Free thinking about economics

Fri 13th February 2015 | Blog

Free thinking logoOn 12 February Wendy Carlin, the head of our steering group, took part in BBC Radio 3’s Free Thinking debate on “Britain’s Economy”, chaired by Anne McElvoy. Alongside her: Will Hutton, political economist and author, whose new book argues that “the free-market economy has delivered a very different outcome from promised” (Financial Times); Luke Johnson, an entrepreneur; and Richard Davies, The Economist‘s economics editor.

If you can use the BBC iPlayer, you can listen to the 45-minute conversation here. If you prefer, you can download the podcast.

The conversation ranged from a discussion of policies to promote long-termism in firms, to a debate over whether more economists should have experience in business. The panel also spent time discussing how better economics education could stimulate this wise policy insight – and entrepreneurial success – in future graduates.

It would be impossible (and less interesting than just listening to the podcast) to summarise the full 45 minutes. But, a few highlights for us:

  • Richard Davies said that he was convinced by CORE’s approach, partly because it emphasised the lessons we can learn from the past (and past economists):

Two things that Wendy’s curriculum picks up on. The first one is a bit depressing: it’s that we’ve seen everything we are seeing now before, and that suggests we should have a much stronger teaching of the history of economics… [CORE] also emphasises the teaching of the history of economic thought.

(The Economist has written about CORE several times, most recently on 7 February this year.)

  • In The Economy we have tried to show how good economics is grounded in real-world experience, and based on evidence rather than ideology. There was one example in the debate: discussing whether welfare states doom European economies to be uncompetitive, Wendy Carlin pointed out that, in some cases, evidence shows the opposite is true. The data shows that Nordic economies, she argued, have been some of the most innovative in the world, promoting risk-taking even while maintaining low levels of inequality and a strong welfare state. These policies helped long-term growth by ensuring that citizens were not only protected from poverty, but also retrained when they lost jobs as a result of technological progress (readers of our ebook may recognise this from Unit 15, section 7). Serial entrepreneur Luke Johnson agreed that the welfare state can promote innovation with an example from the UK:

It’s true that not long ago an American told me that in some ways it is easier to start a business in the UK than in America – because if you leave a job there you have no health cover, whereas in the UK you have the National Health Service.

  • Asked for a lesson from the financial crisis, Wendy quoted Hyman Minsky’s insight:

When the world is very calm, and everyone thinks that risk has gone down, we should be very concerned.

For more on this insight download the latest beta release of The Economy, which will be available on 16 February. Minsky is in the new Unit 17, section 9.