This week, Project Syndicate catches up with Diane Coyle, Professor of Public Policy at the University of Cambridge
Project Syndicate: You’ve advocated the use of industrial strategies “to support particular strengths in production (through innovation policies or procurement frameworks) or to address weaknesses (in areas such as skills).” Taking the example of the United States, which policies have the most potential, and how likely are they to be implemented?
Diane Coyle: Every country, including the US, already has an industrial strategy in some form, whether that be investing in basic research in areas like artificial intelligence or genomics, engaging in defense procurement, or offering tax breaks for investment in R&D. But, to avoid wasting taxpayer dollars, those strategies must be designed strategically.
Today, zero-carbon technologies are an obvious area where a country like the US would do well to support research and investment. At the same time, governments can help to close – or prevent – skills gaps in the industries of the future, such as data science, by improving coordination between training providers and students.
PS: “A digital platform is either large or dead,” you wrote last summer. Does this imply that leading US Democratic presidential candidates’ plans to break up dominant tech companies would be tantamount to killing them? If you were tasked with reining in the growing – and largely unaccountable – power of Big Tech, where would you start?
DC: The network effects that operate in many digital markets make it likely that there will always be dominant companies. On the flipside, many digital platforms fail, because they never get large enough to take advantage of network effects.
Given this, competition has to be sequential: a newcomer with a groundbreaking new technology must be able to overthrow the incumbent. When Google’s search engine came along, everyone switched from Yahoo, because it was inferior. This is an essential element of the process of “creative destruction” that the twentieth-century economist Joseph Schumpeter described.
I don’t think that we need to go as far as breaking up Big Tech to achieve this, at least not yet. Other measures that could improve competition in these markets include regulatory requirements on data interoperability and access, and codes of conduct. Earlier this year, a UK government digital competition expert panel, of which I was a part, made several recommendations along these lines in our report.
PS: You have repeatedly highlighted the inadequacy of prevailing economic assumptions, from the belief that economic agents are independent to the notion that real GDP growth is a good indicator of progress. What will it take to persuade not only academic economists, but also policymakers and the public, to rethink such assumptions?
DC: The prevailing intellectual framework for understanding how the economy operates can’t be transformed overnight. Of course, as history shows, change of this magnitude is possible. It arises from the combination of new ideas and major events or crises – factors that force people out of their intellectual ruts – and organization. Much like technological adoption, the process goes very slowly, and then very fast.
A look at the research topics that have been gaining popularity lately – for example, economic measurement, technology and innovation, climate and behavioral economics, and complex-systems and agent-based modeling – suggests that change is already happening in the academic community. In the policy sphere, however, progress will be much slower, because people working in this area learned their economics a while ago.
That is why it is so important to update economics curricula in ways that ensure that future generations of policymakers have a more modern, flexible perspective. CORE Economics – an open-access platform, of which I am a trustee – is working to address this pipeline challenge.
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We ask all our Say More contributors to tell our readers about a few books that have impressed them recently. Here are Coyle's picks:
by Melanie Mitchell
A clear and concise explanation of what AI entails, its history, and some of the challenges it raises. I elaborate on my impressions in my blog.
by Matt Stoller
An account of the origins of US antitrust law in the early twentieth century, which helps to explain today’s “neo-Brandeisian” movement among antitrust experts. The perspective is very American; European antitrust policy has been more stringent, and its enforcement more vigorous. While I haven’t yet finished the book, I am enjoying it.
From the PS Archive
Coyle reviewed three books assessing what has and hasn’t changed in economic thinking and research since the 2008 crisis. Read the long read.
Coyle showed how regulation can create markets, boost competition, and protect consumers. Read the commentary.
Around the web
Coyle spoke to openDemocracy about industrial strategy, universal basic infrastructure, moving beyond GDP, and how to build an economy that works for the twenty-first century. Watch the interview.
At the WIRED Smarter conference, Coyle discussed why the economics of Big Tech shouldn’t surprise anyone. Watch the talk.