guy and what he said, other than picking the wrong name, was pretty sensible. But what the Washington Consensus is, an example has to do with development, mainly kind of referenced by Latin America, I think, about policies, but the question you’re posing and the one that economists have traditionally shied away from, but which we can’t really shy away from anymore if we care about outcomes, is is there any cannaceae those policies will be sustained in the governance structure in which they’re supposed to be embedded; whether it’s relatively autocratic or relatively democratic or whatever. It varies from country to country, but the question is still the same.
And in developing countries, when I was being tutored, essentially, by practitioners, leaders who had done this for years, basically the message was you can’t get the… even if you know what you’re supposed to do, you can’t get the job done if you don’t bring everybody along with you. I mean, it’s just critical. That, by the way, is where the enthusiasm for inclusive growth patterns comes from and I think it’s right in developing countries, at least they think it’s right and I have no reason to disagree with them, but I think it’s right for our countries too.
Rob Johnson:
I think there’s another element of this danger, which is when people become despondent about the functioning of government dominated by concentrated money, that despair fosters a submission to authoritarian or demagoguery like perhaps we just experienced in the United States over four years and that despair is not going to be alleviated… There’s a static sense in which you can make or transfer and take a little bit of the sting out of the pandemic, but unless systemically that dominance of what I’ll call plutocracy is curtailed, we’ll revisit that despair over and over again. I think that’s a very deep, long-term danger that we have to confront right now for the kind of reasons you’ve shared.
Michael Spence:
Yeah, that’s right. In the end though, I think, at least in a democracy, ultimately people have to look inward when they ask that question. I mean, we have the system we’ve got because we haven’t gotten rid of and replaced it with something. So we can be despairing, but we can also realize that we have some agency if we find young leaders that can take us there and then follow them and get something done. I guess what I’m really trying to say, Rob, is in addition to being frustrated and despairing about aspects of the trends that we’ve been talking about, I think you’re also seeing in various parts of the political spectrum, kind of this is our problem, we’re going to solve it attitude and activism of that type is ultimately what’s required to make significant changes in direction.
Rob Johnson:
Well, I think the combination of even those who have the plutocratic advantage seeing a system is unsustainable, coupled with the activism which reminds them of that, helps us evolve in a constructive direction.
Michael Spence:
That’s a really good point. No. Look, I mean, we got to wait and see how it works out, but the engagement that we can see from the corporate and financial sectors now in taking some of the responsibility for dealing with the big challenges that we face environmentally and in terms of inequality, social cohesion, et cetera, at the very least, it’s promising.
Rob Johnson:
Mm-hmm (affirmative). Mm-hmm (affirmative). You mentioned in passing a couple of times what’s happening in the developing countries and before we talked the difficulties in governance in the developed countries, we were talking about the role of technology. And in the spirit of being constructive, what do you see as potentials related to technology and what do you see as the dangers related to this technology for the emerging countries?
Michael Spence:
Well, I mean, it’s becoming common knowledge, but for awhile it was kind of a closely guarded secret. I think the simplest way to describe it is the most successful development, growth/development, model… I use the word model in like strategy. Think of for most people, you think of strategy, but it’s embedded in the strategy as a model of how the economy works when it’s working well in a development context. The most successful and best known one is sometimes called the Asian Development Model. We know basically that developing countries can grow at the rates we’ve seen, six, seven, eight percent a year for long periods of time, essentially because of the global economy. What does that mean? It means they sell something to the global economy in large amounts and they buy stuff from the global economy because they can’t make everything they need, including the things they need to sell the things they’re selling to the global economy. It’s an open economy model that leverages the enormous demand in the global economy.
But what does that mean? It means relatively poor countries, even if they have a billion citizens, don’t have big enough economies to flood the global economy in any sector. So if they specialize in doing something that they’re pretty good at, they can sell it in enormous quantities. That’s item one. And yeah, item two in that development model is you bring in technology that’s been developed over a couple of centuries, but not adopted here yet and that’s a much faster process than inventing the technology. There’s a good reason why we never saw growth rates at seven or eight percent a year before the developing countries arrived in the global economy after World War II. Those two things together, there’s a lot of other moving parts in that model and they’re not of great interest to us right now, but the core point is that the area of comparative advantage, at least for countries that are not rich in natural resources, including agriculture, was labor intensive manufacturing. That’s why it’s called the Asian Model because that’s where it’s implemented in its most successful form.
The digital technologies, because of their particular characteristic, basically because of the speed with which they’re moving, so the relevant digital technology is automation. There’s been an enormous breakthrough in automation, think of robots, because of artificial intelligence. With data they can learn to do things like see and with sensors. Robots are basically growing like a weed, getting less and less expensive and can do more and more things. If you ask the question where are we now? The answer is we’re at a point where robots, it depends on the sector you’re talking about, can do things that humans can do at lower cost and higher quality and greater reliability, almost no matter what the cost of employing those of human beings are. Because the cost structures of digital technologies, as lots of people have noted, are high fixed, very low to negligible variable cost, as they get bigger, so to speak, as the scope of the markets they enter gets larger and larger, the average costs keep going down and down and down. That’s not true of labor intensive technologies. I mean, there’s a bit of that because there’s learning curves, but it’s not anywhere near as powerful.
Once these digital technologies get to the point that they’re scaled up to get the cost down so they’re comparable and they’re just going to go past. What that means is that comparative advantage in labor intensive process oriented manufacturing and assembly, which has been the turbo charger of a lot of country’s growth, isn’t going to be as powerful. It won’t happen overnight, but then basically we have a situation in which developing countries, if they’re going to successfully grow at relatively rapid rates, they’re going to have to engage with the global economy in a different way. It probably means in services and that has all kinds of implications for what you do domestically, whether it’s in education or infrastructure or whatever, that enables you to search for ways of connecting to the global economy. I mean, commercially productive ways to connect to the global economy. I don’t think that’s an insoluble problem, but it’s not a problem that has the same status as the Asian Development Model because by now everybody knows what that one is. That one is going away and another one is coming probably or hopefully and we don’t really know what it is. That’s the big challenge.
And as an aside, if you don’t engage with the global economy and you don’t have the ability to sell into a big market and specialize, you can’t grow fast. If you’re selling to yourself, meaning to your own economy, then domestic demand is small and relatively small in scope. You really need the global economy in both dimensions, demand and technology, to get this done. The flip side of that, and I don’t want to be long winded, is there’s starting to be studies that suggest that another batch of digital technologies, those that support ecommerce platforms and fin tech platforms and especially when those platforms are the center of an ecosystem. The way the Chinese think of them is the platform is the architect of an ecosystem. Ecosystem means just what it means in Silicon valley and other places, there’s a bunch of complimentary resources that are easily available that make it easy to innovate, start businesses, not have to do everything yourself because you can… it’s in the environment, accessible and you can acquire it.
Those platforms have probably reasonably powerful growth promoting characteristics, but they have very powerful inclusion characteristics. Mobile payments, for example, is being used with the pile of data that it generates to extend credit. I mean, these are algorithms, so there’s machine learning applied to big piles of data and essentially make people who don’t have any collateral, people or businesses, that don’t have any collateral and are anonymous essentially with respect to the traditional banking system, you can extend credit to them on reasonable terms and make a profit and not have big long losses and a whole lot of other things. We’re just at the start of that journey. I can foresee a future in which these digital aspects of the digital technologies aren’t really just a threat, but a whole bunch of as yet not completely discovered opportunities because I don’t think the China experience is unique. I mean, it’s true their infrastructure is better built out than a number of other places, but I’d be astonished if we don’t see this with real differences because of context, the same things in India and Indonesia.
We already see it in Latin America. There’s a big rapidly growing ecommerce platform there that’s also in mobile payments and so on. And African countries themselves have innovated in mobile payment systems, given the technology and the infrastructure they’ve had available. I think there’s some promise there. Whether it’s big enough to have another golden age of developing country growth, I think it’s just too soon to tell.
Rob Johnson:
Yeah. I would also just add to that, we’re on the horizon of climate change and many of the developing countries have been working on it, which we want to call fossil fuel or other types of natural resources as part of their export portfolio. With wind and solar coming on stream, it may take that dimension of the challenge into a new direction as well.
Michael Spence:
Yeah. No, I mean, we have discussed at Adair’s, particularly Adair Turner is particularly articulate on this, but solar is a digital technology basically insofar as it’s used to generate electricity. Its costs have come down way faster than anybody thought, to the point that solar is, set in a proper electricity grid and so on, comparable or in cost to fossil fuel generation or lower cost. Because of those cost characteristics, we talked before, I mean, and in developing countries, this means that they’re going to have to build an awful lot of electricity generating capacity and they’re going to expand their use of energy. They’re going to probably build energy efficient buildings. They’re probably going to increasingly drive electric cars. They’ll build up additional electricity capacity with clean technologies, which will be a boost for them, but a boost also for the global climate challenge. I think there’s some… It’s not all clouds on the horizon, I guess I would say.
Rob Johnson:
That’s right. That’s right. Well, another dimension of technology relates to what I’ll call information management communication with the large economies of scale. These platforms, these networks that we’ve learned about in movies like The Social Dilemma, have what I’ll call novel or interesting new characteristics. The question of who becomes the arborator of what’s distributed, there is a sense in which foment and critical discourse with multiple channels allows a democracy to make up its mind. But if everything is funneled through one channel, what we might call metaphorically, the editorial director on that channel has a very powerful concentrated role in society. How do you imagine shaping those systems and especially with the advertising model that was brought up in The Social Dilemma where using the filter bubble, as Eli Pariser labeled it, to reinforce people’s priors to increase their enthusiasm and their duration and their participation and their invitation to others to join the network creates more profit.
In the parlance of The Social Dilemma, it may help foster a civil war by polarizing people in directions that make it almost intractable to compromise.
Michael Spence:
That’s true. Well, these are deep problems. Again, I like to try to break them down. But roughly speaking, let me tell you where I’m going in case I start wondering around. I think there’s two big challenges. One is data rights and security and all that that is… Big databases are co-created by the owner of the platform and the users of the platform. Most people, I think, are coming around to the view that it doesn’t really make sense to try to decide who owns it, but it does make an awful lot of sense to decide rights. The reason this is such an important issue is because this data is about people and it can be misused. Getting the trust mechanisms, legal structures, rights embodied in regulation and/or law and security arrangements so that third parties, who may or may not get access to the data either because it’s sold to them or because they just steal it, that’s a set of issues. People are on top of it. It’s, I think, will come out in a reasonably sensible place at some point.
There’s data on this now, there’s studies. Users actually learn over time who to trust, what data they’re comfortable coughing up and so on. They’ll probably learn more about how it’s used over time and so on, but that’s one big… I mean, if we don’t solve it… Let me put it in a negative. If we don’t solve that problem, then a lot of the benefits that come from having big pools of data that are responsibly used to do productive and socially useful things like extend credit to low income people, like find good credits and people who are being excluded because on average it isn’t a good risk or something like that. I think it’s important. Ironically, that’s the easy one. I mean, it’s not easy at all, but it’s easier than the other one. The other one is content. I don’t think anybody has a real solution to this, so let me tell you what I see. The Chinese, in fact, any governance system that seeks to maintain order at all costs and understands how powerful that communication channels are.
I mean, Hunter Rint wrote a book on fascism many, many years ago, which she basically said, and I’m not calling China fascists by the way, she said, “One of the most powerful tools in the fascist toolkit is taking control of the media so that the communication system is under their control. It’s very hard to maintain a regime like that if somebody’s out on the corner and uncontrolled telling the truth about what’s going on.” The Chinese approach is that with their own version of what is good for society, which includes stability and not having internal wars and stuff, say basically the content of these communication channels, let’s call it the internet, needs to be subject to controls. Judgment has to be used and that means somebody has to do that. The answer in China is the government or the party, however you want to describe it.
They don’t mince words about it. There’s not a lot of fussing around about free speech. It’s not that they’re against free speech, but they’re against destructive free speech and they get to decide what it is, so they don’t really have a dilemma. Now, this may make a lot of people unhappy and even relatively autocratic places don’t go on forever if the social dialogue that goes on with society is suppressed beyond a certain point because there’s a pretty universal value attached to that. The rest of us really don’t know what to do as far as I can see because we’re caught in a balancing act that we don’t want to acknowledge. That balancing act is the value that we attach to individual rights, especially things like free speech on the one hand and the value that we probably want to attach to social cohesion or collective rights, if you like. When they’re in conflict, we don’t know what to do. And specifically in the internet and social media, which is the focus of the tension, it doesn’t make any sense to delegate content review to a private company regardless of what their business model.
I mean, I think there are problems with a business model where you’re selling people’s data to advertisers, so I agree with that, but I don’t think it’s this problem. This problem is that there’s nothing in the Constitution or anything else that says that they’re the appropriate people to do this. But since nobody else has stepped up to the plate, I mean, I’m overstating it a bit, they’re basically caught in the crossfire in being asked to do it and they’re struggling with it so they have a panel of wise people advising them so that they’re not just making it up in the office everyday and so on. I mean, they’re experimenting and I think it’s largely well intentioned because they have… It took some battering, but I think they now understand how powerful the impacts are on political and social discourse and how they can be very negative, but let me skip to the bottom line. At some point, I think the government has to step… the government and the courts, the legal system, have to step up to this issue and recognize that the answer isn’t whichever platform is en vogue. I mean, what are we going to do?
Suppose TikTok eventually beats Facebook, then do we hand the ball off to TikTok? I mean, it’s just nonsense. These are the big, important social decisions that we have to make and we need the government, the legal system and kind of everybody involved in it, but they’re going to be tough choices because they are going, as best I can tell, I don’t see any way to sidestep this, they’re going to involve restrictions on free speech. You can see universities battling this through now. I’m so glad I’m not an academic administrator anymore because the same tension occurs. At what point does the university’s commitment to open dialogue start to have negative benefits in terms of the cohesion of the community that they hope to foster. Once again, I pose that not because anybody did anything silly, but it’s a really hard problem.
Rob Johnson:
Well, there have been a number of psychologists exploring that. I know Jonathan Haidt has written a book, The Coddling of the American Mind, which drives right into the middle of this. Let me come back to you’ve done tremendous work with INET, in particular helping us develop a relationship with the Luohan Academy and Chin Lung and that whole group is really a very exciting, what you might call in contrast to the polarization that’s taking place, we’ve been able to come together. But in my discussions with many Chinese scholars and leaders in relationship to our Global Commission, they’ve raised another issue. You talked about how the aggregation of data can be sold to advertisers, but the aggregation of data is also an asset for the intelligence community and various people, like our friend John Mallory at MIT and others, have studied the relationship between what you might call multilateral commercial platforms and cybersecurity. This appears to be a very difficult challenge because it will take the US and China, as just a hypothetical example, though there are others. When you are allowing a platform that originates in another country, the data collection can threaten your sense in your home country of what I’ll call proper security.
There is a notion that we all hear about called hacking. The parable I always use is you can be in Saskatchewan as a hacker and pretend you’re in New York hacking Shanghai and you can be Armenia as a hacker pretending you’re in Beijing hacking Washington DC. What this does is you go to the leaders who can see the benefits of collaboration and a multilateral platform become enfrightened because they don’t know how to trust each other and enforce with hackers streaming on all sides where you can’t detect that they’re in Saskatchewan or Armenia. How can you, what you might call, foster the trust and integrity of that system and the benefits that come from a unified commercial platform?
Michael Spence:
Very hard question. I guess step one is you… I mean, you have understandings with the major players in the game, but you’ve got to protect the systems from the unauthorized players, if I can put it that way, the people you just described, the hackers. They’re smart and there’s a lot of them and who knows what their motivations are. For some, I think it’s just the challenge and for others, they have political motivations that, I guess… John and others know more about this than I do, but my impression right now is that there’s a race and so far the offensive is winning against the defense, meaning that… And by the way, I mean, our governments all have these capabilities to one degree or another. I mean, I’m sure the Chinese, if they want to hack a whole lot of stuff in the United States can get the job done and I’m pretty sure the NSA could get it done too, but they’re not. If we can defend these systems adequately so that we can rely on them, then meaning rely on that they’re sufficiently secure that we don’t have to worry about the entire electric grid going down or all the data in the banking system disappearing overnight or some just terribly bad virus causing that sort of problem, then I think that Rohinton Medhora is right, then we have to have agreements with the major players.
They’re going to have to be complicated. I mean, I’m not sure of this, but I think data is going to be… part of that structure is going to be data about Chinese or Europeans or Americans. It’s going to have to be resident in the place where the people live and not get shipped and copied all over the place because it’s a potential weapon. That seems pretty clear, that is that creates some problems for multinational businesses who operate on big data platforms that run across borders. We haven’t solved a lot of hose problems, but that seems to be the direction that we’re heading in. I mean, the nightmare scenario, to go back, is that we can’t get the defense up to the point that we can of confidence and that it will only take one or two… I mean, we already have literally hundreds and hundreds of data breaches and ransomware and other sort of destructive activity, but we haven’t had something where we way, “Gosh, really the whole economy or a big important part of it has been severely damaged by virtue of having been built on digital foundations.” But if we get one or two of those, it’s hard to believe that the course of action we’ll have to take is to back track. We don’t want to do that.
I think that’s kind of where we are. In the technology world because of cybersecurity issues, because of dual use that you mentioned, because of national security issues more broadly and clearly military capability, we’re going to just have to live in a more complicated world than the kind of… I can see that the financial systems will be relatively open because it’s in people’s interests. The Chinese don’t talk a lot about closing up their financial system and we don’t talk about that either. But in the digital area, these other things are going to intrude and it’s not going to be the more open is better formula that applies to much of the rest of the economy.
Rob Johnson:
Well, Mike, I want to turn back now to something you alluded to earlier, which was the relationship between digital education and in-person education. The interesting, I guess, dilemma, using the word in another context, is that when you look at a place like Africa or Southern Asia and describe the influence that digital technology will have, the question is how do you teach the population and who are the teachers, given the newness of this challenge? At some level, if you said we got to educate all the teachers to teach the younger generation to be ready for this challenge, I don’t know if the teachers have assimilated the things that you’re exploring. It’s almost like science fiction. The question is, is there a role for what I will call remote education? Things like courses that teach the teachers and teach the students and then the teachers augment with the inter-personal exploration that…
Almost everything I see, by the way, about online education suggests that real human contact massively increases the participation and the duration of participation in online courses. If you have a teacher that you’re answering to, if you have a mentor who’s willing to discuss your confusions that you might call your emotional stamina for staying with it, preserving and getting the fruits of all, the learning goes way up. How do you see bringing this technology to the challenge of education, particularly in emerging countries?
Michael Spence:
Well, I think of it, Rob, as a voyage of discovery. We’ve learned that these technologies complimenting in-person education and at times filling in gaps, it can be very useful. But you’re right, I mean, we don’t… We’ll learn more about this from a whole variety of experiments, people and studies that psychologists and educators will do. We’ll kind of not really stumble along, but we’ll learn a lot as we go along that we didn’t… answers to questions that are, A, important and B, we don’t know how to answer now. That said, I think the technologies are, especially with the younger generation, the kind grows up using them somehow, are potentially pretty powerful for the teachers, as well as the students. There’s unicorns now… I mean, this is to improve that point, but there’s unicorns in the education space, so these are little smaller experiments anymore, they’re going like gangbusters and to some extent they’re filling in quality gaps in places like India, so we’re kind of finding our way.
But I think When the internet first… When the world wide web became available, I think we correctly thought that it was democratizing because it basically, with enough infrastructure that now seems to be being built out globally, you basically have universal access to information because it’s all digitized and the cost of access… and it doesn’t go away. When A has it and it gets transferred to B, then they both have it, so it’s what economist call non-rivaled. It’s got all these powerful characteristics that Paul Romer and others have described and that’s a wonderful thing. I mean, that is empowering. I think in the education sphere, as long as we don’t slip up and get the point, and I don’t think it’s going to happen, where we think, “Gee, the digital technologies are a superior technology,” because they just aren’t to in-person learning because… I don’t know how to describe it because it’s not my field, but I see it in my own kids and others and my grandchildren. Something goes on in the school when they’re all there that doesn’t go on when you’re sitting in front of a screen; social, non-cognitive development, this motivation that comes from a particularly inspiring teacher.
In the best evolution going forward, you’ll have everything. You’ll have inspiring teachers, personal contact, motivation, curiosity, all the things that educators talk about that aren’t just being able to do math and logic and whatnot. You’ll have access to these resources. INET’s in this business. You have Michael Sandell and Bill Janeway and
Rob Johnson:
Robert Skidelsky, Ha-Joon Chang, all kind of courses.
Michael Spence:
Yeah. You’ve got a very rich menu of offerings that are well produced, that are resources and essentially available to the world as educational resources. I think it’s great. I mean, in a sense we could have done this before, but it’s easier now that networks faster, it isn’t as clunky, but we needed a kick in the pants. I mean, I’ll give you an example. I have been away from Stanford physically for a long time, but then this spring, Dave Brady, who’s there, and I are going to conduct the experiment of having a course, which will hybrid. He’ll be in the classroom and I’ll be online and at least some of the students will be the room, we hope, what we don’t know, but we wouldn’t have even considered that, including me. I just assumed that if I was on a different continent, my value as an educator to Stanford, it dropped essentially to zero and would stay that way until I was back in the neighborhood. That is just one stupid little example of something that I think we don’t believe on a much broader scale now. Now, I’m not Michael Sandell and whatnot, but maybe I can add a little value even at a distance.
Rob Johnson:
Well, Michael is a magical presenter.
Michael Spence:
He is amazing.
Rob Johnson:
Unbelievably gifted in that kind of Socratic place and he’s got a new book out now called The Tyranny of Merit, which is all about what you might call, I’ll call it credentialing versus truly educating and he’s a true educator.
Michael Spence:
He is indeed. This started at Harvard when I was around his dean and he was… I think he wasn’t even tenured and he decided he’d teach a philosophy course in the core curriculum to 800 people. Well, that was okay, but he made it interactive and that’s impossible. Everybody said it’s impossible. Now, he’s done it so many times, not just that course, but his capacity, I think of it his gift is… He has a gift for engaging people so that they start thinking about really hard things. He does it with examples and whatnot. [crosstalk 00:54:54] accredited course, he thinks deeply about these things, about the limits of the use of markets. I was thinking about him just the other day. I mean, we have an absolutely classic example of what he and, to be fair, others have talked about right now with the vaccines. These markets aren’t clearing. We could clear them overnight if we used the price system and everybody knows that’s the wrong answer because it’s unfair. We’re not going to the price system and the policy makers, our government, should have seen it coming because if you’re not going to clear it with prices, you got to have another allocation system.
If you get the wrong one, people are going to be mighty unhappy. I mean, you can use lotteries, you can have priorities, which we’re starting to get now and so on, so he’s right. I mean, there are times when you just… The example I used in my Nobel lecture is do you really want to have the people sitting at the Super Bowl the people who can afford to buy the tickets only? Is that the way you want to allocate those things? That seems to me that most people would say no, what you want, you’re probably going to get a fairly high price, but what you want is to allocate at least some of the tickets to people who love football as opposed to have enough money that they really don’t care. Then the economist come along and say, “Yeah, but if you have the secondary market, they’ll bid the price up and then the people who really love football will finally have a high enough price that they’ll actually sell the ticket.” That’s exactly what Sandell was talking about in that book, What Money Can’t Buy.
Rob Johnson:
Yeah. Well, Michael Sandell has a phrase that he uses quite frequently, the common good and the common good. When you think about the pandemic and the vaccines, as you were just sharing with us, the common good involves the fact that when you get the vaccine, the likelihood that I get infected goes down. There is a public good element of broad scaled dissemination and the price system isn’t going to reflect that.
Michael Spence:
Yes, there is no question about that. No, it’s not. No, it’s not. The only reason in a normal circumstance you might use the price system is because you symmetrically get that affect regardless of who gets vaccinated, unless people live in different neighborhoods, in which case which is the reality, in which case you got to make sure… and those neighborhoods don’t have the same purchasing power. Then it starts to get to the complexity of the real world that we live in, but there’s no doubt that there’s a public good element to it. I mean, I’ve been watching these guys, the doctors and others, get in trouble because they’ve got 50 things that are going to expire in the next two hours and nobody who’s in the high priority category, so they give it to somebody else and then there’s a [hooferall 00:58:21], but I’m very sympathic in part because of the public good character. Might as well, not throw them out in the garbage can.
Rob Johnson:
There was a big episode of that in Houston, Texas the last few days that the New York Times is covering.
Michael Spence:
Yeah, exactly. Somebody got in big trouble. Now, it can be abused if they say, “Well, they were going to expire so I just took care of my friends.”
Rob Johnson:
Yeah. Well, Mike, I want to say to you that when I have the pleasure of being on screen with you, I always think of my young scholars because you are such a model of humility and curiosity, an unyielding curiosity. When I try to point to them as to who should, what you might call, inspire them to want to be an economist, you’re one of the first people I think of [crosstalk 00:59:21] and today’s conversation is a beautiful illustration of that. We’ve toured across all kinds of cutting edge domains, dilemmas, corruptions, unknowns and you engage imaginatively, humbly and with a, what you might call, a curiosity and imagination that illuminates and inspires hope. I think there are a whole lot of leaders can learn a lot from your example and the young people too. So thanks so much for being my guest.
Michael Spence:
So thrilled to be with you, thank you Rob. I wish we had more answers though.
Rob Johnson:
That’s a nice thing to wish for.
Michael Spence:
I wish we had more answers.
Rob Johnson:
But I love the fact that you’re at the helm, along with Joe Stiglitz, of the Commission on Global Economic Transformation where we’re trying to deal with all the elements of disruption; globalization, migration, climate, technology and so many of these facets of the challenge, even the historical financialization and the ongoing ramifications and, how would I say, in addition to your imagination, your spirit gives us leadership.
Michael Spence:
Thank you. Thank you, Rob. It was great to be with you.
Rob Johnson:
And you too. And check out more from the Institute for New Economic Thinking at INETecnomics.org.
