Diane Coyle on Brexit and Economics at a Time of Climate Change and Inequality

"We have not included nature in what counts as the economy"

Welcome back to Lucid! Mark your calendars for our next live Q&A, this Friday, December 17, at 1-2pmET. You'll receive a registration form on Friday morning (registration is free). We'll talk about the week's news in America and anywhere else democracy is threatened. All are welcome to ask a question, air a concern, or just listen in. I'm looking forward to seeing you.

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I'm pleased to bring you this interview with Diane Coyle. She is the Bennett Professor of Public Policy at the University of Cambridge, and she co-directs the Bennett Institute. Her many authored books include the 2021 work Cogs and Monsters. What Economics Is, And What It Should Be, and she writes the Enlightened Economist blog. A former Vice Chair of the BBC Trust, her research focuses on the digital economy and digital policy, and on concepts and measurement of economic welfare. We have been friends for many years, and I always admire her ability to speak about economics in understandable ways. Our conversation took place on December 7, 2021, and has been edited for clarity and flow.

Courtesy of Diane Coyle

Ruth Ben-Ghiat (RBG): You were the Vice Chair of the BBC Trust, which governs the BBC, and you've worked as an economics journalist as well as an economist and in public policy. I'm curious how you see the problem of disinformation.

Diane Coyle (DC): There's obviously been an interaction between the growth of social media and the way those markets have developed in concentrated ways. The business model of so many social media companies is about advertising, and you get the advertising dollars if you can generate the clicks, and you generate the clicks by viral content, and it doesn't matter whether or not that content is true.

RBG: The disinformation campaign that led people to vote for Brexit is a case in point. So many were misled by "Leave" messaging and voted for Brexit, only to regret it later.  How do you see the consequences of Brexit unfolding? We've read about its severe impacts, like disruptions to supply and distribution chains.  

DC: The Brexit campaign was built on lies and although 95% of the economics profession  pointed these out, it had no impact at all on the vote. Indeed, one of our senior politicians compared economists who signed a public letter saying Brexit would be economically damaging to scientists who had worked for the Nazi regime. He apologized immediately, but that was just an indication of how polarizing and emotional it all was. Now all of Brexit’s economic impacts that were predicted are emerging. Those who were most likely to vote for Brexit are the ones who are going to be hardest hit by the economic damage it brings.

That's a terrible and paradoxical consequence. I don't think human nature is such that they'll revisit their opinions and change their minds. They'll find some other scapegoat to blame. But what's interesting about the current context is that the government has continued to lie. It's a tactic that's worked well for them, so they've continued to do it.

One might argue that the liberal side has been playing it too nice and perhaps needs to be much more assertive in media and social media debates.

RBG: That's true of liberals in the States too.

DC: You can't expect to win playing by the rules if your opponent is playing a completely different game.

RBG: It seems like we are at a critical point in terms of economic inequality. The pandemic makes it easy to forget that in 2019 there were a record number of protests over inequality around the world. So you've got this popular dynamism, and yet you've also got the spread of authoritarianism and oligarchic and kleptocratic economic systems. Can you talk about inequality and its effects on societies?  

DC: It feels like a bit of a turning point. Obviously, inequality has been long in the making, and weakened enforcement of labor laws, weakened unions, the erosion of minimum wages, and facilitations of illicit financial flows have all contributed to it. It is quite interesting that a lot of the very wealthy are now in effect illegal people. They're using money laundering techniques and stepping outside the boundaries of what most jurisdictions legally allow.

This is not sustainable over the long run. So, whether it's revolution or some other form of political upheaval--I don't want to get into pundrity--it feels to me like things will change.

RBG: In Cogs and Monsters you talk about the old boy networks in economics that have often hindered innovation by preventing people who are in a position to see things differently, like women and people of color, from being promoted within the field.

DC: I suppose that all professions or academic disciplines are prone to having self-elected priesthoods, but it's particularly bad in economics where the gateways you have to go through to be successful are unbelievably narrow. You must publish in five journals in the world, which are linked to five top American schools. The makeup of the academic profession of economics is scandalous: it's a majority of rich White men. This matters because economics claims to be a social science, and it does have a lot of influence on policy that affects everybody's lives.

This situation means that a range of questions that could be addressed just aren't being asked, and so data's not being collected. I find the top-down perspective that economists often take incredibly disturbing. It's the old Dr. Strangelove idea that you are social engineers, you stand outside the society and observe what happens. It makes for very poor economics.

RBG: Ah, the myth of objectivity, which makes it easy to label certain categories of people as "biased." You see this in history too. But it's more destructive in economics because that field is so connected to policymaking, and economists have been so influential in the history of nations. I am thinking of the individuals who implemented neoliberal policies in Augusto Pinochet's Chile or in Eastern Europe after the fall of Communism and were able to influence the economic destinies of entire populations.

DC: The fall of Communism is a great example. A group of largely American economists went to Eastern European countries and the former Soviet Union after 1989 and advocated for shock therapy. They were so confident, and yet they knew so little about the fabric of the societies they were intervening in. I think you could plausibly construct an alternative history in which Putinism would not have happened if economic shock therapies had not been implemented in Russia.

RBG: In your 2015 book GDP and in a recent podcast interview, you point out that the metrics that we've used to measure societal economic health and productivity are no longer appropriate. For example, they don't take into account the value of digital markets. You also argue that sustainability is neglected: everything from wellbeing to environmental health. "We have not included nature in our definition of what counts as the economy," you said on that podcast.

DC: The current framework of measurement was devised during and after World War 2. That matters because we are kind of reaching the end of the road in how much we can take nature for granted in our own economic and other activity, whether that's climate change, tipping points in ecosystems, or lack of clean water. There's also the issue of unpaid women's work in the home. That's been excluded, along with all other non-market activities, even though these are fundamental to our lives.

Digital activity presents a similar problem, because some of the categories of digital activity are not easily handled by markets: they've got the characteristic of public goods. Data would be a great example. We've got to put in the work to measure all those previously unmeasured things, just as we did in the decade after World War 2.