One day, Jean Tirole, the French economist, stepped out onto the street and noticed people would stop him at every corner. “Please, we need an Economics book that we can understand!” they implored, as to some kind of Messiah. Tirole had, only recenty, the Nobel Prize in Economics (2014). And so, he decided to write a book meant for the public at large. The result is 577 pages long, and has been a success in France. Its title is “Economics for the Common Good”. It has now been released in Spain, under the Taurus publishing seal. The book was presented at the Rafael del Pino Foundation in Madrid, where the following interview took place.
And just what Is Economics for the Common Good? “The economy is not a servant to private property and individual interests, nor to those who wish to use the State to impose their own values” Tirole says at the start of his book. “The economy serves the Common Good in order to make a better world.” Full stop.
Tirole, born in Troyes in 1953, graduated as an engineer from the Paris Polytechnic School and went on to a Doctorate in Mathematics at the University of Paris-Dauphine. His greatest push, however, came when he left for the USA to study at the Massachusetts Institute of Technology (MIT), graduating in 1981 with a PhD. in Economic Sciences. The book sketches out, in layman’s terms, part of the work that would earn him the Nobel. Why is the economy so hard to understand? What are the limitations of the market? Why do certain social policies have such terrifying backlashes? What are the challenges presented by new technology? When should the State be reined in?
Q. Did anybody offer you advice for writing to a wider audience?
A This is the first time I write for a mass audience. I have written for politicians before, or for experts in economics or for businesses. The problem is that we use academic jargon, and the problem was making something that other people could understand, as we tend to take things for granted.
Q Isn’t that approach part of your idea of the Common Good?
A Yes. It’s important that we expand our knowledge.
Q In your book, you say that one of the problems with the crisis in 2008 was that economists failed to inform people well.
A. For example, Spain was undergoing a financial bubble, and there were experts around who knew this. The Bank of Spain warned everyone, but they were never able to make the majority of people understand.
Q You begin the book talking about cognitive bias, that is, the way our economic reasoning is influenced by hidden prejudices.
A If we don’t understand our cognitive biases it can be hard to comprehend why people do certain things: Why we procrastinate with our chores, anything to do with alcohol consumption, savings…
Q Was Brexit a case of cognitive bias?
A No. It was a clear case of Imperfect Information. British people ware made to believe that they could do better with Brexit than without it. They had an incorrect notion of how much they would save if they no longer had to contribute to the EU’s budget. And that protectionism would benefit them.
Q And that immigrants were taking their jobs…
A Look: Immigrants don’t steal jobs. People don’t understand, because they believe there’s a limited amount of jobs. In the short term it may be true, there may be a limited number of jobs, just as in the short term there is a limited number of books around. But countries with high immigration don’t have a very high unemployment. The US, Scandinavia, Britain and Germany all have lots of immigrants and low rates of unemployment.
Q Can you solve a riddle for us? How is it that many US workers can believe that Trump will get them their jobs back, when there is very little unemployment in the country?
A Because there is a part of America that has become very rich, with very high income, while the poor have only had a 6% raise in their paychecks over very many years. Globalization has made the USA wealthier in general, but it has been uneven. If someone in the Midwest loses their job they won’t be finding a similar job in a similar environment; they will have to move, and switch jobs. This has caused some discontent. Trump has exploited this anger, by offering the wrong solutions.
Q In the film ‘Gran Torino’, Clint Eastwood portrays a retired Ford factory worker who feels threatened by immigrants. Is this a good portrait of the USA?
A True. Every country has its own films dealing with this phenomenon. In France it’s La Loi du Marché (The Law of the Market). It won an award at Cannes. It’s about an unemployed man who finds a job at the supermarket, but the position isn’t a good fit for his abilities, so he fights with his boss. Films like these reflect what people have suffered as the economy evolves. It’s real. I’m a supporter of globalization, because it has been generally good, but we haven’t paid enough attention to the losers of globalization. And now Populists are exploiting it the wrong way.
Q Plenty of new parties in Spain are exploiting it.
A Spain has been hit hard by the economic crisis. People are right to complain, but they have been bad at choosing the right measures to take.
Q What do you make of the crisis in Venezuela?
A Venezuela is precisely the wrong way to do things. It should be a very wealthy country, since they have the largest oil reserves in the world, and it’s a relatively small country of 30 million people.
Q Norway has oil, it’s small and very rich. Venezuela isn’t. Why is that?
A It’s because, if you choose the wrong policies, you can make a country poorer. This has happened with North and South Korea. It happened in East and West Germany. We’re not talking about a 10% difference in income between them, we’re talking about a monstrous difference! In France we have people who think Venezuela should be a role model, and that puzzles me. They don’t know what’s really going on there. They can’t see what’s behind the curtain.
Q In your book you speak about the impact that technology can have on jobs. If I were a taxi driver, would you recommend I switch to Uber?
A That is all going to become obsolete very quickly due to the rise of self-driving cars. 10 years from now I don’t think there will be Any taxis. If you’re a taxi driver you have two ways to react to Uber. You can either try to compete with Uber and become more efficient – which is what the taxi drivers of Paris are attempting – or you can block the streets and stick to your routine – which is what’s happening in Toulouse. I like Uber’s service, because it is very good. Of course, some things have to be brought to level with Taxis, such as having the same Social Security obligations. But it’s true that the taxi service in France is often very bad, expensive, low quality and some cheaters.
Q What kind of question should we be asking about this?
A The key question here is how the Digital Economy is going to affect your job and your world. It’s changing everything. Your job as well as mine. That isn’t a new thing, there have always existed fears about the impact of technology on employment. However, the impact was relatively slow-acting before. Now the effects are felt very quickly.
A Yes. Jobs are changing very quickly. For example, thanks to genetics, blood tests and computers, we will soon have very precise medical diagnoses. What will a Doctor’s job be like in 10 years? Completely different. The job for a professor will be totally different. I may lose my job as a teacher in 5 or 10 years. We have to be prepared, and this is where the good and bad solutions come in. A bad solution is to try and protect jobs. As I say in my book, one should protect workers, not jobs. We have to protect people, because jobs will change in the future. We have to protect workers by giving them social security, of course, as well as entertainment, education… I don’t think we spend enough on education. We need a constant process of training, so people will learn new skills. We have to be learning all the time.
Q If I were a student, what would you recommend?
A Education is also going to change. We will have to teach people how to learn more, and maybe give them less facts. You can find plenty of facts on Wikipedia. A physician using a certain software can even learn about genetics and perform tests. Knowledge of fact is less important, as it’s accessible to everyone through their computer screen. Thinking is more important. The way we think, the way we adapt our knowledge to new skills, that’s more important. We have to re-train ourselves all the time, and it’s not easy.
Q So you’re telling us we have to learn how to learn?
A Even professors will have to adapt to this trend. When I give a lecture I try not to give my students too many facts, since they can find that in books or articles. I try to say to them – “Here’s a situation, what do you think about it? What do you think of this measure?”
Q Like Socrates. Helping them think.
A I say to them: “How will you tackle this problem? What comes to mind?” That’s a lot harder than just passing on knowledge. Teaching facts is easy, since you simply have to read your own papers out in class. But believe me: It’s not easy at all to teach someone to think. Professors aren’t prepared for it, but it is very important.
Q What about the good consequences of technology?
A On a global scale, we will be wealthier, with better sanitation, and we’ll live longer. Thin about search engines, Waze’s GPS, the internet in general. We will have better technology to help us combat ageing and increase the average amount of wealth. However, there will be consequences we have to deal with: One of them is that inequality will increase, both within and between countries. Within them, because there will be a greater demand for skilled people. Between them, because talent can move from one country to another. This is worrisome. If you look at the large new companies –Google, Apple, Microsoft – they are all immensely rich and have rich employees: the average salary at Facebook is two million Dollars a year. And they’re all in the USA. Those who invent things in other countries already speak English and are globalized. The danger lies in all that creativity and innovation being concentrated in only a handful of countries.
Q Have you been pressured by any parties or interest groups to join them?
A It’s very clear to me that I won’t be getting into all that. During the elections in France I co-signed a letter speaking out against populism (referring to Marine Le Pen). But I want to stay apart from politics, whether on the left or right. [Tirole would not discuss Macron’s reform programme]. I can offer my advice privately, but not lend my support. I say this in the book: I don’t want to be someone who supports something. All I do is talk economics. My role is to explain. This is hard, because when you talk about the economy, if the Left and the Right are in disagreement they take it as your standing in favor of certain politicians. I don’t participate in these acts. I have my own values, like anybody else. I’m an Economist, and I’d like to remain in this position.
A Independent. It gives you more power.
Q I believe I read in your book that the reason why developers bother with Open Source coding is that they are very selfish, and they are actually doing this to gain recognition and perhaps a job.
A I don’t mean that they are selfish in that sense, but they respond to certain incentives. Most people are truly generous and want to work towards the Common Good. The other incentive is the opportunity to stand out, since these programmers sharing their code are usually quite good, and tend to be picked up by the likes of Google or Microsoft. That’s the kind of altruism I mean. And finally, the image. We all want other people to wee us as kind, generous, intelligent… We all respond to incentives.
Original Interview (In Spanish): El Mundo