On 7 March 2019, we were delighted to be joined on campus by Andy Haldane, Chief Economist of the Bank of England. Andy has recently been visiting schools, business, charities and universities as part of a regional tour aimed at putting the Bank in touch with its most important stakeholders – the general public.
Andy presented to staff, students and alumni on a macroeconomic theme of contemporary interest – in this case the contribution (and intersection) of ideas and institutions to economic growth. Drawing on DeLong’s estimates of long-term growth in the world economy, Andy presented a compelling case to indicate that GDP growth remained relatively static from pre-history until the advent of the first industrial revolution in 1750, before rising stratospherically to its current level, via two further industrial revolutions. The average GDP growth per person has increased by about 1.5% annually since 1750, making each generation around a third better off than the one before it. As an inverse to this, rates of poverty have declined sharply over the same period with the consequence that male skeletons have increased in height at a similar rate as GDP growth due to the effect of enhanced nutrition.
Andy touched upon some of the key ideas, innovations and inventions behind this extraordinary growth cycle but also pointed out that ideas, unlike exponential GDP growth, are not unique to the post-1750 period. This is particularly true of the printing press, a 15th century invention that revolutionised information exchange but, according to DeLong’s figures, had no immediate discernible effect on economic growth. For Andy Haldane, the key to growth is institutions, or rather, ideas in combination with institutions. Drawing on a car analogy, Haldane pointed out that innovations provide the spark, but institutions provide the fuel. Ideas need a solid institutional framework to make them effective – to support innovation we need the rule of law, property rights and physical infrastructure – to support education we need primary, secondary and tertiary structures – to support society we needs healthcare, housing and welfare institutions.
Projecting this central idea, Andy spoke of a fourth industrial revolution that will be underpinned by the development of artificial intelligence and the rise of the robots in the workplace, speculating that institutions, including universities, will need to reform in an equally radical way in order to make these ideas effective.
Following a lively Q&A session, Andy departed campus and headed back to London. This followed two days in which he delivered eight separate presentations in the Yorkshire and Humber region – a tour de force which left many people inspired, enlightened and, crucially, that little bit closer to ‘The Old Lady of Threadneedle Street.’