Categories
Development economics Research

What if … we all worked together?

In other words, “why science does not have all the answers… and why it needs to work with the social scienes for maximum impact”.

This post starts from the saying that a scientist can tell you how to clone a human being, but a social scientist can tell you why this might not be a good idea… or then how to regulate the technology and maximise social benefit if you’re determined to go ahead.

Similarly, I was watching BBC’s “Pandemic” on BBC4 with Dr Hannah Fry, which aired last week. This asked how vulnerable we might be to a viral infection that had decided to turn into a global pandemic. They took a group of mathematicians and modelled the infection rates of the virus across a small town in the south of England. The results were, frankly, worrying. A pandemic is coming. The questions relate to how prepared we are.

The approaches were entirely scientific, and consisted of mathematicians and virologists wondering how social interactions could spread a virus. It did occur to me that if they had included a social scientist on the panel, someone could have pointed out that scale, depth and nature of social interactions have actually been the subject of social science research for decades.

The team used smart phone GPS tracking to analyse social interactions and deduce the likelihood of infection from these.

The results of the Pandemic experiment revealed the existence of some so-called super-spreaders of infection. These were generally high-profile individuals in the community – people who ran local businesses or who spent time in cafes or busy hubs of social interaction. This led to the suggestion that vaccinations could be targeted at super-spreaders for maximum impact. This was certainly an impressive result of the experiment and hugely important if we are to respond effectively to a super-virulent strain of flu, for example (the experiment assumed possible infection from 20 metres away).

But, instead of focusing solely on science, what could the results achieve if we combined insights from the social sciences to change behaviour as well as immunity?

As we know, you can present people with all the facts in the world, and they will fail to change their behaviour accordingly. Vaccinations, the climate emergency, and so many other examples show that presenting people with “the cold, hard facts” will change nothing. There’s an side point to be mentioned here about the devaluing of information through the spread of “fake news”, but since the 1970s psychologists have demonstrated that “reasonable-seeming people can be completely irrational”. For a review of the main studies in this area and why reason and confirmation bias could actually be helpful from a social perspective, see this post in The New Yorker. Applying this to cognitive bias that can be dangerous for the belief-holder, the Gormans have analysed how we can tackle these mistaken thoughts.

On the other hand, research has shown that “nudges” and insights from social science can have as much, if not more impact than financial incentives. The Behavioural Insights Team, founded on Sunstein and Thaler’s “Nudge”, published in 2008, looks at opportunities to shift the context in which people make decisions, hopefully pushing them towards “the correct” choice. In the case of improving our diets, or reducing knife crime, this is obviously a good thing. But what does this mean for epidemiology, virology, and pandemic response?

What could we achieve if we combined the insights of the natural and social sciences? The BBC Pandemic experiment into how viruses infect a community are insightful. But only when they are combined with the insights of the social sciences to actually translate this into real human behavioural changes that could change lives.

For example, if we want people to wash their hands for 20 seconds using soap, telling them about how they are reducing abstract infection rates will have little impact. “Nudges” on the other hand, like installing timers next to taps, singing happy birthday twice, or better still stopping water-saving taps that cut off water after 3 seconds, will have far greater impact. Other nudges that could encourage people to wash their hands are reminders that “everyone else does”, and countdowns near taps that tick red until 20 seconds are up – potentially showing on a smart screen how many bacteria are left on the subjects’ hands… these are just suggestions. But imagine what we could achieve if we combined science and social science insights. We would be unstoppable!

Categories
economics Embeddedness Free market PhD Research Thesis Uncategorized

“Embeddedness” (and why we need to stop saying it)

Is the economy embedded in society? Is society embedded in the economy? Is the law embedded in society? Or is society embedded in a set of rules and regulations?

Have the law and economy become “disembedded” from society, and is this why the financial crisis in 2008 came as such a surprise? Would it help to “re-embed” the economy?

This post explores the use, misuse and abuse of the concept of embeddedness in the context of econo-socio-legal interactions.

Coinage of the term in the context of economic sociology and ESL is attributed to Karl Polanyi in his 1948 book The Great Transformation. Polanyi had reportedly been reading about the coal mining industry in the UK, and had taken the term “embeddedness” from descriptions of coal embedded in the walls of a mine. Thus, to Polanyi, the term was likely a relational descriptor and metaphor. Interestingly, despite earlier documented usage, Richard Thurnwald’s use of “embeddedness” has gone largely unremarked, enabling him to dodge the bullet of origination foisted on Polanyi. The term only appears twice on page 60 of Great Transformation, and then on pages 68, 73 and 135. There is no great overarching theme of embeddedness. Nor is there a definition offered. It is probably safe to assume that the word was a throw-away term of description that came to hand, and was then never given much more thought.

Little did Polanyi realise that 70+ years later, scholars would be puzzling over his meaning and even writing doctoral theses on the matter! One catalyst for the development of embeddedness into the core concept of sociological lenses was Mark Granovetter’s accidental revival of the term. Granovetter’s theory of networks, published in 1985, described the actor as embedded in networks. He has since admitted that at the time of writing, he had forgotten Polanyi’s usage of the term. Nevertheless, the success of Granovetter’s paper revived the career of embeddedness, but at the same time created confusion. Polanyi had been referring to the macro-level embeddedness of economy in society, although his “always-embedded economy” is more a theoretical proposition than empirically-proven reality. Conversely, Granovetter had used the term at the micro-level to describe the embeddedness of the individual in networks of interaction. Thus, development of the concept of embeddedness already straddled the micro and macro, giving rise of the question; “what are we talking about”?

Here’s the rub. When discussing the extraction of coal from a mine, for want of a better example, “embeddedness” is a perfectly adequate relational descriptor. It implies the co-existence of two conceptually separate phenomena in time and space; the coal, and the rock from which it is hewn. There is no problem with saying that one is embedded in the other.

Where difficulty arises though is where we also want to investigate the possibility that the two phenomena described not only share characteristics but might even be two aspects of the same phenomena. For example, we can say that the economy must be re-embedded in society if we accept that the economy and society are two distinct entities. This is clearly nonsense. An economy cannot exist outside of a society. An economy necessarily implies human interaction of a specific nature (economic). The same is true of law. We cannot imagine a legal system without a society behind, underpinning, and performing it. A legal system implies human interaction of a specific nature (legal). Therefore, stating that one is embedded within the other – whichever way round you phrase it – clearly does not make sense.

My research puts this in the context of ESL, which aim to reintegrate social science dialogue and which ultimately takes a constructivist approach. In other words, economic and legal phenomena (the econolegal) are performed through social interactions. All social interactions have econolegal aspects or flavours. There’s no escaping this, just as there is no way to have an economic exchange without it being between people (I’m excluding high frequency trading between computers here for argument’s sake, but will return to this in a future post).

Why is this important? Well, the response to the 2008 financial crisis is something we, in the UK, are still living with. Austerity, as the main policy response, was based on a particular understanding and framing of the economics that led to the crash. This is an economics that sees the discipline as somewhat ‘apart’ from society. Neoclassical economics sets out a version of ‘economic man’ on which complex economic theories are modelled. There has been recognition of the limitations of this approach. But in turn, those who criticise mainstream neoclassical economics frames tend to (with or without the help of Polanyi) argue that we need to “re-embed” the economy in society.

If we take this approach, we deny the possibility of ever seeing the economy as an aspect of society, the same as the law. We cannot hope to reorient the economy and its regulation (the law) towards real people if we talk about society, economy and law as separate entities. Speaking of one being embedded in the other simply reinforces their difference, their separation, and their disunity. It reinforces existing ways of doing, talking and thinking, which are predominantly shaped by neoclassical economics. It prevents us moving forwards.

So, what to do? We need to move beyond embeddedness, and how to go about that is the subject of a future post.

Copyright note: animation by me using ProCreate 5 on iPad Air 3. Please ask before you take!

Categories
Development economics methodology methods Research Vignettes World Bank

Vignettes as method… both an input and output tool

Vignettes can be an invaluable tool for generating, controlling for, interpreting and contextualising research data in a variety of fields. They can be both input and output methods of research. Finally, they can also frame, and be framed by, the research raising important questions about comparability, use, and ability to measure culturally relative norms. This post discusses the use of vignettes, when they might be appropriate, some relevant literature, and matters to be aware of.

Gourlay et al define vignettes as “short stories about a hypothetical person, traditionally used within research (qualitative or quantitative) on sensitive topics”. They can be used to gain insight into people’s beliefs, and can be a way of discussing sensitive or personal topics freely by projecting these on to a third person. Vignettes can be constructed through text or images, and Hughes and Huby set out a guide to constructing and interpreting vignettes as a methodology in the social sciences.

Vignettes can both generate or refine data. As the GIF above shows, they can be an input tool, generating and shaping the data gathered. Similarly, they can be used as an output tool, contextualising and illustrating research findings. Kandemir and Budd note that, given the debate ongoing about the precise definition and use of vignettes, simulations, real-life stories, anecdotes, or simply a narrative form of presenting research findings have all been referred to as vignettes.

In development economics, vignettes are not commonly deployed, but can respond to a specific methodological problem. For example, the measurement of intangibles such as happiness or subjective wellbeing or satisfaction can suffer from cultural relativity. Concepts, words, and their ultimate meaning can all vary by country or culture, making comparative studies in their area particularly tricky to undertake. However, in an era when the value of measurements like GDP have been questioned as inadequate, being able to measure satisfaction, happiness and similarly intangible attitudes is especially important for those working in development.

Reviewing the literature on what constitutes happiness between cultures, Uchida et al find that there are a variety of factors that determine an individual’s likelihood of declaring themselves happy, and that these requirements are culture-specific. What constitutes a good life in Japan includes emotional support from others, while personal achievement and self-esteem feature more prominently in the United States.

There are also cultural differences in the way we describe our happiness. Research by Minkov cited here notes that responses from Middle Eastern respondents tends towards extremes of happiness and unhappiness, while Asian and Western respondents tend towards moderation. Minkov and Bond have also examined the genetics of happiness as well as the impact of local climate, finding that certain genetic traits have a far greater impact on perceived happiness than factors such as recent economic growth or the rule of law.

King et al examined the incomparability of survey results when measuring subjective wellbeing and explored the use of vignettes as a way of measuring the incomparability. They find that “[b]ecause the actual (but not necessarily reported) levels of the vignettes are invariant over respondents, variability in vignette answers reveals incomparability. Our corrections require either simple recoded or a statistical model designed to save survey administration costs. With analysis, simulations, and cross-national surveys, we show how response incomparability can drastically mislead survey researchers and how our approach can alleviate this problem”.

One technique to measure and make sense of the variables in to anchor survey results to vignettes. This method is used by Angelini et al in their cross-country comparison of subjective wellbeing in 10 European countries. Standardised vignettes on life stories were included in each of the ten national surveys, and the vignette responses were included through econometrically rescaling self-responses according to how the respondent rated the standardised vignettes. This reduces disparities in life satisfaction across nations, and changes the ranking across counties from the original unadjusted cross-country data.

While the anchoring vignettes method has the potential to improve welfare comparisons and reporting, it relies on certain assumptions like vignette equivalence. This means that a particular vignette is capable of being interpreted and have the same cultural ramifications across the populations surveyed – for example, is a large family a blessing or a burden? There are ways of testing vignette equivalence, but this also usually requires some degree of interpretations and relativity.

Jed Friedman remarks that “[v]ignette anchoring can indeed improve the inter-comparability of different samples so where researchers have the opportunity to add meaningful vignettes to a planned survey then they should do so. But the assumption of vignette equivalence is not guaranteed, especially when comparing dramatically different populations in terms of culture and custom. If we have any doubt about vignette equivalence there may be no alternative to more focused mixed-methods research into the interpretation of [subjective wellbeing] concepts specific to the populations studied”.

While vignettes anchored to subjective wellbeing analyses can measure the incomparability of data, there are limitations to their use that also need clear explanation. The problems with language, interpretation, translation, and cultural norms remain, and there is the possibility that use of a vignette as a methodological tool to control for variability and comparability is still simply testing cultural frames. As noted, vignettes can both be used as a tool to output (explain, contextualise and understand) data, and as a tool to input (gather, frame, collect) data. Kandemir and Budd note that, to be of value, the vignette must be specific enough to guide the respondent, but not too specific as to nudge the respondent into an “expected” answer. In short, vignettes can both frame, and be framed by, the cultural norms in which they are constructed and deployed, and any researcher must be mindful of, and reflexive about, the use existing frames within vignettes when these are used both as research method inputs and outputs.

Categories
Development economics PhD Procreate Research Uncategorized Vignettes Visualising ESL

Making research relevant: Meet Ann, Pol, and Lil

One of the biggest challenges for anyone working on conceptual issues is making their research relevant to everyone else. After all, the first question any researcher should be asking themselves is “who cares”? This is not the passive-aggressive, somewhat depressing question that it could be, but rather a positive nudge to any researcher to bear in mind why you’re doing the research, and who is going to benefit from it.

My research is primarily conceptual, but has three main audiences: academics engaged in sociolegal research, policy makers working in international development, and a lay audience seeking more innovative responses to the financial crisis. Using designerly approaches to make the research tangible and visible, this post puts a face to each of these groups. Let’s meet each in turn.

Introducing Academic Ann…

Academic Ann

Ann works at a university as a law lecturer. She is researching the importance of the legal system for any country wanting to attract foreign investment. She is planning a trip to Sri Lanka – her target country for research – and is going to talk to government ministers, business people and investors, and local communities around investment zones. But how should she frame her research? How can she hold the interests and views of such a wide range of people in one frame at the same time?

Introducing Policy Polly

Polly has been working at an international development institution for several years now. Her job requires her to use existing research to make policy recommendations for foreign governments, international agencies and charities. She wanted to work in development to reduce poverty, but has become disappointed by the lack of tangible impact her work has, and has been wondering whether there is an alternative approach to understand the causes and ways of addressing poverty.

Introducing Lay Lillian

Lay Lillian

Lillian is not an academic. Nor does she work in development or policy. In fact, she is a retired dinner lady and pillar of her local community. She doesn’t know much about “the law” or “the economy”, but she cares about her community, and knows that something isn’t working properly. The economy crashed in 2008, and a decade of austerity was rolled out. She was told that there was “no more money” and that budgets across the country needed to be cut. But while her community saw centres close and support disappear, she noticed that the rich continued to get richer. So, she began reading about the crisis, and noticed that there were a lot of people arguing that we need to “do” economics and law differently. Lillian is an interested bystander, and wants to know more.

Why the characters? Personae can be a useful tool for exploring research concepts. We can see the relevance of concepts and frames for our own lives. They can make the conceptual visible and tangible.

Each of these will be developed in future posts, and will each bump up against the limitations of the ways we currently do, talk, and think about legal and economic phenomena. Each of them will then try an ESL lens using embeddedness and then moving beyond embeddedness. Through their eyes, we can explore the benefits and drawbacks of reframing in different contexts and for different audiences.

In the meantime, these characters are by me, using ProCreate on an iPad. They are rough first drafts, and the characters will be developed along with their stories. Copyright 2020.

Categories
economics Maps Research Visualising ESL

Maps and mapping…

Sean C Jackson is an artist who draws maps and mazes. The Guardian featured his work recently, and you can see it here. His maps are mostly imaginary, but ask the viewer to dive into the world he has created and puzzle through it. Most of the works sit somewhere between 2 and 3 dimensions, which can make for some disorientation at times, and asks you to engage with the work by turning either your head or the page.

Topography and mapping can be useful ways of visualising ESL, interactions, and social phenomena. Like a map, an ESL can highlight the relevant and hide the irrelevant. Like a map-maker, the researcher using an ESL must choose what is relevant and important and why. Like a map, an ESL lens can also zoom in on areas that are more important, while identifying but minimising others. As a result, we can appreciate the whole landscape in all its complexity and understand the context of the research.

If we were to map out current mainstream approaches in law, economics and sociology, how might it look? The picture below is a (stylised) suggestion that the academic silos of law, economics and sociology would look be islands of research endeavour. They are separated by sea, and generally have their own languages, cultures, and traditions. Some brave interdisciplinary scholars traverse the seas and work on two or more islands, but many do not.

Map of current mainstream disciplines
Current mainstream disciplines as islands of endeavour

How might it look if we were to draw an ESL as a response to these islands? Would they converge? Would we need bridges, ships, or loudspeakers? Would this enable inter-island dialogue, or just increase competition? And what could a map of the topography of ESL tell us about the lens?

Categories
economics Procreate Research Thesis Visualising ESL

Visualising interactions in colour

What if we visualise interactions according to their type? Legal aspects of interactions are red, economic are yellow, and social or other aspects are green.

The first GIF here imagines what interaction patterns might look like if we use yellow for economic phenomena, red for legal phenomena, and green for social, political and/or power-oriented phenomena. They are presented separately, performed between actors represented by the red dots.

The following GIF asks what this might look like when these phenomena occur simultaneously.

The colours show the various phenomena as they are simultaneously performed through interactions.

It is worth noting though that by using colour to separate out the economic, legal, and social phenomena, we are using “embeddedness-based” ESL lenses. In other words, we are accepting that legal, economic and social phenomena are separate.

As I argue elsewhere on this blog, if we really want to talk about, think about, and do the econolegal better, we need to move beyond embeddedness.

Future posts will explore what this might look like.

Categories
economics Procreate Research Visualising ESL

Visualising interactions using Procreate on the iPad: an update

I’ve recently started using ProCreate on the iPad to explore visual representations of econo-socio-legal interactions. My portfolio has always relied on the good, old-fashioned pen and paper approach, so it’s been really exciting trying out different technologies. I’ve been updating my portfolio and recreating the pieces digitally, which I’ll discuss in this post – with pictures!

I’ve found the app to be really responsive and a fun and easy way to get creative. The Apple Pencil can be a bit frustrating to use as it has that “drawing on glass” feel, and runs out of battery at crucial moments. But the feedback and pressure sensitivity works really well and makes drawing on the iPad a really enjoyable experience.

But on to the content! Here is a first attempt using Procreate at recreating the social fabric of interactions, weaving together three layers. Here, they are legal, economic, and “other” aspects of social interactions. This recalls the goals of Economic Sociology of Law-based approaches that want to recombine legal, economic and social phenomena, as well as recognising the importance of others aspects of interactions. In this, we can refer back to Max Weber’s four interaction ideal-types (instrumental, affective, belief-based, and a traditional); all of which fit into the “other” layer here.

In case there’s any doubt about the three layers, we can add some colour. For me, law is best represented in red, economics in yellow, and social otherness in green.

Then, adding in economic aspects of interactions…

And then, the social “other”, completing the woven fabric of interactions as seen through an econo-socio-legal lens…

The really cool thing about Procreate is that is can record everything you do on a particular canvas, and can reply the progress of the piece as a time lapse video. If you want to see the steps involved in creating this piece, it’s on my YouTube channel here.

I’ve also started redrawing representations of orthodox economics, economic sociology, and economic sociology of law. The idea is that the main stream, orthodox economic theory relies on assumptions and models that provide a straight jacket and that sociological and econo-socio-legal framers can moderate this and make the approach more flexible and more reflective of real life.

So, in the first image, neoclassical economics is drawn as straight lines, with little flexibility outside of the predetermined categories built into the models. In this sense, it fails to capture the complexity and unpredictability of real world interactions.

By incorporating more insights from sociology and from focusing on interactions rather than actors, we can capture the full extent of how complex, dynamic, and unpredictable real world interactions can be, and what this might look like…

All that’s needed now is a roadmap from the orthodox to the heterodox… a visualisation of which I’ll post as an update!

Categories
economics Free market Gig economy Infrastructure Research Uncategorized

Complexity and Community are crucial for rethinking economics

What could society look like if we do economics better?

Do mine eyes deceive me? I came across this post by Evan Davies on the BBC website, where he blogs about the changes taking place in economics. For those fond of the TL;DR, he says that economics has been, and still is, in need of a radical overhaul, given that most economists did not foresee the 2008 financial crisis, and that economics has not addressed its flaws in the decade since. Davies sets out the “two Cs” that make “neoliberal” or orthodox economics models risky (to put it mildly), and these are Complexity and Community. The short version is that people are Complex souls who live in Communities. Well, duh! Some of us have a been banging on about this for a while now.

Davies is clear not to make a straw man of mainstream economics though. And this is an important point. Microeconomics – the small-scale interactions between actors – has been remarkably successful in boiling down our collective lives into theories, formulae, and models that guide economists towards understanding how we act (and then nudging us in the right direction to make better decisions). But macroeconomics – the larger scale stuff that includes GDP, interest rates, international trade and investment and so on – tends to draw on the microeconomic theories and scale them up. But as we all know from experience, the more people you include, the more complicated it becomes to plan anything. And that’s before you start on complex interaction patterns across communities and societies.

Why have things started to change now? As I wrote in a previous post, change occurs gradually. Many successful careers have been built on the status quo of neoliberal or neoclassical, orthodox economics. The core of the academic economics community has developed, advocates, practices and teaches this approach. So revolutions, as in most areas of life, tend to be the exception. When we start to question the entire shape and direction of a discipline, there are myriad interests at play that all need to be reoriented. The mainstream journals, senior economists, and general momentum is geared towards neoclassical theory, and its implementation as neoliberal economic policy. In short, we are steering an oil tanker rather than a Mini Cooper.

Secondly, neoliberal economics is plugged into and reflected in the political mores of the day, and neoliberalism in politics remains in the ascendancy. A theory of economics that retreats from and questions this is bound to raise eyebrows. Perhaps then, eleven years might be a relatively short timespan for the reorientation, or evolution, of a discipline.

So what changes are actually happening now? The past decade has seen a wave of literature questioning the type of society we want to live in, both locally and globally, and the type of economics that might realise this.

But there are more recent projects turning explicitly to the way we do economics and its role in society that are much more exciting. The NIESR has a project underway Rethinking Macroeconomics, which is ESRC funded. The IFS is launching a project looking at inequality in the UK and targeting questions like the kind of society we want (a particularly timely question in the light of the most recent UN Report citing poverty as endemic in the UK). And then there are the centres rethinking traits of orthodox economic theory like the Paul Woolley Centre at LSE, the full title of which is “The Paul Woolley Centre for the Study of Capital Market Dysfunctionality”. The Centre essentially asks what happens if the frictionless markets featured in economic models suffer from, well, friction.

But what alternatives are there? If you’re familiar with some of my previous posts, you’ll know I’m a fan of socio-economic and econo-socio-legal approaches that take economics back into the social sciences. There are myriad alternatives though within these disciplines, including relational work, actor-network theory, community lens, network analysis, systems analysis, and many more. Zooming out somewhat, historical, geographical, psychological and anthropological approaches can also contribute to an understanding of economics as it really is performed in the real world.

But, why should we care? To make a bold, and controversial statement, economics is usually one cause of most social issues facing us today. What do I mean? The rise of populist politics caters to the anger and frustration of the “have nots” in society (economics). Austerity as a response to the financial crisis enacts neoliberal economic theories (economics). The lack of living wages and the rise of insecurity, the precariat, and the gig economy has resulted from technology and a reluctance of government to intervene based on neoliberal economic theories about the free market (economics). Climate change and global warming continue unabated because of the economic consequences of actions to tackle environmental issues head on (once again, economics).

In short, if we want to get society right, we need to get economics right. And that means a retreat from the belief that there is one “right” way of “doing economics”. It means recognising (or re-recognising) that economics is about how people act and interact. And that we do not always act rationally, or even in our best interests. Until economics models and formulae reflect this, we are left with a hollowed-out version of economics that cannot reflect the full complexity of real life. And this is something we all pay the price for. A broader, richer understanding might help us spot the next financial crisis looming on the horizon.

Categories
economics Research

The Science of Economics? What Works, and How Much…

We do seem to be talking more about economics – what it should do and look like. But there is still a whiff of revolution about calls for the discipline to be more evidence-based and, well, scientific. This article, by Philip Aldrick in the Times yesterday, argues for more careful scientific approaches, and this is worth noting. Of course, in the natural sciences, this would be taken as read. Drugs need to be extensively trialled before they are sold and used to treat disease in humans. But for some reason, in the social sciences, theory and ideology have the ability to shape policy just as much as evidence.

Aldrick’s piece cites two studies launched by Nesta, a UK Innovation think tank, roughly seven years ago. The first was a retrospective review of the effectiveness of business clusters; do small businesses do better when they are closely located and can share location and labour advantages? The second was a randomised controlled trial on whether tax relief for small creative companies worked. The results of the studies were not their most important findings however.

For the sake of finishing a story, the first study proved relatively inconclusive, and could not find any clear correlation between clusters and growth. The second study found that tax and financial incentives were helpful in the short term for small creative businesses, but after 12 months any advantage had faded.

So, what was the main impact? The reason these two studies are remarkable are for their illustration of research methods. While retrospective reviews – generally the majority of most empirical work in the social sciences – can only look for correlation, randomised controlled trials (RCTs) can go deeper, further, and can identify causative factors. In other words, we can target specific factors and identify why things happen. This is important because it means we can be more scientific about what works, how it works, and why. And this means we can begin to base policy on evidence rather than theory. RCTs also offer a way of measuring the extent of policy impacts. By having a test group and a control group, we can gauge the extent to which a policy really makes a difference. And that means we can evaluate whether a policy is financially and economically viable. So, RCTs offer a way of seeing not only what works, but how much.

Why is this news? Similar to other recent posts on here, there is increasing discussion of economics and how the discipline can be improved in the mainstream media. Aldrick’s argument is that economics – both the research and the formulation of policy – can and should be more scientific in its approach. And to this end he calls for more RCTs and longer term studies testing causation before policy is enacted. The government has launched the Business Basics Fund with Nesta to carry out trials investigating, among other things, productivity. UK productivity lags behind that of other countries, attributed generally to poor management practices. But how can management practices be altered to improve productivity?

Questions like this lend themselves readily to RCTs where different techniques can be trialled in comparison with a control group. Nevertheless, there are questions of macroeconomics that are not suitable for trials. We cannot test interest rates or tariffs, for example, against control groups. And this remains a problem for the larger questions tackled in macroeconomics, where theory remains a significant influencer of policy.

Calls for greater use of careful empirical data in shaping economic, legal and social science policy is not new though. Economic sociology, economic sociology of law, and sociolegal approaches have long stressed the need for analysis and understanding to be based firmly in the real world, on real data, and about real people. Increasing access to big data and AI could enhance this. As Aldrick states, “Economics is a social science. Why not make it more scientific?”

Categories
economics Free market Infrastructure Research

Waiting on the market?

The UK government has finally declared a climate emergency. This is great news of course, but what does it really mean in practice? And what is this doing on a blog about law and economics?

The government in the UK has subsidised the purchase of new electric and low emission vehicles in a a bid to support and stimulate the market. But at the end of 2018, the government reduced the available subsidy rates, the makes and models of cars that were eligible, and capped the number of vehicles that could be purchased under the scheme. It’s really no surprise then that the rate at which electric and plug-in hybrid vehicles have been sweeping the market has fallen since the subsidy reduction. Indeed, sales of plug-in hybrid cars fell by one third in the period to April 2019. This is, of course, against the backdrop of a clean air crisis, a backlash against Diesel engines and emissions scandals, and the Extinction Rebellion protests calling for every tighter emissions limits.

So, it would make sense for the government to support the clean(er) transport industry, including electric and low emission vehicles. More to the point, the industry seems to be crying out for a level of oversight, investment, and general co-ordination. While some companies have started to set up charging networks across the UK, these are often not cross-compatible, resulting in up to 15 different types of charging points that drivers of electric cars have to navigate. What’s more, charging points tend to congregate in wealthier areas of the country, while residents in poorer areas struggle to find a single charging point. On top of this, most experts agree that if the electric car revolution is to take off, fast charging – or the ability to charge a car to 80% in 30 minutes – is essential for the success and sustainability of the network. The problem is that the national grid in the UK is simply unable to support the required wattage, or provide the increased levels of electricity required. We would, literally, face a melt down. The answer is a massive investment and overhaul of the underlying infrastructure.

So here we turn to economics. Once again, the problem is not technology. We have the knowledge, the tech, and the skills to make the green revolution happen. It comes down to economics.

The UK government has repeated its mantra that it is waiting for “the market” to step in and develop the charging networks for electric vehicles. Meanwhile, “the market” currently complains that there is insufficient basic infrastructure available for them to build on. This is not a new dilemma, and as Mariana Mazzucato has documented, a great deal of the tech that has driven progress over the last half century has developed out of state-funded R&D. Steve Jobs did not “invent” GPS or the touch screen; he took the technology and packaged it up in a shiny box.

It feels too obvious to state that a network of charging points for electric vehicles across the UK needs to be integrated and cross-compatible. It also feels obvious to state that this network needs to be connected to a grid that has the capacity to charge the nation’s cars, if we actually want people to move to cleaner, greener, options. It also feels like common sense to point out that this level of integration, planning, and investment needs to come from the state, as the only entity with sufficient oversight, patience, and funding. Or, at very least, it needs to come from “the market” working closely with the state to achieve clearly set targets that can establish a nationwide network that avoids duplication and achieves integration for the greatest value and usability.

The markets for broadband and mobile phone coverage are instructive here. There are still areas in rural Somerset in 2019 that have no mobile phone coverage. Understandably, where the market is left to decide where to invest, it will do so where the returns are greatest, and this is in towns and more densely populated areas. Given the basic underlying premises of business and shareholder value maximisation, this is to be expected.

The problem arises when ideology and a die hard belief in neoliberalism takes hold and denies the valuable role that state involvement can play. Writing in 1944, Karl Polanyi emphasised the utopian nature of the ideological divide between state and market, and criticised the belief that the free market was entirely self-regulating. He pointed out that both market and state relied on the other, and that some degree of state oversight and involvement was necessary if society was to avoid the worst effects of the free market. To use the example of the telecommunications failures, the government can step in at this point and regulate the operation of the market to ensure that everyone has access to broadband, whether they live in London or rural Somerset, and regardless of the cost to the company bidding for the contract.

At the same time, the market benefits from state involvement, and the examples of infrastructure such as an enhanced national grid, green power and a network of clean vehicle charging points on which the green transport industry can flourish is an archetypal example of where the close collaboration between the two spheres has never been needed more.