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Volcanoes are erupting in The Philippines, but on-fire Australia received some welcome rain. The Iran war cries have been called off and The Donald’s military powers are about to be hamstrung by the Senate. Meanwhile, his impeachment trial is starting, and we’re all on Twitter for a front-row seat.


GDP Ain’t Measuring Up

Featuring Diane Coyle

When you hear the word “economics,” do you hit the snooze button? Yet how we structure our economies, whom they serve, and even what we decide to measure has an enormous impact. A few changes could mean the difference between a world we’ve sucked dry and one where we all flourish. We talk through the unknown outcomes of a post-COVID economy and why we need to move beyond GDP with Diane Coyle, co-director of the Bennett Institute for Public Policy at the University of Cambridge, who conducts interdisciplinary research on key policy challenges of our times.

Prefer to read? Check out the Audio Transcript

Zachary Karabell (ZK): What could go right? I’m Zachary Karabell, the founder of The Progress Network. And I am here as always with Emma Varvaloucas. The executive director of said Progress Network, and we are having a series of conversations with seriously interesting people about seriously important topics. One of which today is how we are measuring and trying to figure out the world we are in economically. Now, when people hear the word economically, there usually is a pause followed by a snooze button. But in this case, trying to figure out what the world looks like economically in a post-pandemic, or at least a hopefully post-pandemic world, where governments have been spending trillions of dollars in ways that violate every rule that supposedly existed until well yesterday does raise the question of are the ways we thought society is working economically actually the way society needs to or should, or even does function economically. And so today we’re going to speak with a member of the progress network, Diane Coyle, who has been one of the more creative and innovative thinkers about how are we measuring the world?

Emma Varvaloucas (EV): Diane is the co-director of the Bennett Institute for Public Policy at the University of Cambridge. She works in interdisciplinary research on the key policy challenges of our times. And our times have many challenges. She is the author of numerous books, most recently, “Cogs and Monsters,” out in October 2021. And she’s a regular contributor to the “Financial Times” and Project Syndicate. She was previously the economics editor of “The Independent,” and she started her career at the UK Treasury.

ZK: So Diane Coyle, it’s such a pleasure speaking with you in person. I feel like we’ve been bouncing around each other for a whole bunch of years. It’s good occasionally for disconnected atoms in space to, if not collide, then at least enter each other’s genial orbit. You’ve been one of the more outspoken, fascinating, eclectic, interesting—I’m sure we could come up with several more adverbs, but our time is limited—voices of here’s, how we’re looking at the world, either through the lens of GDP or through the lens of economic data that we collect. So here’s the world that that shapes and the world that the picture that that presents and you’ve been acutely critical of the way in which too many extrapolations have been made of, you know, the numbers good, societies a success, the numbers bad, societies a failure, or the numbers are good, government’s a success, the numbers are bad, governments a failure. And I wonder as we are all, you know, depending on when this is being listened to presumably we are in a post-COVID time or at least a post-the-most-acute-crisis time, you know, let’s, let’s hope that the case by the time people are listening to this. Has the past 18 to 24 months sort of reaffirmed a lot of what you’ve looked at in terms of, you know, numbers and assumptions and orthodoxies?

Diane Coyle (DC): Well, it’s been a very interesting time to be a social scientist and an economist, obviously, because there has been this tremendous natural intervention in the normal stable order of things. And it’s a good time to reflect on what we think is important and what we’ve been doing. And one of the things that has really struck me and many other people really forcibly is how different people’s experiences have been. So the ones who can work from home in their professional jobs and can’t spend all the money that they’re earning and are adding to their already existing savings, that’s all fine and dandy. There’s even talk about a new roaring twenties. And then there are those who don’t have enough to pay their rent, built up new debts, and are really struggling. So in our two countries, those trends were very present anyway, there’s inequalities and they have obviously become even starker and underlined even more by the differences in health outcomes.

And it’s been another—less than I think in fact that the economic measures, the incomes or GDP although they have their limitations, they’re actually really tightly correlated with other things that people care about, like health and access to clean air and green space. And actually I was running some surveys just before the first lockdown in the UK, trying to understand how people value the free digital goods that we all have been using so much in the past 18 months or so by asking, how much would you need to be paid to give up X for 12 months when X is Facebook or online shopping or personal emails and so on. And we included parks because access to parks is free. And then we also included some goods that you pay for like newspapers rather than online news. And then the, the lockdown happened and we ran the survey again a few months later, and then we ran it again after 12 months, and it’s really striking to see some of those changes access to online shopping and access to parks, for example; both increased enormously in value. So it’s been another lesson to me in thinking about this wider array of indicators than just the quarterly GDP that you’re talking about, that the politicians take the, take the praise for whenever it goes up and avoid the blame for whenever it goes down.

EV: I mean, one thing that was interesting, really interesting to me about the pandemic conversation was that there was, this, what seemed like this natural holistic view to it that all of a sudden it felt very natural to talk about mental health and loneliness and physical health and the economic consequences of the lockdown and look, and look at all of it as a whole. And it seems to me like your work is trying to move, you know, economics in that direction. So do you think that the, first of all, would you agree with what I just said, you know, about a more holistic pandemic conversation, and if you do, do you see that translating into your work with the economies? Is economics moving in that direction, do you think?

DC: I do agree with you. And in fact, I’m midway through some work now with some colleagues looking at the way that the structure of a local economy is actually one of the best predictors of health outcomes during the pandemic. I think people understand that being on low incomes or being a member of certain ethnic minorities has been a risk factor for COVID outcomes, but what’s been eye-opening for me is the way that it’s really tightly tied to the entire structure of an economy. What occupations are, what’s the industrial picture of a given place. And so these things are all linked together. Whereas economics is typically just focused on one aspect of it and ignored all of the you know, interactions between things. And a great example is the importance of tree cover or access to clean air and green space and how that is actually really tightly linked to straightforward economic outcomes, because it affects your health, which affects your human capital, which affects productivity and incomes. So I think you’re right to say that these things are already linked.

ZK: Although it’s interesting in the, in the the free goods of the internet and which two of The Progress Network’s members, you know, Erik Brynjolfsson, also, Andy McAfee have done, there’s been this attempt over the past 10 to 15 years, and you’ve obviously been doing this so well to capture what is the additive value of things that are free given that most of our macroeconomics statistics that use the frame, the map of how we’re doing only capture things that have a price, right? So you’re always trying to figure out, you just refer to the surveys you’re doing. One way to try to figure out a price is to ask people what they would give up, right? What’s, what equivalent that they have in their minds. And then what’s the nominal value of that which you could do with clean air and you could do with parks as well, but it’s such an intensely constructed effort because we essentially live in an economic world where those things are all external or even non-existent right. Fresh air and parks. Like we get the fact that we should have parks. Cities go, oh, we should take care of parks and clean up parks. But how do you really, I mean, has the ship sailed too much? There’s been a lot of talk about all the inadequacies of how we’re looking at things, but do you see any actual governmental movement, local or national in any country that is, kind of gets this and has started to say, well, what do we do about that? How do we integrate these things?

DC: I’m beginning to be a bit optimistic about it actually. And it’s partly because interest in things digital is driving interest in these wider kinds of things that we value as well, you know, be it nature or unpaid work in the home. And a lot of economists have been really suspicious, as you’ll know about these kinds of approaches in surveys that ask people, because it seems a bit a bit wooly, but you have to remember that GDP is constructed from surveys too. And very often, it’s been sending surveys to factory managers to ask you know, what they’ve got in stock or how much they spent on investment in the last quarter. And this isn’t really any, any woolier than that. It’s just as valid a method. I think. So the interest in digital stuff is, and the pandemic, is actually, I think, starting to change opinions a little bit in economics, and a lot of economists will find it really hard to leave behind, you know, you just look at market prices and leave it to the market. But my sense is that things are shifting partly because of the pandemic, partly because of all the climate issues.

ZK: It’s funny, you know, in, in this like when you look under the hood, and I think most people don’t realize just how fuzzy—I love the fact that you used the word wooly. That’s just one of those perfect—English and Americans, you know, are divided by a common language. If you look at how these things actually are constructed, you start, it’s like looking at legislation and sausage; it’s things you don’t want to peek under the hood to look at too closely, how vastly fuzzy they are, rather than, “we know that our economy grew by 2.8% this quarter.” I mean, we even, most people don’t even realize that three years later, all those numbers will be revised, sometimes pretty radically,

DC: Maybe you always knew it. But when I did my book about GDP, it was a real eye-opener for me that there was so much uncertainty and that people had always known that there was so much uncertainty. Books in the 1950s saying there’s a 10 or 15% margin of error on your GDP number.

EV: I’m wondering if we could backtrack a little bit and just, you know, connect the dots for people who might not be familiar with this conversation. What’s the problem with just sticking with GDP, right? Because we wouldn’t be trying to move beyond it if there wasn’t an issue with just sticking with it. So what’s the issue?

DC: Well, for me, it’s fundamentally that it’s a really partial picture of things that we care about, and when our economies were poorer than they are now, it was the main thing to care about because it really correlated with things that matter a lot, such as health and educational opportunities and so on. But it’s not very well linked to other things that matter. The most obvious one is the environment. We’re not reckoning at all the services that we take from nature for free, and that’s going to come back and bite us. Climate-Disturbing weather is one example, which will damage agricultural productivity around the world and make some places unlivable and cause mass migrations of people unless we do something about that. Loss of biodiversity, similarly, is going to make it really hard for the world to feed itself, unless we tackle that quite quickly. So not pricing those matters.

I think actually not pricing volunteer work and work in the home has mattered also because we kid ourselves in the 1960s and ’70s that growth was much higher than it was because a lot of it was women who had been in the home going into paid employment, buying new consumer goods and ready meals and so on. But also it means that policy decisions get taken, that don’t take account of all the caring that needs to be done. When you’re deciding about taxes or welfare payments, you should be thinking about that, who is going to care for elderly people and children, but it’s the thought of policy decisions. And those for me are the sort of main issues. But obviously digital has come along and made it much harder to interpret all the figures anyway. And that’s, I think really helped open up this debate because it’s created a coalition of people who are interested in talking about, well, what do we think we’re measuring? Are we doing it well? And actually, what do we want to be measuring? And what kind of society do we want to be shaping by decisions based around these numbers? And that’s a good thing. I think that’s a really healthy discussion.

ZK: It’s, you know, one of the challenges too, which we’re seeing now is GDP is highly sensitive to the aftermath of a catastrophe in that catastrophes are really good for subsequent GDP. In fact, they’re so good for subsequent GDP, you can almost make an argument that, you know, we should generate catastrophes to generate economic growth. Because on the other side of the pandemic, between trillions of dollars of government spending in the EU, in the UK, in the United States, around the world, and pent-up demand, people not having done whatever that is they’re going to do, we’re likely to see some of the best GDP growth in both the developed and the developing world over the next 12 to 24 months that we’ve seen since the end of World War II, another you know, catastrophe-induced GDP growth. But on your comment of like, what is it we actually want to structure, right. Well, what is the world we want to live in? We probably don’t want to live in a world where the aftermath of catastrophes is an optic of, “wow, we’re doing great.”

EV: I don’t think a lot of people would trade the COVID pandemic for better GDP.

ZK: Right.

DC: No, and you’re forgetting that we had the biggest decline for 300 years before we had the bounce back as well, so you shouldn’t overlook that, but you know, people will obviously be pleased by big GDP growth numbers, not least because it means everybody’s getting back into jobs. But what it’s overlooked, it’s the destruction of assets to do that whether it’s you know, direct loss of people through deaths or long-term illnesses whether it’s the loss of businesses that have had to close down. So the argument’s a bit like saying, “well, I’m going to smash the machines in my factory because then I can spend a lot of money on investments and I’ll have some more people, and it will be great.” So it’s having a balance sheet in that national perspective. And thinking about what in the jargon is called comprehensive wealth. So all of the assets that we have available to us as a society—people, nature machines all of the things, and how do we work together to build what we want, what we want for our children as well.

If GDP is what we think is success. People will strive for GDP and political leaders all the time say, you know, I, you know, they always put it, you know, I’ve succeeded in getting the economy to grow at 6%. Now what the he did is hard to figure out, but that’s, that’s the politician does that, you know, I’ve created X million jobs. So that’s part of the political rhetoric. The question is by doing that, they focus policies on things that will increase GDP. There’s actually informing the commission. We’ve, we’ve identify a large number of ways in which GDP is not a good measure of economic performance or societal wellbeing. One of them I’ve already alluded to, which is GDP. Doesn’t tell you about what happens to the typical citizen.

EV: So if there were some other metric other than GDP or metrics I understand that we’re in this conversation of trying to figure out what such a thing would look like and how to measure it. But do you have any idea of, if you were to assess where we are right now, would this non-GDP number or non-GDP metrics be good, be bad? Are we in a rosy picture right now? Or are we in a disastrous picture? What would be our current situation?

DC: Oh, gosh, that’s a hard question. I don’t know. I don’t know is the answer. It’s [inaudible], isn’t it, you know, on the one hand we’ve got all these fantastic innovations. They don’t get well measured in GDP. And how on Earth would you place the value on the vaccines that are going to avert lots of deaths and illness. And on the other hand, we have the aftermath of the pandemic and the catastrophe, and we’ve got all the resource implications of climate change and biodiversity loss. And how do you, how do you weigh those up together in one number? Well, that’s really hard to do. On the other hand  it’s just hard to concentrate on too many numbers. So you’ve got to whittle it down somehow to a handful at most. I was just going to add it’s going to keep me going for the rest of my career in probably the next generation as well.

ZK: Well, I mean, at least there’s that, I mean, it’s a career enhancer if nothing else. So insofar as like statistics are they’re narratives about data. That’s not my line that’s often been said, and we certainly live in a world where there’s just an absolute surfeit of information, right? Data is everywhere and wading through it and sifting through it and making sense of it is much more complicated. And of course, now we have algorithms and programs and AI to help us sift through all the data that’s being generated by algorithms and AI and, and, and more data, but trying to create a comprehensive map of like, what’s important. Do you believe in, we should go, we should start with first principles, like what constitutes a good society, and then try to construct a useful map for government and corporations and individuals to kind of measure what they’re doing against it.

Should we actually try for a limited set of numbers, as part of the problem is presumably any number you would create, any one or two numbers you would create statistics to try to blend complicated societies would, would have all the problems of GDP that just would be somewhat different problems in specific. So what’s the, what’s the starting point, is it what constitutes a good society and then, dot dot dot dot dot. And we had a conversation with John McArthur who’s been, you know, doing this whole, you know, Global Goals, right. And they have they’ve divided into how many rooms was it? I can’t remember.

EV: Seventeen rooms.

ZK: Seventeen rooms. So what does one do?

DC: This is really difficult. And there’s the problem of a proliferation of different indicators, dashboards, different kinds of models for thinking about this. And I think part of the challenge is that we want to get everybody converging to the same kind of mental framework for thinking about the world, because that’s important to align decisions that need to be taken to get everybody pointing in the same direction in society, whether it’s business expectations about what market demand will be like, or whether it’s the global coordination that you need to address climate change. It’s very powerful to have a standardized framework. And that’s why GDP has been sticky because economists and such to the degree that in the aftermath of the second world war and it stuck. So that’s definitely a problem with too much too much data. I think, SDGs—sustainable development goals—there’s something like 300 separate indicated there, and you don’t have any idea about how they trade off against each other. And there are contradictions in those.

So I’m very keen that we get something that’s, you know, not too many numbers and it’s consistent with economic theory. So graduates in finance, ministries, and central bank client program. And we can get some kind of standard. But having said that, you know, I think your question about what does the good society look like is the right one, because if you implement the public policy, which is supposed to make things better, then what is better and for whom is it better? And so the questions about distribution come up, what is it that you want to see more of, what, what do you want to see less of? So you have to have some framework for thinking about the good society, and economics as traditionally being the greater the good for the greater the number, the classic utilitarian, let’s make it bigger. And that to me seems quite flawed. It’s got us to this situation where we have been very shortsighted about what we’re doing with our societies. So thinking about, you know, a bunch of ethical frameworks is important. We’ve gotten deep into philosophy. I didn’t mean to do that so quickly. I was going to save that for the crescendo at the end.

ZK: I think having little crescendos along the way is a really good thing. So treat this as kind of a either a false summit or a mini crescendo, or just an interesting peak on the way to another one. Right? Are you with me?

EV: I think so. We’re, we’re all about the you know, consistent and small crescendos here at What Could Go Right?

ZK: That’s interesting, Emma, are people, do you think people in post-pandemic land are thinking more in terms of what’s a good life and not how much and, and more and more and more, or is that just a brief stepping out of the lane that people will reenter?

EV: I think absolutely. I mean, I’m definitely a sort of devotee, maybe of Arthur Brooks, and he talks about if you miss the opportunity of the pandemic to sort of assess your life in a personal way, you’ve missed a huge, huge opportunity. And I think if we miss that opportunity on a societal level as well, we will have missed a huge, huge opportunity. And I certainly leave it in the hands of people like Diane to keep that conversation going.

DC: Emma, you mentioned mental health right at the start, and I think that’s one of the legacies of what’s happened that we’ll have to face up to, particularly for young people who’ve been disrupted at school. And I think that’s going to be quite a big deal that will lead that generation to reevaluate things. And if you’re around young people, as I am, you’ll know, anyway, that there’s just a big generational shift in terms of attitude to society, to the environment. So I think I think things will actually change quite a lot. And when you have a once in however many hundred years event, it’d be odd, I think to expect things to just snap right back to normal.

EV: And when you say there’s a younger generational shift towards society and environment, meaning that there’s a greater energy towards care and stewardship of those things, or something else?

DC: Yes, I think so. And rejection of materialism for its own sake. But there’s a passion that has gone into the climate strikes and preparing for COP26 and so on even before the pandemic fully hit, that I think was quite striking. And I talk to employers who say you know, they’re not themselves so bothered about all this green nonsense, but if they want to retain young people, good young people, they’ve got to take it seriously. But I think that’s, that’s quite a powerful lever for the youngsters to have over our future.

ZK: All right. So my devil’s advocate pushback on that is there was a widespread sense both in Europe and the United States in the 1970s of a similar change in the air, right? That the, the combined effects of some of the economic crisis of the seventies, certainly the Vietnam war in the United States, Watergate in the United States, the student uprisings of ’68 throughout Europe. And you had a lot of people saying this is going to lead to a permanent change that people are gonna think more about in fact about the environment, right? That’s the rise of the modern ecology movement, which is kind of the progenitor to today’s more more full and robust paying attention to the environmental crisis. And that ended up being much more of a blip than a sea change, or, you know, maybe these things go in waves. So it wasn’t a blip. It was like two steps forward. And then the eighties and the nineties were the one step back. So I just, I mean, the pushback would be, yes, a lot of people talk about this. Yes, this is, you know, a sea change amongst the young. It’s probably more intensive in Europe, to some degree also in the UK, but what you don’t see in a lot of places is you know, corporate and government structures changing nearly as much as sentiment.

DC: That’s very fair pushback. But I guess I would argue that things really did change a lot and they just changed in the opposite direction, that we got the Reagan and Thatcher revolutions as the response, the reaction to the turmoil of the previous 10 or 15 years. And I think the reason that happened was that there were entrepreneurs of ideas who were ready for it. And people in think tanks across both of our countries have been planning for an occasion when they could reshape society with ideas, and ideas are really important. So I suppose the moral of that is that if you want things to head in a certain direction, now you better be ready, and you better be organizing and engaging in that debate and winning the famous battle of ideas. Don’t you think?

ZK: That’s a very cool way of looking at the seventies. I hadn’t actually thought about it that way, even though you’re right. And a lot of people have talked about this, that it wasn’t a false dawn or that people just went, “oh, you know, that was great to think of in alternate terms about a system of not more and more stuff, but other values,” that, that it wasn’t a false dawn. It was actually purposely aborted, right? It was, it was halted. It didn’t just peter out on its own steam, as people decided, “Hey, you know, the ecology is great and we can live in a van off the grid, but it’d be much nicer to get a subdivision and and get a job for $70,000 a year.” So you’re saying it’s more that the idea of pushback was intentful. It was a counterrevolution that we’re still living with. And that’s a good way of looking at it. I don’t know if it’s entirely true, but it’s a good way of looking at it.

DC: So there was a revolutionary situation, but the wrong revolutionaries won, from my perspective,

ZK: The counterreformation succeeded in this case,

EV: Although we don’t really know who the counterrevolutionaries would be in this particular case. Right? I mean, there’s no bad guy coming out of the pandemic.

ZK: Not yet. Right. I mean, give it a couple years. Maybe we’ll go, “oh, right. That emerged from it.”

ZK: So the question is government matters to a degree. I mean, a lot of what’s gone on productively in terms of whether it’s environmental or values that are not fully captured by material gain, companies have strangely been, more multinationals have oddly been somewhat more progressive, small-p progressive, than a lot of governments, right? Um I guess you have the the city government of Amsterdam embracing this idea of a doughnut economy, that there should be, you know, they should think about maximizing a whole series of lifestyle values, some of what you’ve alluded to. Is that necessary to cement these realities? Or has government, you know, government will sort of go with the flow.

DC: Watching makes governments change their mind. I do think business pressure makes a difference and central banks are certainly getting with the program now because they have really opened their eyes to the financial risk that comes from climate change and biodiversity. You see people like Mark Carney, who was at the Bank of England and other central bank governors, really starting to worry about the implications of what’s happening. So those are quite powerful, I suppose, one of the barriers to change is the fact that there’s a whole wave of official public servant economists in public life who were trained in the 1980s and so are completely naturalized in that very pro-market let’s just fix the odds of all market failure way of thinking and and not understanding the strategic role for government to coordinate change in the way that you need to with technologies or responding to global challenges. So as always economists blame, I think is a key lesson in life, but I think the discipline is certainly changing. And the question is, how do you change that kind of public mindset or that official mindset as well. But I think business pressure and central bank pressure is quite a good place to start.

EV: Diane, I wanted to ask you about your book coming out in October 2021. It’s called “Cogs and Monsters,” and I am sort of dying to know who or what are the cogs and who or what are the monsters, because I have a nervous feeling that the cogs are us. And I feel like as a, you know, issue of self-preservation, maybe we should figure out what the monsters are. So yeah, what’s what there in that title?

DC: Well, we are the cogs and I’m arguing that economics needs to give the cogs some agency so that we get more control to shape the kind of society that we want. And the monsters are all of the unknown creatures in the way the economy is changing. So just as the old maps used to say, “here be monsters.” The technologies are changing the economy in ways that we don’t really understand. And I think the subject hasn’t hasn’t yet really got gripped with all the things like the dynamics in digital markets the creation of a large corporate power. And there’s this struggle to understand these and develop policies to address them. It’s just beginning really.

EV: I mean, it seems like we’re very behind the times when it comes to, I mean, I’m just thinking about some of the US congressional hearings about technology and the questions that are being asked about it. And economics is playing catch up too, with this, these, these digital things how far behind are we in an economic sense? Are we, you know, is this a long marathon to play catch-up to, or is this a short sprint?

DC: A bit of both. I mean, there’s a lot of work in academic economics that is getting to grips with these. Translating that into policy is slower, partly because you’re teaching future generations of policymakers, but also partly because you’re talking about changing laws and engaging with you know, big corporations in legal disputes about what can and can’t be done in terms of policy and all the lobbying that goes on about regulation, but that’s bound to be a much slower process you know, in, in the EU, to which we did belong until quite recently, there has been some quite rapid policy development in digitals, and it looks like that might be happening in the U S as well,

ZK: Although it’s interesting, in the UK partly as a result of Brexit. And, and certainly as a result of the pandemic, you have a nominally Tory, i.e., conservative, small-c conservative government, that’s embracing, you know, massive safety net spending, massive social spending massive investment. And some of this is totally compensatory, right? It’s partly a, if we spend enough money, people, maybe people won’t notice that we’ve just left the EU, but it does raise this question of particularly in the pandemic, governments everywhere, certainly in the United States, are spending with abandon, in a way that four or five years ago would have been met with not just skepticism, but it would not even have been countenanced as serious policy. Like let’s spend $5 trillion on direct payments and small business subsidy. And while we’re at it, let’s spend another few trillion dollars on childcare and early childhood education. Do you think that’s, and that’s certainly, you know, from, from many people’s perspective, quite a positive that we’re unleashing a lot of collective capital to do things that we think are absolutely vital for a good society.

DC: It’s certainly shown that government can do this, hasn’t it? So, it’s been a demonstration of feasibility if nothing else. Um my government is, well, parts of it, are clearly starting to panic about how much they’ve been spending. And we’re about to go into one of the rounds when the treasury tries to beat other departments bids down and cut back on spending. I don’t think it will succeed because the kind of challenges that we face are pretty enormous, and it’s much better to try to boost growth, to keep debt at a bearable level. But I think there’s going to be a gamble in terms of what will happen. We need, we still need massive investment in infrastructure, in healthcare, and making up to the kids whose education and home life has been badly damaged in the past couple of years. So what do you think will happen there? Will, will the spending carry on running?

ZK: I mean, what’s fascinating right on two scores is the economist class and the investing class that used to say, “oh, no, no, no, no, you, you can’t spend that much. We’re going to raise interest rates because it’s going to, we’re going to raise the cost of spending because it’s untenable, it’s not wise, it will throw things out of whack.” That seems to be if not completely absent, then largely in abandon. And I think my question around all of this is are we really at some sort of fundamental change where either by necessity or simple, the example of having spent governments and markets are recognizing that whatever that outer band is of debt and interest rates and inflation, you know, it was all made up anyway. These are human systems, they’re not laws of nature. And maybe everything that was perceived to be orthodox was just an orthodoxy of a time and a place that is no longer suited. I just don’t hear a lot of people, even beginning to articulate a framework of this, other than some people who have been talking about modern monetary theory, which is this idea that economies print money, and therefore can’t ever really become bankrupt because all, you know, they have the ability to endlessly generate capital that they can spend

Well, that didn’t work so well sometimes in the past, I’m a bit skeptical about that myself. I think there are limits, and at some point governments will have to start talking about raising taxes, but there are lots of other debts. You know, we have this natural debt as well that we owe to future generations. And fixing some of that is going to be costly.

ZK: Explain that. What natural debt do we owe?

DC: The natural debt of having rundown species and destroyed the atmosphere and polluted rivers in ways that mean that their living standard will be lower than ours, unless we do something restorative now like spending money on cleaning up rivers and reducing carbon in the atmosphere and so on.

ZK: You’re not a devotee of like a techno-utopian. We will innovate our way of these self-created dilemmas?

DC: I think the innovation will take you so far, but not far enough to fix everything.

EV: I think what I’m getting from the two of you… I keep on thinking of that TV show where they always started with that line everything’s made-up and the points don’t matter. Like, it seems like I don’t know that much about, you know, economics, but it’s really striking to me how much of this is a lot more human-made, I think, then I realized, which is a little bit scary, but also a little bit empowering in that the, you know, it could be created in a better way, which is something, you know, it’s what you’re trying to do, Diane. Right?

DC: Yeah. So I agree. It’s just human nature. It’s just a social system. But the catch is, it’s really hard to get many millions of humans to agree to something and all work together in the same direction. And that’s the kind of challenge that we’re tussling with. I think, you know, if everybody thought the same thing that wouldn’t really be a problem, we wouldn’t be debating, should you cut the debt, or is modern monetary theory absolutely right.

ZK: So for you, it’s also part of the problem is not whether or not the frameworks we currently have are flawed, it’s that they may be flawed, but at least there’s a broad level of global consensus and it’s creating an alternate global consensus, but doesn’t that mean, I guess the pushback on that could be, well, then we’re sort of settling for a flawed consensus because the primary import is that we have a consensus, not the flaws.

DC: Well, I’d rather push us to a different one. But, but in my mind, it’s a world of many possible outcomes, multiple equilibria in the economics jargon. And so what we’re trying to do with the framework and the narratives from data that we tell is get people onto one or other of those, those paths. And we could be on a better one than the one we’re on now, but we’re not going to get there unless we have a sufficient degree of agreement about it.

ZK: Although when you say multiple equilibria, it sounds, you know, poetic and desirable and not jargony. If I say multiple equilibria, it sounds just wrong. So when you are, you know, reentering, right, you’re meeting with students again and talking with them you said earlier that you were feeling somewhat more constructive about the way in which at least the past 18 months has, has cracked open possibilities, I suppose. And maybe just to speculate where things, where things go from here in how governments think about what they spend. And clearly right now, they’re thinking we can spend more than we thought, and maybe there is a limit. It’s just that that limit might be more like Japan, right? It may be three times what we’ve been spending and not one and a half times what we’ve been spending, but it can’t be 30 times what we’ve been spending. So it’s a limit, but it’s, it’s a limit that’s well, down the line. I mean, surely that is on balance, a good thing, right? That some of the, the breakers against using collective resources for social imperatives have hopefully, if not temporarily, then permanently, been lifted.

DC: I think that’s a good thing. I guess I want to see more focus in the future on making sure that everybody gains from where the economy is going and clearly in a lot of societies that has not been the case. And that’s why we’ve seen the kind of you know, political upsets that we have over the past five to 10 years. You know, literally people on median incomes in the UK have had the worst period since the Napoleonic wars, but incomes have not gone up, and that’s not a recipe for stable democracy with society. So that needs fixing. And then the other thing I would love to see is tackling some of the ways that businesses behave. Not because they’re bad people, but because they are short-term profit maximizers and they create foods that are making people obese and unwell there are you know, systems that are damaging people’s health and damaging the environment in the ways that businesses operate, and that I think needs fixing too.

And that’s more about corporate accounting, and national accounting and how that gets regulated and about competition authority. But you know, that’s all, that’s all very doable. And I think attitudes are changing. We’ve seen this demonstration of what governments can do in the past 18 months. And there is a big, big generational change. I did a talk for schools last week and we started out by asking them to write down what they thought were the three most important challenges presented. The word cloud, it was a really boring word cloud, because they all pick the same three. And it was, it was, it was climate change inequality and recovery from the pandemic.

EV: So maybe the global consensus hasn’t been reached, but in the classroom, at least, the youngins are agreeing. So that’s, yeah, that’s something to go with.

ZK: And it’s hard to argue with any of those three as absolute societal imperatives. Diane, it’s great to speak with you as always. And I love “Cogs and Monsters” as a title. It’s a brilliant title, and I’m sure it’s a brilliant book.

DC: Thank you. I’m not sure it’s going to make me all that many friends in the mainstream economics profession, but we’ll see how it goes.

ZK: I’m not sure you need all that many friends in mainstream economics, but that’s probably another conversation.

DC: Next time.

EV: Thank you so much, Diane.

DC: It’s been a great pleasure. Thank you.

ZK: So Emma, are we convinced that the world is moving forward the way it should, maybe not quite Galileo-like, who apocryphally remarked after being condemned by the Inquisition for saying that the Earth revolves around the Sun, after he recanted it, he famously said “yes, but it moves.” Is the world actually moving in a way that it should?

EV: Well, I certainly hope so. What I am actually curious to know about from you and after being part of that conversation is, is Diane a lone voice in the economics field? Or is she one of many, because I think that might then answer your question about if we’re heading in the right direction. Is this a chorus or is this a you know, lone wolf situation?

ZK: I think it’s probably somewhere in-between. And interestingly, some of the names that come to mind immediately who are really challenging this consensus are, are all women since Stephanie Kelton who talked about modern monetary theory, Mariana Mazzucato, who’s been a longtime consultant about alternate ways of looking at things. There’s a book called “Doughnut Economics” about different ways of structuring. And a lot of these voices tend to be not, not peripheral to the economic profession, but definitely to the degree that economics more than even some was extremely male-dominated to the degree that there are a bunch of women voices coming in and saying, “Hey, wait a minute. This pure focus on material gain, did we make more stuff today than we made yesterday is a very limited framework for understanding what constitutes a good life.” So I do think there is a growing chorus of other voices saying, “Hey, time out, wait a minute, maybe there’s other ways of going about this.” But it remains to be seen of course, whether or not that shifts permanently the nature of the conversation.

EV: After hearing that, though, I do feel a bit more bullish about answering your first question as a yes. You know that to me is, is enough people and enough sort of new and interesting people to the field of economics. Not that those women are, but new kinds of voices, I think that will definitely push us where we need to go.

ZK: I mean, I’d certainly like to see more integration of these things in a more coherent fashion, into the governmental discussion, not that governments have to lead the charge here, but it would certainly be more helpful if governments were part of the movement or, as it were part of the solution and not part of the problem. And I think that one remains to be seen. And it’s also true government structures move change, absent revolutions, slowly and clunkily and in a cumbersome fashion. So there is that. I think for me, the most dramatic question is going to be is whatever the pandemic produced a blip and an anomaly in the greater scheme of things? Or do we look back at this moment as a real change? And of course we won’t know the answer to that until we look back on it from a much greater distance than now, but it is something to keep in mind. You know, it’s really tempting in dramatic moments to go, “Everything is different, it’s all changed.” And that’s usually not the case, except in moments of intense revolution, you know, when governments fall and there’s drama. This is one of these questions where it’s just too soon to tell, but some of the signs I think are quite favorable about what could go right.

EV: Well, on that note, Zachary, I think it’s the perfect way to end. It was great talking to Diane. Thanks everybody for listening. We so appreciate you being a part of this conversation, in order to keep those favorable conditions going that Zachary mentioned.

ZK: Join us for the next one.

EV: To find out more information about The Progress Network and What Could Go Right?, visit You can also sign up for our weekly newsletter to stay up to date with everything happening with The Progress Network. If you like the show, please tell a friend, share an episode, or leave a rating and review on Apple Podcast, Stitcher, Spotify, or wherever you’re listening to this podcast. What Could Go Right? Is hosted by Zachary Karabell, and me, Emma Varvaloucas. We are produced by Andrew Steven. Jordan Aaron is our production coordinator. Executive produced by Jeff Umbro and the Podglomerate. Thanks so much for listening.


Meet the Hosts

Zachary Karabell

Emma Varvaloucas



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