Monthly Archives: March 2018

Economic development in 150 pages

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It sounds an impossible challenge, but Ian Goldin does an impressive job combining clarity and conciseness in his Development: A Very Short Introduction, one of the well-known OUP series. The book seems to be a version of his longer book from a couple of years ago, The Pursuit of Development. Its six chapters cover: what it is, how it happens, why some countries are poor and others rich, aid, sustainable development, and globalization. The book manages to give a reasonable capsule description of the debates among economists and some sense of how development economics has changed over time. It studiously avoids reacinh strong conclusions on the efficacy of aid, this being a rather factual chapter.

There’s a useful list of further reading at the end. I think someone knowing more or less nothing about the subject would come away with a rounded overview and the capacity – and interest, probably – to read more. I like the pay-off too: “Development is not simply or mainly about the lives of others. It is about ourselves and what we care about. Development is about who we are and our collective future.

My quibble would be that the charts aren’t all that illuminating and only partly because they’re in black & white. Maybe all charts from now on should be left to Max Roser and his team at Our World in Data.

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Economies in space and time

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There’s a section of Economic Geography: A Critical Introduction by Trevor Barnes and Brett Christophers about the richness of border zones – not physical ones as these tend to be quite the opposite when it comes to economic activity, but intellectual. Interdisciplinarity has been a buzzword for a long time, and immensely hard to achieve within conventional academic structures. But perhaps its moment has come. At any rate, the number of in-principle interdisciplinary research centres is increasing (including the new Institute for Public Policy at Cambridge, which I join tomorrow). Perhaps more important, more and more people appreciate that solving pressing challenges – ageing, the consequences of climate change, trade wars, technological change – requires multiple social science, humanities and scientific perspectives.

Besides, I’ve always found the borders of economics interesting, including economic geography. The gap between economists who do geography and geographers who think about the economy has perhaps been narrowing in recent times. The book – a textbook but one accessible outside the framework of a university course – makes surprisingly little of what I think must be one of the main reasons for this. Which is that the technology-driven changes in the structure of production and consumption have made face-to-face interaction more valuable. The digital economy is an economy of clusters and dense cities, as well as one of globalisation. The classic Marshallian spillovers are bigger, the more important tacit knowledge (which, it turns out, is often complementary to codified knowledge, rather than a substitute for it). The evident importance of city regions is boosting urban economics and what is typically described as the ‘new economic geography’.

The geographer authors are understandably wary of the way economics is expanding into this territory. We economists do have a habit of presenting as marvellous new insights things other disciplines have known for ages, albeit wrapped in some nice econometrics. However – and inevitably there are some frictions in this process of inter-disciplinary engagement – it’s bemusing-to-painful to see how economics is perceived. The book describes (mainstream) economics as being only about constrained optimisation, which is the kind of reductionist statement an economist might make (and anyway, constrained optimisation under conditions of asymmetric information is everywhere in nature). It also defines the economy and economics as being essentially about ‘materiality’, material resources. Surely this can’t be literally intended? But in that case I’m not sure what this means.

Finally, the book notes – rightly – that economists insist on the importance of models, but conflates this with the use of mathematics. A lot of economists cheered Paul Romer’s assault on ‘mathiness’, but we like non-mathy maths because it is a concise way of trying to ensure models have a certain logical internal consistency and clarity. One could write many of them out in words instead – just as historians do when they model the causes of the first world war or literary critics when they theorize about the imperial perspective in late 19th century English novels. All scholars use models whether good or bad ones, and whether they know – or like – it or not.

These gripes aside, I enjoyed the book a lot. It’s a clear and comprehensive survey of the territory (sorry) of economic geography and at the same time manages the difficult feat of stepping outside the substance to deliver the critique promised in the subtitle. The first half of the book discusses the definition, history, boundaries and theorising/methodology in economic geography. The second half covers topics such as globalization, cities, finance, the environment and technological change. These topics chapters would make useful stand-alone readings for economics courses on the relevant subjects, giving students a healthy alternative perspective. In any discipline, we quickly socialise our students into our usual ways of thinking. Extending their frame of reference must be a useful contribution to their education.

It’s interesting that economic history is clearly enjoying something of a revival in economics, albeit from a base sadly diminished since before my PhD days, when most doctoral programmes had an economic history requirement (mine, at Harvard, still did but I think many others had already dropped it by the early 80s). There is much talk (and some action) now about ensuring economic history is in the standard economics curriculum, and the CORE course for one weaves some throughout the whole text. Economic geography doesn’t have that traction, but I’d be happy to see options at least for economic geography and economic sociology. I for one am also happy to try to explain to other social scientists #whateconomistsdo as long as they will be as patient with me.

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PS I also applaud the sensible pricing of this book by the publisher (WILEY Blackwell), in contrast to many textbooks.

If you only read one book about higher education…

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A University Education by David Willetts is, as I expected, a brilliant book, and one anyone interested in higher education should read even if they blame its author for being one of the architects of the current English funding system. The book covers this, but also ranges widely over the issues facing the university system: the distorting effect of the Research Excellence Framework; the monoculture that’s partly the result of this (all HE institutions wanting to climb the research-based league tables); the early selectiveness and narrowness of education in this country; the standing of our universities in the world; the failure of research excellence to translate into commercial and economic benefits for the UK; and more.

Funding first. Tony Blair’s government first introduced fees in 2006, £3000 covered by an income-contingent loan. In 2009 Peter Mandelson set up the Browne Review (I was a member) to report after the 2010 election on the future financing structure. It was pretty clear to us that post-crisis cuts in public spending were going to hit HE and the fees would need to be increased to preserve adequate levels of funding per student. We were very preoccupied with designing an equitable structure, looking at the balance of public and private funding of HE (so many taxpayers not benefiting from a degree and the wage premium that goes with it), and at how to structure a system that would not discourage low income and non-traditional students. The IFS was helpful in looking at the distributional consequences of the proposals.

The way the system has been implemented is, needless to say, different from our design. One key – and fateful – difference was the coalition government’s decision to set a fee cap of £9,000. The book says that the widespread assumption across Whitehall was that most universities would not charge the maximum. Well, we on the Review had told them as clearly as we could that every university would go straight to the maximum. It’s pretty simple economics – in this context price signals quality, and would any university signal it was less than top quality? We had recommended no cap, and a taper above £6,000 that taxed universities on the additional amount in order to fund bursaries. The controls on student numbers should have been lifted faster than they were – the Treasury was too cautious. Another subsequent change for the worse has been the interest rate on the loans.

With hindsight, we should have been more concerned about the effect on part-time courses. Peter Horrocks of the Open University has a letter on this in the FT today and he is right to say this needs fixing. We should also have chosen different language and called it a time-limited graduate tax. Anyway, other things about the system need fixing now too – and I would still change the name because of the psychology of young people feeling their loan as a personal burden when it isn’t, and there is so much designed cross-subsidy. But although I wouldn’t be quite as gung ho as Willetts about defending it, I still think it’s better than realistic alternatives, and any cut in fees would hammer university finances and quality. They are, after all, one of our important export sectors.

One of the interesting arguments the book makes is that there is too much of a monoculture in higher education. He argues that this is the consequence of too much autonomy – “There is a trade-off between autonomy and diversity.” His view seems to be that competition occurs only over one dimension, research ranking, and this discourages the excellent teaching-focused, vocational type of institution and also the old-fashioned civic universities geared toward serving the needs of local employers. I think there’s a lot to this, and find it hard to think of any positive consequences of the REF. (Nor does there seem to me to be a lot of prospect of either the Impact element or the TEF (or KEF) improving matters.) So paradoxically, more central planning – the government deeming certain institutions to be of a different type, be it teaching-centred institutions or specialist (but non-university) research institutes like the Frauenhofers  – would create more genuine diversity than the over-regulated, target-entangled universities we have. Willetts writes that science funding through Whitehall departments was meant to ensure there were non-university, applied research labs, but these budgets were the first to fall victim to budget squeezes.

There is much else besides in the book. Some very powerful points about the damaging early narrowing of study in the English school system, about the influence of selection by A level results and its consequences for the social bias in universities, about the rigidity of a system almost wholly based on entry at 18 and depending on a handful of exam scores, about the balance of pure and practical knowledge and the relationship between our universities and our disappointing innovation performance. This book is enough to make you wish David Willetts were still the universities minister because – and surely even people who disagree with him recognise this – he loves and cherishes them, and wants more of our young people from all backgrounds to be able to get the higher education they want and that will serve them well. These are dangerous times for universities politically. For many voters, universities signify elite, remote experts, rather than dynamos of the local (and national) economy creating jobs and a rich cultural life.  There’s some truth in the charges – it’s why I, for one, believe so passionately in civic engagement, ‘impact’ and public debate about academic research. As the book adds, there are other challenges too – globalization, new technology. We could all think of things that need reforming about the system, but I fear there is some danger of doing real damage.

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