Stian Westlake is the chief exec at the Royal Statistical Society, and before that he was a policy advisor to government and the executive director at Nesta. He is the co-author with Jonathan Haskel of Capitalism without Capital, and they have a new book out, Restarting the Future. You can follow his Twitter here. Amazon link to book here.

Stian discusses how recessions might be different under an intangible economy. I ask him (H/T Tyler Cowen) how national security concerns might be different in a very intangible world. Part of his answer:

…​​the west took much more extreme [economic] actions than I think many people had predicted before the war started…what's been amazing about that is because the modern economy depends so much on these highly scalable, intangible intensive products. It's been quite remarkable how it seems, how damaging that's been to Russia. So, the fact that some of these things are all obviously very tech based and perhaps their salience is obvious…. the fashionable kids of Moscow can no longer use Instagram. That's maybe one of the salient examples, but obviously the intangible economy is about much, much more than tech. And we see some really interesting manifestations of this around things like aviation. So, insurers refusing to deal with aviation in Russia and that appearing to ground planes and stop flights. The supply chains that drive maintenance, further causing damages to those kinds of industries and indeed the kind of dependence on things. There was a story the other day about the effect that this is having on dentistry in Russia, because dentistry is so dependent on very flexible supply chains with basically a bunch of specialized manufacturers. … if you are an interconnected, relatively open economy, and Russia was always the most relatively interconnected of the BRIC [Brazil, Russia, India, China] countries, the intangible economy kind of makes it easier to turn off those taps in a way…. how dependent some of these kinds of more security based, more military based factors have been on intangible assets. We've probably all seen the stories of the dependence of the Russian air force on US GPS devices, which has led to them being more observable and perhaps has played a role in the fact that they have not been as present in the conflict as people thought they would be. I think that kind of interconnectivity is like many things in the intangible economy. It's great for winners, it's great if you're the US or if you're a US ally and it's probably not so great for the losers. …

We chat about these observations:

• Stagnation

• Inequality

• Dysfunctional Competition

• Fragility

• Inauthenticity

And Stian offers an intangible lens to explain the observations.

We discuss: BS jobs and whether culture and trust might be upstream of this.

Why we need new institutions to tackle intangible challenges, whether this would be more technocractic and if there is a political economy challenge on this.

The importance of where the intangible meets the tangible for instance we have heat pump technology but not the intangible systems and ideas to install them. Sanitation is “hardware” but building and co-ordinating all this is an intangible and institutional challenges more than a hardware challege.

What the trade-off is between losing red tape and increasing the risk of corruption.

Stian argues for why the tax treatment of debt and equity would be a good idea (while acknowledging this would be politically hard).

Why Stian is more optimistic on institutional renewal.

We play over/under rated on:

Innovation Prizes, Blogging, Sugar tax, Carbon tax, Plastic Bag Tax, Innovation agencies, GDP and UBI, universal basic income.

Stian ends with some life and career advice.

Listen below or wherever you get podcasts.

PODCAST INFO

• Apple Podcasts: https://apple.co/3gJTSuo

• Spotify: https://sptfy.com/benyeoh

• Anchor: https://anchor.fm/benjamin-yeoh

Stian Westlake, Transcript (only lightly edited)

Ben Yeoh (00:40): …if the world is much more intangible today than ever before, when we enter the next recession and some models are indicating significant probabilities of this happening by say 2023, do you think recession plays out differently in a really intangible world?

Stian Westlake (01:00): I think this is a really good question. And in some senses, this recession that we might be expecting will be the first really big recession in an economy that's dominated by intangibles. And I guess there's a few things about the way intangibles work that might change that. One thing that sort of essential to why an intangible economy is different is that intangible capital tends to be highly scalable. A bit of software, an algorithm, a brand can go a long way compared to tangible capital where you continually need to reinvest to scale it across big business. And in some ways that is good. At least for some companies, it means that there are companies that are maybe less dependent on the need to raise new capital, but will be more comfortable expanding, even if capital markets, as a result of the recession, become more difficult to access, and that could work very well. The flip side is that, one of the things that is really important, if we want to see intense competition in an intangible economy, I think one of the things we argue in the book is that competition works a little bit differently in an intangible economy.

Stian Westlake (02:16): So rather than a traditional model of competition, where what you want to see is lots of rival’s companies in each industry, you can almost count them. It's quite easy to do. Because, intangible companies tend to grow big and fast and exploit synergies. Good competition often looks a bit more like what biologists will call punctuated equilibrium, you know, where the dinosaurs rule Supreme for a million years and then an asteroid hit them and then something else kind of evolves to take up the slack. And I guess what that model depends on, is it depends on attackers, or new companies being able to take advantage of the scalability of intangibles and come up quickly from behind and embarrass the incumbents, you know, people will get bored of having Facebook accounts.

Stian Westlake (03:03): Kids will think Facebook accounts are for old people, and then suddenly there'll be a niche for someone else to come in. And I guess where that becomes important in or where a recession becomes potentially challenging there, is if this affects risk capital, if we've got something where say valuations of public companies, feedback into the IPO market and therefore into private market valuations, there's always the risk that the public markets needs and the private markets catches a cold. And in a sense, we're more dependent potentially in an intangible economy on the availability of risk capital competition than we would be in a traditional economy. 

Ben Yeoh (03:53): And you make the point in the book that our ability to assess the value of intangible capital or the systems in place for say, you can finance a loan on a building property very easily. It’s very hard to finance a loan on an idea or something else. So, this might be a very interesting follow up for things in a recession for coming up with the idea of how much intangible capital we can actually really back up in terms of financializing.

Stian Westlake (04:22): That's a really good point. It'll be fascinating to see how this plays out, because in a sense, in a recession in a tangible intensive economy, businesses that fail will typically have a bunch of assets for which they're a secondary market. So, you know, they will have buildings that have plants and machinery which can be sold. Now. Normally that's a great thing if you're a creditor gives you something you can take a charge on equally. I guess one of the problems of a really widespread recession is if every creditor wants to sell the assets of liquidated businesses, then the assets which you thought were very valuable, the kind of properties and the machines suddenly become super abundant when everyone is trying to kind of buyer sale them.

Stian Westlake (05:19): So, I guess what is interesting to me is in a sense in an intangible economy, your assets are almost like that already. If you see what I mean, they're very hard to sell when a business fails anyway. So, it's possible that we might be in a better position because the difference that the recession makes to the salvage value of business assets is less. I mean, you sort of start off, everyone kind of knows you're in a bad position already if intangible businesses are your debtors.

Ben Yeoh (05:50): I see that. So, they don't go necessarily distressed. I guess I would be worried that essentially, if you think about it in ideas that a bunch of good ideas go down to zero, right? Partly because they needed to intersect and things and those companies, or those ideas just disappeared. So, you can't even buy them, like you would buy a distressed asset or building because they were in a bad place and then they just disappear.

Ben Yeoh (06:14): But to your point, I can see the other side that actually, maybe they don't lose as much value because they were already hard to value and in liquid. So actually, there is something particularly, if you can get a larger company buyer, so not saying a new company. We see this in biopharmaceuticals or tech, they can rescue that idea at a price, which may have been similar to what they might have thought before. Not as distressed because actually they know they're going for the idea, which was already very difficult to value. So, we'll have to see how that goes. I had a question from Tyler Cowan and he asks, what are the national security problems involved with relying on so much intangible capital? Is that again, very different from a tangible world? 

Stian Westlake (06:58): Well, it's been interesting to see some of these things playing out. I mean, the recent kind of very sad situation that we're seeing are developing in Ukraine. I mean, we've obviously seen the way sanctions have played out against Russia. I mean, obviously the west took much more extreme actions than I think many people had predicted before the war started, but I think what's been amazing about that is because the modern economy depends so much on these highly scalable, intangible intensive products.

Stian Westlake (07:39): It's been quite remarkable how it seems, how damaging that's been to Russia. So, the fact that some of these things are all obviously very tech based and perhaps their salience is obvious. So, the fact that the fashionable kids of Moscow can no longer use Instagram. That's maybe one of the salient examples, but obviously the intangible economy is about much, much more than tech. And we see some really interesting manifestations of this around things like aviation. So, insurers refusing to deal with aviation in Russia and that appearing to ground planes and stop flights. The supply chains that drive maintenance, further causing damages to those kinds of industries and indeed the kind of dependence on things. There was a story the other day about the effect that this is having on dentistry in Russia, because dentistry is so dependent on very flexible supply chains with basically a bunch of specialized manufacturers.

Stian Westlake (08:38): So, I guess that's an example, if you are an interconnected, relatively open economy, and Russia was always the most relatively interconnected of the BRIC countries, the intangible economy kind of makes it easier to turn off those taps in a way. I think the other thing that's been kind of interesting to see is how dependent some of these kinds of more security based, more military based factors have been on intangible assets. We've probably all seen the stories of the dependence of the Russian air force on US GPS devices, which has led to them being more observable and perhaps has played a role in the fact that they have not been as present in the conflict as people thought they would be. I think that kind of interconnectivity is like many things in the intangible economy. It's great for winners, it's great if you're the US or if you're a US ally and it's probably not so great for the losers. 

Ben Yeoh (09:42): Yeah, I could see that. So, supply chains, essentially, I guess the financial war in terms of intangible capital flow and then I guess we only get a glimpse of it, but there's another kind of cyber war or tech war happening as well as to whether you are interconnected. You probably see this most in the financial part, like swift and the messaging and things but an underlying stream. In your book with Jonathan Haskel, you note five observations of the world and you call these symptoms. Stagnation, inequality, dysfunctional competition, which we touched upon, fragility and authenticity or inauthenticity. And in the book, you described that actually all of those symptoms are not as easily explained either by a traditional economic explanation, or there seems to be some holes in what a traditional explanation might be able to explain.

Ben Yeoh (10:43): And yet, if you were to use an intangible lens, potentially you can explain more or at least differently on some of these things. So, I thought it might be worth going through a few of those because they're so sort of relevant today and how that might go. And then the implications for policy and new institutions and things, which is kind of the other part of the book. So, one of the first symptoms is stagnation. So, people call this the great stagnation, I grasp. Some people have said stagnation is kind of inevitable and some people have said, this is a pause. Those are traditional explanations. What's your reading of the stagnation problem? And how are you thinking about it?

Stian Westlake (11:25): Yeah. So, stagnation is kind of one of the big, and maybe obvious symptoms of what we've called the great economic disappointment that's been affecting the world for most of it all, but certainly the developed world for most of the 21st century. And, I think if we look at the stagnation question, it's pretty clear that economic growth since at least 2005, before the global financial crisis in the US countries in Europe and elsewhere has been significantly lower than trend.

Stian Westlake (11:56): So, I think that's somewhat uncontroversial. The interesting thing for us is a decent chunk of that falling away and growth is what economists will call total factor productivity. So, it's productivity, it's the ability to every year do things better and better. And one of the things that causes that is the spillovers caused by intangible, a new idea comes out, it gets widely adopted where an economist would see that is in rising TFP. So that’s kind of fallen away. And the interesting thing is that the whole book is our work is predicated on the fact that intangible investment has been growing very steadily for decades in pretty much all developed and developing countries.

Stian Westlake (12:47): But one of the things that we noticed looking at the data is that since about prime of the financial crisis, just before, in quite a lot of countries, that growth rate began to level out and this is really interesting. It took us a while to realize it and it was something we hadn't really spotted when we were writing the 2017 book, because you really had to clean the data and so forth. But in places like the UK, it seemed that although there's this kind of underlying dynamic in the economy, driving us to an intangible economy. Our ability to invest in that for some reason was beginning to slow down. And that translate directly into this kind of falling total factor productivity, and what we attribute this to, and the second half of the book looks at this is the fact that we don't really have the right institutions to encourage, to provide and to manage the new challenges of a tangible economy.

Ben Yeoh (13:45): That's really interesting and thinking about the new institutions, just on the stagnation point, some people argue, well, it's all great, we need these new organizations and ideas, but isn't a lot of the world still tangible? So, what about all of these new electric charges that we might need? Or what are these new heat pumps we might need? And maybe we can go back in history. Cause I think it is quite interesting. So, when we figured out public health, we wanted clean water. So, you know, we got the sewers and everything about, but I believe there were these like water works boards and these organizations, which came around in this kind of coordination problem. And to what extent do you think that that coordination problem is now even harder. And we now need these institutions. So, it's not, I was speaking to someone recently saying we have the heat pump technology. We just don't know how to coordinate it all and, and get it all done. So actually, it becomes an intangible problem more than an, a tangible problem. What do you think? 

Stian Westlake (14:47): I think that's really right. And you mentioned earlier that one of the issues, one of the five big problems that we talk about is this idea of fragility. The fact that the economy is vulnerable. So, whether it's climate change or COVID. And I think there's something really counterintuitive about how that relates to the intangible economy, because quite a lot of people, when we talk to them about intangibles, they say, well, surely these big existential challenges, aren't about this kind of fluffy and tangible stuff, they're about really hard physical assets. The climate change is a great example where I've heard people say that surely climate change is about building renewable energy sources, as you say, building heat pumps and that kind of thing. But I think what's so interesting is when you look into what is really hard about transitioning to a low carbon economy. 

Stian Westlake (15:39): It turns out that it's not the tangible stuff that's hard, it's the intangible stuff. And what I mean by that is if we take, UK electricity generation which is an interesting example, the UK, is not perfect, but it's done an amazing job of transitioning its electricity generation away from coal fire power stations, things that generate a lot of carbon, it's gone a very long way towards a much lower carbon economy and its continuing to push on. It turns out that so long as you're allowed to, it's quite easy to build winds turbines. It's easy to move from coal to natural gas, which is somewhat less carbon intensive and so forth. But it turns out that the hard stuff in terms of electricity generation is all the intangible stuff about permitting. Being allowed to build a nuclear power station, getting local permissions, to put up wind turbines and that kind of thing, it's the soft stuff, not the hard stuff. 

Stian Westlake (16:34): And then similarly, when we get to the things in the economy that are really hard to decarbonize, again, the problem with installing air source, heat pumps for replace gas boilers to make domestic heating carbon free is not the problem of affording the air source heat pump. The problem is that when you install it it's requires you to reconfigure systems, it requires you to persuade people to adopt these. It requires a lot of complex changes to the way people use heat and those kinds of things. But again, it's s problem of systems and a social problem. Actually, the tangible capital stuff is in all these things, the really easy part, even though that's not obvious, and I would go.

Ben Yeoh (17:15): Perhaps even further. And I think Mark Andreessen made this argument, he's a big VC person about software eating the world, but then he updated part of this argument to suggest that where the intangible, so software can meet the hardware of the world, it can improve it. And so, the big question mark for what intangibles can do is, so for instance, we have all of these heat pumps, but can we coordinate them so that we can say sell electricity back to the grid. So, you've got all of the tangible parts, but is there something intangible and he would put it for software. So, all of these things. How true do you think that might be? That actually there is this part where intangible meets tangible and you get these really big benefits, if you can solve the problem, or is it more a kind of organizational systems, that it's just there within institutional capital. 

Stian Westlake (18:14): So, I think this is absolutely crucial. And, if we're thinking about this from a business point of view, this is the way to create very large amounts of value in the next 10 years. An interesting business development over the last five years that I think sort of sums this up is what's been happening in the used car market, both in the US and in the UK, in the US, I guess Carvana is the big player in the UK, Zoom and others. But I guess what we're seeing there is in some senses, the used car business is the antithesis of a tangible economy. First of all, you are dealing with buying and selling physical assets and you have to store them in showrooms and those kinds of things. Typically, these businesses have not had great investment in software and so forth. Even things like brands have not been particularly powerful. This is quite a fragmented industry. And your stereotype of the used car sales person is very different from the stereotype of your kind of acknowledge economy worker or your intangible economy worker.

Stian Westlake (19:25): So, you've got an industry that feels a very long way from the intangible economy. But what's really interesting to see what has happened with these businesses is they have partly through the expenditure of a lot of risk capital, and a lot of experiments by entrepreneurs. So, [Cazoo, second-hand cars] in the UK have broken through and created a system where a bunch of intangible assets ranging from a kind of national or international brand, an incredibly sophisticated software layer and a bunch of processes around giving people the confidence to overcome the kind of classic informational problems of buying used cars. What happens if you buy a lemon? What happens if you sell a car and you don't get a fair price. That is really a sort of material little industry that has been transformed significantly through the expenditure of a lot of risk capital.

Ben Yeoh (20:32): That makes a lot of sense. And then if you have that and you have all of these winners and you'll have winners in business and things, is it inevitable that we're going to see more inequality because growth seems to come along with some of this inequality. Is there a differing or a more challenging explanation once you view it through an intangible lens?

Stian Westlake (20:54): So, I think there definitely is. And one of the really interesting things that economic research sort of pushed the frontier in the last kind of 15 years is, you saw a lot more economists doing sophisticated things with linking firm data and individual income data. A lot of it was on is Scandinavia, because they have such amazing employee data sets, but there's been some really good work done on the US census as well.

Stian Westlake (21:18): And one of the things that this showed is a really big part of the rise in income inequality in the US and Scandinavia and we suspect other countries, arises from the difference between what economists are called the leader and the laggard firms, the industry dominated firms …this is not the gap between chief executives and janitors. It's the gap between the chief executive of kind of a very big and successful firm and the chief executive of a sort of failing micro business or equivalently staffers at those organizations. And I guess why that's interesting is one of the very strong forces of intangibles as you implied, is that it creates a wedge between the leading firms in an industry and the laggard firms.

Stian Westlake (22:08): Another really interesting finding is for a long-time economist, particularly in place like the OECD have been pointing out that the gaps between leader firms and lag of firms in industries have been growing and that is a driver of inequality. There's been a lot of debate about why that might be the case, but we looked at how that varied by the intangible intensity of industries. One of the interesting things is basically where the industries that have the wide lag of gaps are the ones where there are a lot of intangibles. So again, there’s a smoking gun for why this is driving inequality in a significant way right there. 

Ben Yeoh (22:44): And I guess this is a similar explanation for how we might think about competition differently because of how intangibles affect competition. So, we mentioned this briefly, but do you want to highlight how actually through an intangible lens you might end up with quite different competition policy or ideas versus where you were 50 years ago when you just wanted a lot of competition, because everything was tangibles and widgets.

Stian Westlake (23:08): Yeah, that's right. And I mean, obviously this is a huge economic policy issue on both sides of the Atlantic at the moment. You've got the FTC in the US, you've got the competition directorate in the EU at the moment, pushing a kind of quite aggressive line on competition policy, especially with regards to digital platforms. And to some extent that is informed by a philosophical view, what sometimes get called the Neo-Brandeisian view, which sort of holds that competition authorities have failed in the last few decades because they're kind of taken the foot off the gas. They have been more open to lobbying, they've been more open to what they would describe as right-wing ideologies and therefore they've been more willing to talk, tolerate anti-competitive practices. 

Stian Westlake (23:51): And I think that an intangible perspective brings to that debate is that may well be part of the equation, but there's also something going on, which is that the nature of businesses that depend on intangible capital is that they will be more prone to what classically would look like monopoly for large businesses with valuable intangibles to do really, really well. And if you sort of say, well, what then does good competition look like in that economy? It might not look like splitting up Facebook so that when you look at the box on how many social media companies are there, there are five rather than four or whatever. Yeah.

Stian Westlake (24:34): What it might look like instead is making sure that you have a situation where the new competitor to Facebook has access to capital, has access to the ability to expand. So that one-day Facebook can be dethroned. Now that is really challenging for policy makers, because it's really easy to look at a th Herfindal-Hirschman (HHI, anti-trust index) index, which tells you how many companies are there in an industry and how big are they? That is a sort of a discreet mathematical algorithmic task. But to sort of say, how confident are we that one day when, imponderably Facebook stumbles, that they will be dethrone. That's a much harder question. It's much more open to judgment. And it relies on kind of quite a lot more expertise on the part of regulators and I think that's a big political demand that we would see on institution for the future. 

Ben Yeoh (25:34): And I see that. So, I speak to a lot of startups or entrepreneurs or even smaller market cap companies. And part of their thinking is that, well, if we go fairly well, but not absolutely amazingly well, so they might create 10 times value and not a thousand times value then Facebook or someone like actually might buy US because there's some value there. And actually, we might only pursue that because that is an industry buyer, as well as say, a public markets route and they will argue that actually, if that is dethrone to some extent, they lose some of their incentive to try and start and develop that I'm not exactly sure how true it is, but it is definitely something they say. And if they're going to do 10,000 or 100,000 times returns, they're in it, they would not necessarily sell, but they know they have some backstop if they can create some value or not. …there’s another interest thinking you put because partly the answer. If we could stomach, it is to have more, how would we put it technocratic expertise? And we see this, or you make the point in the book and I'm seeing this across so many domains. So, planning would be another one. If you could just get someone to look at this project and go, well, you know what? I can look at all of these tradeoffs in the round and say, this is probably a project which should go ahead and you have some sort of technocratic expertise in doing that then that would be great.

Ben Yeoh (27:11):  I spend quite a long of time in patents and IP and patents have kind of got this broadly standardized 20 years. But I can see that there's obviously some ideas which are much more valuable and some which really probably should never pass through a patent office. And if you had technocratic expertise, you could maybe somehow even put those in buckets or desire and get actually much more value from your intangible ideas because you've has given them the same 20 years or whatever it is on to copyright. So, to what extent do you think your book then argues for technocratic expertise? Putting aside the political economy question to one side, because there seems to be maybe this ongoing pushback against to technocrats. I'm not exactly sure, but is that essentially what is calling for it? Because that would answer something around the stagnation and institutional capital. It might answer something around competition. It might even answer something around the authenticity questions as well. 

Stian Westlake (28:13): So, I think that's absolutely spot on. I mean, what we see in an economy where the nature of capital hasn't changed very much and where you don't have these really detailed questions like observing competition policy or working out how you should assess a kind of where assessing a kind of complex pattern becomes more important. In those kinds of economies, your rules can be pretty algorithmic, whether that's about competition policy or whether, that every patent kind of gets assessed by potentially not super skilled, patents turning and so forth. In an economy where intellectual property is that much more economically important. We have to make more finely balanced judgements about competition, where potentially there are really important quality and quantity tradeoffs about research funding. So, one of the big pitches around organizations like ARPA and those kind of big, research funding agencies is they really depend on having very, very good managers.

Stian Westlake (29:22): All of those things, point to a situation where you need higher skilled bureaucrats, frankly with greater discretion. So, if you were being unkind, you could call that a bureaucrat’s charter. And I think there is a political economy question that we might want to come onto next about what the implications of that are. But it broadly suggests that you need institutions that have what might be called higher state pasti that have stronger ability to make judgements and a stronger ability to act on them.

Ben Yeoh (29:58:):  So, let's take an example. I'll borrow it from the US. So, take it away from the UK for a moment. They, during the pandemic, I think this was in San Francisco or California or somewhere. They brought in the ability for restaurants to have these structures called parklets. So, these little huts on the road where people could eat outdoors and they were judged to success. Restaurants like them, people liked them. It was judged a good thing. So, they thought, well, let's try and make this permanent. And then when they went through the legislation for this, and as recliners covered this quite well, for the New York times, they found that once everyone had a say in how parklet should be done. So once fire and road and transport and safety, very few people then wanted to do parklets anymore because there'd be very expensive or half the parklets which were already available, had to be taken down because they wouldn't meet regulations. And in some sense, you wanted someone to have a common-sense view and said Well, you know what, parklets across this road are kind of all right.

Ben Yeoh (31:00:):  And we understand if there was a fire, it might make it little bit harder. But broadly, this would seem to make common sense, but the system is not geared up for anyone to be able to do that. And so, what seems to be that our idea that everyone can kind of agree on parklet seem to be a nice thing can't actually get executed, can't actually be done in the sophisticated, regulated environments. Is there a way of unpicking that, is that a form kind of institutional capital, is that kind of inevitably as we get more intangible and more special interest and, and where, then that it becomes log jams like that?

Stian Westlake (31:39): Well, I think what you're seeing in that example is a situation where the circumstance, the situation in which the regulatory framework was meant to govern changed really rapidly. And that's something where high-stake capacity organization can respond to. And one that is being run on kind of more economical lines in a more kind of simple kind of rule-based way finds it harder to respond to. So that's classic example of where red tape is allowed to run riot and get in the way. I guess the, the interesting trade off then here comes, if we sort of say, well, what do you lose? So, obviously, if you increase discretion and sort of state capacity, you gain flexibility and the ability to respond to these kinds of things, but what do you lose?

Stian Westlake (32:32): And there's a kind of classic political economy finding here, where, what you actually lose is a certain sort of power to resist corruption and resist political influence. So, to take the classic example of central bank independence. Once upon a time in countries like the UK, you had massive political interference and interest rates and governments that put the interest rate down before an election. So, there'd be a little boom and everyone would feel happy, but sort of disastrous for long term economic credibility. Now, what governments did was say, let's make central banks independent. Let's give them a very narrow remit; inflation targeting, and then they will no longer be wilt like, you know, a DCS tying himself to the mask.

Stian Westlake (33:24): We will no longer have this temptation to mess around with things in a way that we all know to be unhelpful. Now that's great if the circumstance never changed, if all you ever need to do is do sort of fairly straightforward inflation and targeting in a narrow bound, your kind of fine. But one of the things that became challenging if we look at say central banking is obviously in recent years, until not long ago, we were very close to the zero bound and indeed governments were central banks are doing huge amounts of quantity easing, which often started to take quite novel forms.

Stian Westlake (33:56): So, for example, you'd had situations where the Bank of England was kind of getting involved in corporate bonds and having to make potentially what could have been in some people's hands, quite nuanced decisions. Now the interesting thing there is that we were using a system that was designed for a very particular set of terms for a scenario where the situation had changed and we needed, we needed much, much more dynamism, but I think what the simple systems are really good when you really understand what's happening, you don't expect it to change, but this move to an entire economy is a classic example of things changing and needing more discretion and maybe being willing to pay for that by being willing to accept a bit more of that discretion and the risk of political influence.

Ben Yeoh (34:48:):  Okay. Yeah. That makes sense on the political economy trade off. I mentioned that because it's a small example of the fact that cities have become more complicated and it appears to me that they need more of this technocratic expertise. I think this is one of the arguments you really make in the book on the cities and the fact that you think of cities as very tangible, coming back to that, but actually a lot of the challenges that they have are really where the intangible is meeting them. Planning, design, organizational capacity for net zero, all of these types of things. I wonder on the political economy question here, so we could maybe talk about in respect of the cities. I'm sensing in recent times, this kind of more, I guess you could call it populist, but this kind of slight suspicion of the technocrat, maybe because of political corruption or maybe because some of these technocratic things just seem so far removed. Is this a solution for cities? And do you think that it is politically tenable?

Stian Westlake (35:58): So, I guess the key thing about cities are that cities are very much made of tangible objects than buildings but they are the place where the intangible economy to a great extent, disproportionately happens because there were spillovers between ideas. They're where the synergies occur. As you say, the thing that stops us, growing cities typically are planning restrictions and those kinds of rules, which, you know, you could see the type of intangible asset, the claims that people have over these things. But I think specifically, if we think, about what's going on, our planning system is kind of an institution or a settle to locking institutions that help people make certain tradeoffs between, you know, I own some land, I want to build a building, but I might inconvenience to my neighbor and that's sort of the collective action problem that the planning system is meant to solve. 

Stian Westlake (36:57): Now, the planning system frankly, was designed at a time when people were pretty suspicious of cities, both for political reasons and for economic reasons, there's a kind of wonderful letter written by Thomas Jefferson, where he basically says, cities are just these terrible places. They're full of disease, they're full of rent seekers, they're full of these kinds of nasty people who don't produce anything. So, we really want to make sure that our new nation has very small cities and we don't encourage people to block to them. And you know, that kind of mindset, although that was a couple of hundred years ago, has always been with us in some sense, the kind of garden city mentality that you know was very predominant in the UK in the early 20th century was also that mindset and that was what our planning laws were based on. 

Stian Westlake (37:42): So anyway, there was a world in which we thought, well, cities aren't really that important and they're pretty dirty and they're pretty germy so let's create a system that finally privileges people's rights to not being overlooked and to enable developing things, because the cost is quite low, what does it matter of London doesn't get bigger. I mean, London was emptying out until sort of the 1990s in any case. We're now in a situation where, because these intangibles are so important, we really want cities to be able to get bigger and not just for the benefits of the people who live there, but for the benefits of the people who would be able to earn a lot more and be more prosperous, if they could move to cities, if they could only afford to pay the rent.

Stian Westlake (38:19):  I guess when we talk about what sort of institutions you need. You need institutions that allow people to do deals. So, if we think about say somewhere like San Francisco or Manhattan, where property prices are extremely expensive, because these are highly productive places, lots of intangible activity going on there, we know that, if you could ignore the law and build whatever you wanted to on your plot land, it would create an enormous amount of value. You would become very rich if you could sort of knock down your kind of three-story Victorian house in San Francisco and build a kind of vast block of flats or something. Now one way of fixing this problem is to allow certain areas to say, okay, well, we will let you develop, but if you develop, you share the gains with the people who are inconvenience. So, one of the ways this has been described as street votes, you allow zoning decisions rather than to be made at a level of cities or, in the UK, local authorities, where there are so many people, it's almost impossible to do any kind of deal share the gains. You do these things at a level of street, and you say that everyone will participate in the kind of very large amounts of wealth that will be created. Now, not every Street's going to want to redevelop, but you don't need every street to redevelop, to allow cities to densify very significantly.

Stian Westlake (39:40): But what you do need to do, is to create that kind of institutional escape valve 

for so that the people who want to do those deals to share the kind of upside, can do them, which without that, there's kind of no way of doing the decisions are taken at a different place. 

Ben Yeoh (39:44:):  Yeah. New ways of thinking on that. So maybe thinking about those last two observations, which were around fragility and inauthenticity, how does an intangible explanation think about those two observations? 

Stian Westlake (40:10): So, authenticity is a really interesting one. When I talk to economists about this, they always raise an eyebrow because the problem with authenticity as we describe it is that this worry that the economy doesn't seem to be as real as it should be, that jobs don't seem to be kind of real. So many people spend their time, shuffling it to paper or sending messages to one another and so forth. And I think, if you've been through the professional training of an economist, you've had concerns like this kind of totally hammered out to, so economists often look at this and say, why should I care about that?

Stian Westlake (40:46): What's interesting is when I talk to people who are not economists about this, whether they are people who work in other sort of knowledge-based disciplines or, people who are just ordinary people. This is something that people are very familiar with. And obviously it's a huge element of populous politics. The feeling that there was once an economy based on really making stuff and that, that we've somehow morally lost something that we no longer do this. Or, if we take someone like David Graeber, the late anthropologist who wrote this kind of influential article in book called ‘Bullshit's Jobs’, which was about the idea that everyone spends their time doing stuff that doesn't really matter.

Stian Westlake (41:25): This is clearly something that when we think about things that people are disappointed in about the economy, it's something that really touches the nerves at least among non-economists. And I guess the story there is that, this is kind of what you would expect to see in an economy dominated by intangibles, because we talked about how intangibles have a lot of synergies. They're very valuable when you combine them. They have a lot of spillovers, the knowledge about the economic benefits of intangibles often kind of escape the business that invests in them. And it's sort of unsurprising that leads to a lot of jobs that involve kind of corralling those spillovers, making those synergies. 

Stian Westlake (42:03): I had a fascinating conversation some time ago with what I guess you could call a kind of intellectual property family office. So, this was the people who ran the creative estate of a very famous children's author who passed away a while ago. The company was owned by his heirs and their job was within certain limits to maximize the value of this kind of Pantheon of children's books that the original author had written, and they were basically brokers of intangible assets. They spent a lot of time thinking about how to maximize the legal claims on those assets. So, the right approach to copyright law and as you probably know, you can extend copyright law by making derivative works, by changing things in the right way. So, there are aesthetic decisions that one can make about an estate like that, that make them more valuable equally. They spent a lot of time brokering deals with other production companies. And I guess things like the marble extended universe, a classic example of how in the modern economy are relatively, what was once thought of as probably a kind of trivial intellectual property asset can be worth, can turn into a franchise worth absolutely billions across the whole range of media .. they were also responsible for sort of thinking about the reputational side of this brand as it were and thinking about, well, where do we want to be positioned? How do we want this earth to be seen as positive?

Stian Westlake (43:43): Now, I suspect if you were to ask Marie Le Pen or Donald Trump what they thought about people who spent their time doing these things, they would say this was a terrible sign of modern Western decadence. And actually, things would be much better if more people did honest jobs in factories or fields. But you expect to have more jobs like this in an intangible economy. And indeed, they in a second order way, create a lot of things that people appreciate and make people's lives better. 

Ben Yeoh (44:13):  I can definitely see that you have these more jobs, which are involved with the intangible world. But when I was reading that section, I did think it was quite intersectional maybe with the idea of trust or perhaps culture. So, you have these people who say have jobs in crypto, and I could definitely say some people say oh well, those are BS jobs. Or maybe you even have some of these second or derivative jobs where you have yoga, personal trainers and, and sort of jobs like that. My reading of that is when people trust that either other people or trust that these jobs are really adding value and particularly in an intangible world, you are not sure, but there's now so many types of intangible things, you are kind of vaguely not sure about them. 

Ben Yeoh (44:58:):  If you trust that that is something that is adding value, then actually you don't mind, you don't think it's necessarily BS. Like yoga teachers probably not so bad as a crypto job for some people who don't understand crypto or don't trust that it's really adding value. And I wonder if there was a kind of more cultural acceptance of either innovation or weirdness or these things around the intangible world that would solve the problem around that. So, it's not necessarily to do with a falseness, which I guess authenticity or sort of the BS ideas, but it's actually really to do with trust. And actually, that goes back to some of our own institutions and things like that. If you trust institutions or you trust the laws or you trust these types of things, then social cohesion is it's a kind of collective action problem. You'd going back to the Quakers. You trust their handshakes. So, contracts and things got done. You didn't have to, to write it down. And, and I wondered whether that was a little bit upstream from that, or as intersectional because these jobs have been created from the intangible world. 

Stian Westlake (46:04): That's a really interesting question. I mean, so one way of looking at it, if we describe these potentially suspect jobs as basically being service jobs of various sorts. There's a sort of high status attached to at least some primary sector jobs and manufacturing jobs, but you know, all these jobs that you talk about, whether it's crypto trading or rights management or yoga teaching, or are kind of broadly speaking service sector jobs and the service sector jobs without a strong moral component as not being a doctor or a nurse or a firefighter or those kinds of things.

Stian Westlake (46:37): So, I guess there's an interesting thing. If we look back in history, once upon a time, probably a disproportionate number of service sector jobs were basically rent seeking. They were basically about apportioning existing value rather than creating value. And I'm here thinking about Thomas Jefferson's day here, thinking back to long time ago. Back in the old days, the economy, there were probably farmers, there were some blacksmiths and there were courtiers. And actually, all the courtiers did was they praised the king until the king gave them a here or something like that. And slightly stylizing here, but in the economy like that, it'd be extremely suspicious of service sector job because a disproportionate number of them would be rent seekers, would not be creating value and any money that they made, any riches they accumulated would be basically taken from someone else. There's kind of no value created there.

Stian Westlake (47:31): And I guess in a tangible economy, more and more of those jobs are actually genuinely value creating. I mean, obviously in the economy now, 70 to 80% of economic activity is service sector activity. So, you'd expect a lot of service sector activity to be value creating otherwise something is sort of fairly significantly going wrong. But you probably have a world that has changed over time. And as the economy gets more intangible, you'll be seeing an even greater percent of service sector jobs that are value creating. And I wonder, there's this generational because when I speak to 20 somethings, I think a lot of them do not think these are BS jobs. In fact, a lot of them are going into crypto subs or in fact, they go, well, I won’t do this, but I'm going to become a personal trainer. So, there is that. And they think they're genuinely adding value as opposed to rent seeking. 

Ben Yeoh (48:33) In your book, you kind of avoid a lot of political economy questions. I think that might be wise but about what's sort of tractable or not in policy, I think is kind of very interesting. Maybe you could call it the so-called Overton window oof possibilities. But one of your suggestions, which comment in the book I thought was probably not tractable, therefore I was quite interested about why you proposed it, and this was the idea of equal tax treatment of debt and equity, which actually from an economist point of view, and you can make the argument about why that would seem, but actually there seemed to be so many special interests around why that is in globally that it would seem quite far away from being enacted. So why do you think this idea is quite important to discuss and what would be the benefits of equal tax treatment of debt and equity finance? 

Stian Westlake (49:25): So, I think the reason we've included it and mentioned it, I think is just that there's an awful lot to play for here. So, one of the big implications of an intangible economy is intangible based businesses are generally more suitable to equity finance than debt finance. And with the exception of some sort of small but important bits of the economy, like high growth tech firms, for the most part, most business finances, still there. Most business finance is still undertaken by banks because intangible capital tends to be sunk, which means it's no good as collateral and just because of institutional part dependence, take a long time, set up new modes of financing and to make them work as you know, better than me. We are still stuck with a predominantly debt-based economy.

Stian Westlake (50:14): I think the reason why this kind of potential equalization of the tax street and debt is worth pushing for is because it's such a powerful lever. It's such a kind of thumb on scales. And to the extent that intangible assets become more and more important to the economy each year, the cost the tax shields of debt, a favored tax treatment of debt basically grows every year. Now you are a hundred percent right. To score a victory on this would only come after the most incredible political fight. There are a lot of people who would be very greatly inconvenience, business models, destroy and businesses laid low by this change. But I think if someone were to say to me, I’d buy all the stuff about the intangible economy. What is the biggest shift that we could make the biggest sort of political battle to fight? It will be that one. The nice thing about this is a lot of the design work has been done. So, Nobel Laureate, James merely kind of set a pretty detailed plan for how you would set, put in place a system of X credits.

Stian Westlake (51:25): The UK government spent quite a while working on this in the mid two thousand, got derailed by the small matter of the global financial crisis. And then the idea got dropped. The Belgian government of all places has done some work on developing this. So, it's one of these things where if one said tell me something that doesn't require a lot of new research, doesn't that isn’t sort of somewhat up and ready, but just required political will. I'd be, well, this is the big Kahuna.

Ben Yeoh (51:54): Great. And any other policy idea, which is probably outside the Overton window that you'd want to highlight or push within this?

Stian Westlake (52:03): So, I guess the other big thing is greater public investment in intangibles. Now, you know, in some ways this is not super controversial because most countries are saying, well, we want to invest more in publicly funded R and D and so forth. I think the growing importance of the intangible economy really ups the ante on this, it means that investing in these kinds of intangibles is all the more important. I guess, the wrinkle that our booklet throws on this is that you also need to invest pretty actively in how you make sure your system income, encourages high quality investment in intangibles as well as maxing out the quality of the quantity. I think that's where some of these experiments that we're seeing in new ways of funding science, whether that's stripping out the bureaucracy so scientists, aren't wasting a lot of time on applying for research grants or whether that's coming up with more entrepreneurial funding channels, which is kind of the other extremes. So, some of these, what are get called private art sort of private versions of the US projects agency that funded a lot of breakthrough computer technology research, but there are a few of these private operas being set up by Silicon Valley billionaires that I think are really interesting approaches to how you might do that.

Ben Yeoh (53:28): I completely agree. And I see no reason or at least no theoretical reason why we can't both increase quantity and quality. It's like you could definitely walk in chew gum and this. I definitely think least UK government, I think probably all governments are kind of slightly missing a trick. Maybe they haven't realized how much technology has moved on. So arguably 20 years ago you could make the case that government led some sort of technology was going to be a disaster. They didn't really know about innovation and that, but technologies moved on so far that actually some things which seem to maybe say 60 something as almost technological magic is really a baseline level of technology that even small, medium, large organizations are using, which hasn't necessarily hit public sector because of an older cultural way of thinking.  I think even in the UK, what's the government department, the GDS, the design part, public sector as a service. They've done really great work, but it hasn't managed to infiltrate as widely as it could do. So, they do quality for all these various types of things. And that seems to be just one element. So, I would definitely agree with that.

Stian Westlake (54:43): Yeah, that make sense.

Ben Yeoh (54:44): So, if you could choose one new type of institution. So, I guess this is policy or institution that we could create, what would it be?

Stian Westlake (54:59): I think this is something where, I mean, I would go for the kind of the experimental research funding agency seems to be kind of one good institution. I think the other thing that would top my list would, and this is kind of institution, not in the sense of organization, but institution in the sense of set of rules would be this idea of how do you do of doing hyperlocal planning to make it easier to build. I think that would make a huge difference. And I think one of the interesting crossovers between that kind of things is that if you did make it easier to build residential housing offices in streets in cities, again, you don't think of that as being very technological, but that might actually have big technological benefits as well because when I think of university towns. These are often highly space constrained places. Whether we're looking at, say Palo Alto in California or Cambridge in England, very high house prices, which be that the brilliant ideas that get funded often by government in these places.

Stian Westlake (56:05): It's very hard to start businesses based on them because it's hard to hard to correct workforce if it's so expensive to live there. So, I think there's a really interesting thing that planning liberalization, if done the right way, is not just a sort housing policy intervention. It's also a tech policy intervention as well. 

Ben Yeoh (56:26): Interesting. Yeah. I can see that. I, and there's a lot of work going on about actually how that the housing challenge, the kind of guardian knot is if you can unleash that would have so many positive effects. I would probably work on a new branch of the patent office; I really think more differentiation on that could be really helpful. I see that a lot of my healthcare work when I can look at drugs and things in the world. One of the reasons you could argue that we haven't got a lot of new antibiotics is that we're actually not paying enough for antibiotics at the moment. And there's a lot of other, these mechanisms, you know, bulk buy, advanced purchase to get around that.

Ben Yeoh (57:03): But actually the, the way you really need it is much more granularity about the kind of patent monopolies that you gave. And if you could do that and across the other things, some software's more valuable or not, even with some gradation, I think you'd add value, but as a new institution, I think I would plump for something around public health. And I know we have public health institutions and I would put one arm, well, the whole thing would really be around preparedness. That's why I would say it's new. So obviously pandemic preparedness is a thing, but I can already see that investment on that is really dying from government. So, there's some private or nonprofit thing but governments are basically, you have a boom and bust within pandemic funding which I've now seen yet again. 

Ben Yeoh (57:51): … But also, I actually think essentially digital machine learning public health, if we were to have a buy-in about how essentially our public health stats could be used, and we got the intangible capital that an organization that we would have an extraordinary leap in our ability to be healthier as a populous and again, this would be more prevention. So, there's a preparedness rather than treatment, but politically what you'd need to allow or you'd need buy-in is that the public would have to be prepared to give up its data, which it already does to Facebook and Google. But to somehow give it to this new institution and they say with this data, we will make you healthier.

Ben Yeoh (58:46): And I completely believe it's possible now. It is the cutting edge of where we are, but it’s there, but we actually don't have the new institution and then the political economy to make it true. And I find it's an unbelievable that we give up all of this data to Facebook. Yet we are little bit cautious about what we have with our NHS and other data. And so that's actually a cultural political economy question. But if we were to do that, I think we would have a huge potential boost. But anyway, that would be my one. 

Ben Yeoh (59:18): So, one question on this, what's one belief that you have, perhaps economic or policy belief, that you have now has changed over the last decade or has been updated. Has there been anything that you might have held fairly true or even very true and you kind of think, you know, what, I think either the world has changed or the data that, I just think actually I was fooled and I just don't think that's true anymore?

Stian Westlake (59:48): So, I think one thing that I've got more confidence in is the, and this is a very kind of big and wide-ranging thing, but is the ability, of our institutions to renew themselves or be renewed. This is something I think a lot of people have been very pessimistic about, you know? And I think in this this was something where in the early two thousand, it felt like there was not a lot of hope, our institutions felt quite escharotic and they didn't feel like a huge amount of hope. And that sent, I think a lot pull off in quite kind of radical direction. So, we had to smash everything and start again. But I think one thing that's been really interesting is whether that has been injections of new thinking from new voices that are coming from the tech sector, whether it's been things that have happened in new countries, there have been kind of more renewal. 

Stian Westlake (01:00:45): So, I guess as someone who is sort of pitching institutional renewal, I'm a lot more optimistic than I was before. But I guess that the fact that so many, that in a sense, one of the kinds of silver linings of the awful situation in Ukraine at the moment is that, many of, the defense mechanisms of the west, whether that's sort of sanctions or some of the political response to is have proved a lot more robust than I think anyone expected, you know, thinking back to the distant days of February 2022, expected that they would be here. So, that's something I've updated on, but updated in a way that I feel somewhat positive about.

Ben Yeoh (01:01:31): I think I agree. I'd also look at the experience of the us over the last 10 or even 20 years. And essentially their institutions have survived quite a lot of political upheaval. And I was speaking to Alex Stapp the other day on a podcast and he makes the point, or he has this idea that you can have new branches or new pieces in old institutions. And that form of renewal might be an underrated mechanism. So, it's still the old body, but actually you've got a new branch and I see this in companies all the time, you open a new subsidiary or you have a new team, and actually, I think you might be seeing this in institutions, you have new little bodies or seeds within them. So, you're within a very old institution, but they're starting to do new things. So, I think I might agree on that one. Okay. So, if you're willing a short section on overrated, underrated. So, this is Tyler Cowen’s game on this, and then we'll have a couple of final questions. So again, you could go overrated, underrated, you can pass or neutral, or you can put some little commentary. So, let's go, innovation prizes.

Stian Westlake (01:00:45): I think overrated, I think sometimes they to some extent coast on the reputation of the Ansari X prize, the kind of cheap space exploration prize, which was very significant because it crowded people into a hit to underexplored sector. I think the danger of innovation prize, if they're not doing that, if they're there, isn't really a kind of amazing surprise element telling people about a new sector, then they can just be a kind of somewhat ineffective way of funding because they're so uncertain and people are less likely to be interested. It's very interesting that the darker self-driving cars prizes, which are also described as a kind of great example of challenge led funding, wasn't a prize at tool or not significantly price. It was actually a bunch of very stage bits of funding that was just branded as a prize more broadly. So, on the whole, yeah, classic inducement prizes, I think are overrated. 

Ben Yeoh (01:03:35): I would prefer better patents, personally myself. But because we can't get them, maybe I would have to settle for innovation prizes. Blogging?

Stian Westlake (01:03:51): I suppose to the extent that blogging now feels a little bit like the poor cousin of substack. Everyone sort of has a substack now and is saying that's better than blogging. Blogging may be a little bit underrated on the grounds. I love a good substack, I subscribe to a lot of them, but there's something nice about the slightly more permanent structure of a blog. And you don't have that sort of angst where you write a sub, send it out and realize there's a typo in it, but a blog you can always go back and correct. 

Ben Yeoh (01:04:18): Sure. And haven't you been signed up to be a blogger this year through this, it's kind of FTX.

Stian Westlake (01:04:29): Yes, FTX substack. Yeah. That's going to happen once the book is launched.  Expect more in that area. 

Ben Yeoh (01:04:38): So, you must think it's at least a little bit underrated to be drawn into that.

Stian Westlake (01:04:42): That's true. That's true. 

Ben Yeoh (01:04:45): Okay. Three quick sets of taxes, carbon tax.

Stian Westlake (01:04:52): Underrated. I think, see, it feels like a, a taxing and pricing carbon generally feels like a really effective way of accurately sending signals about the best way of reducing carbon emissions. And, you know, given what we were saying earlier about how complex it is and the complexity of systems around climate change, this is a climate change solution that somewhat decomplex buys things.

Ben Yeoh (01:05:19): So, I used to think carbon tax was underrated and now I'm facing, having tried to actually really work in these areas of policy and companies and things. I worried about the political economy. It just seems intractable. And so, I might be now side swerving and going essentially through more innovation standards, actually to solve that because I can't see the public currently swallowing it, but maybe there might be cultural change. So, I I'm kind of open, I'm flip flopping. Well, I kind of know this one for you, but if carbon tax though, you think is underrated, where do you stand on a sugar tax? 

Stian Westlake (01:05:58): Sugar tax are overrated. I'm very skeptical about those things. Not least because I used to be a fan of the Sam Paulino fruit drinks, which have been rendered almost undrinkable by the fact that the sugar tax has had them topped up with aspartame, which I did aesthetically object to.

Ben Yeoh (01:06:18) Yeah, well, the biology of it is also a little bit uncertain. There seems to be quite a strong strand of evidence that if you have a baseline level of sugar craving, craving is the wrong word. It's kind of a SATIC level of wherever you put it. If you use a substitute, it just drives it higher. So, if you have a lot of sugar substitute products, or even sort of diet Coke, if you haven't, depending on where your baseline set is, you just then have more fat Coke later on. It is not entirely clear that it works biologically, although it it's a bit debated. And then maybe one in the middle, plastic bag tax?

Stian Westlake (01:06:59): Yeah. I feel that's a bit overrated. I've certainly been swayed by Robert Woodlands writing on landfill, basically thinking landfill isn't particularly a big problem. I think plastic waste is a problem globally, but not particularly a big problem in kind of Western countries with good landfill systems. I think the plastic bag is not the end of the world, but, to the extent that it, the carbon effects are not necessarily clear because canvas bags, unless you use them an awful lot are more carbon intensive than plastic bags. I don't think these things are killing turtles. At least the ones that get thrown away in the UK are probably not killing turtles. The other thing I worry about, this is something that really, I saw when I worked in government, is that plastic waste really felt like it was distracting political spending, political capital would otherwise been spent on carbon in emissions. And I think carbon emissions are a real problem. I think plastic waste isn't. And the thing I observed in government is there was a limited amount of political will to do something about the environment. And I genuinely saw time and time again, money, political capital resources that might otherwise have been spent on carbon reduction, basically being spent on plastics, innovation funds, or plastic bag reductions, which is that there is a clear loss to.

Ben Yeoh (01:08:18): So, I heard from two different sources, although I don't know if this is true, that actually, there were industry interests, which created the stories around plastic straws to deflect from this, that they thought let's focus literally on the straw, let's focus people on the straws and actually that will deflect from these get issues or say carbon tax and then because exactly of your point and to the plastic bags, yes. You have to use a paper bag five to 10 times more on carbon and a cotton bag somewhere between a hundred to a thousand times more. And actually, organic cotton is actually even worse with that this a thousand to maybe even 10,000 times more, if you're just looking at energy and for the waste part, you're right, it's more problems in rivers and in essentially poor countries with not the waste systems that we have, but interesting on the signal. Okay. And then, innovation agencies?

Stian Westlake (01:09:17): Underrated on the whole, I mean, I think this is something that's really important. It's really hard to get. Right. But I think as we said, we are going to need more state capacity in terms of making these investments and innovation agencies a really important way of doing this. You know, we see in places like Israel, where their innovation agencies work really well, that they have made a big difference in the economy. So, I think it's an area where we probably underrate their importance. 

Ben Yeoh (01:09:43): I think I'm neutral to underrated as well. So, I think they're important, but I really think what you need is good people in them. I don't even think you necessarily need that many. So, without the agencies, you can't get the good people, but like your point of DARPA in the like, is they're filled actually with really good program managers and that I think is actually more the bottleneck than that, but we'll see. Yeah. And then last two. GDP as a measure?

Stian Westlake (01:10:11): Underrated. I think, I was speaking with Gus O’Donnell [former head UK civil servant] this morning who was talking about how dreadful GDP is and what a terrible measure it is and how we should all measure about how happy we are. I think it is very important to measure how happy we are, but I think it's interesting if you look at things like human development index, correlates pretty well to GDP, I think most people who try and sort of sell me on GDP replacements are normally have something pretty suspect or sinister to sell you. I mean, the extreme example being kind of Bhutan, which obviously very famously got rid of GDP, but not in a way I think anyone would politically be happy with. GDP is not bad and I think you can tweak it rather than saying, well let's get people to fill out a like, at score about how happy they are and base policy success on that.

Ben Yeoh (01:11:07): Sure. Diane Coyle is very skeptical on happiness indexing research. Didn't like it at all really, and also was quite skeptical on human development index, even though actually she's interested in a lot of other things as well. So that's quite interesting, and then last one on this, UBI, Universal Basic Income?

Stian Westlake (01:11:31): So, I think this is probably me don't know. It sounds like a sort of very good idea to me in principle. I think it's probably very difficult to assess because probably the true impact of UBI only come when it's kind of guaranteed and therefore quite hard to pilot to the extent I've seen things like the Alaskan permanent income fund. It seems to potentially have some good effects, but I wouldn't say I'm a kind of evangelist for it. So, I think I probably better keep my mouth shut on, on that. I just don’t know enough. 

Ben Yeoh (01:12:08): So, in the US, I've heard, there's a kind of between the lines almost Strassman reading of how they do their benefit, essentially for a kind of disability and one reading is that, that essential benefit is kind of a pseudo UBI because you tend to get it from your local community. Doctor will say that you are entitled to it. And then when you have it, it's quite difficult to lose it. So, it becomes a sort of UBI, but it's not obvious that that's what it's going to be, and you need to know a reasonable amount to get it. So, it's not an automatic thing that would attract, say an immigrant or something going, oh, look, this is the one that I'm going to get.

Ben Yeoh (01:12:50): But if you know enough about that and there's a kind of assessment in it because typically a doctor will have to sign off something. And essentially what happens is that your doctor sort of signs you off and goes kind of do you deserve this? So, there is, there will be some medical element to it, but there is some other judgment within that. So that's a straussian reading of the fact that I've been told that the US has a pseudo UBI. I don't know how I feel about this one. I'm also a little bit tempted by this idea, which is more problematic, but I think more interesting about a kind of almost universal basic job. So, this idea that you give people a kind of job guarantee. I guess it would come with that because I actually think there's a lot of essentially socially useful jobs that we don't really do. Whether that's helping the old lady across the road or planting flowers or whatever that is and why I slightly preferred jobs maybe to UBI. Okay. So, you've got UBI, you've got cash, you can kind of do what you want and that frees you. And I kind of quite like that, but jobs there's a lot of intangibles, which comes along with that. Like the ability to prove to a prospective employee that you turned up. Day in day out for three months, looking after this lady or planting this flower or getting that sort of thing, it's actually quite valuable for future employees. They can say, oh, look, they've done that. And that's a plus.

Ben Yeoh (01:14:23): And then I guess these are the people who had these like manufacturing jobs or, or whatever. There's a certain mental health, self-worth, element to working at something and be given some responsibility that I think we might undervalue so completely politically intractable. But I almost wonder whether you need to sort of say, well, if you're going to go to UBI, maybe you should give people a sort of job guarantees and have these kind jobs, which might be socially useful if people want them. But yeah, completely intractable.

Ben Yeoh (01:14:59):  Okay, so final two questions. What advice would you have to someone who wants to be maybe working in policy or economics or thinking about that, and then the, the sub-question is, do you have any advice or life advice in general that you'd like to share?

Stian Westlake (01:15:18): working in policy, it's a really interesting question. I think at the moment it's an area that is probably certainly in the UK, I think in the US as well, undersupplied with skills. So, it's probably an area where there's a lot of generalists where specific skills and those might be technical skills, those might be analytics skills or coding skills are generally undersupplied. I mean, I came to policy through kind of consulting set skills from that, but I think in general finding ways of gaining skills like that is really valuable. I think one sort of interesting aspect to that is even in sort of economics, clearly there's a lot of people who get economics degrees and master’s degrees and PhDs, and that's very valuable for them. I think accountancy is quite under underrated in those kinds of areas, because actually so much of both policy political, economic things, you can get a real jump on them by the quantitatively less sophisticated discipline of accounting. We probably need more accountants in economics and in policy more generally.

Stian Westlake (01:16:38): And it's quite not an economically bad qualification to get either. It's certainly a lot more lucrative. To obtain in an economics PhD. So, I guess I'm long accountancy. In terms of life advice. Goodness me, that is a hard question, I guess my general life advice is that we all probably worry more than we should about things. As I think US president Calvin Coolidge once said if you see 10 worries running down the road at you, nine of them are very likely to fall into the ditch before they get to you that’s my general philosophy that I try and force myself to remember. 

Ben Yeoh (01:17:20): Great. So, with that, please do check out the book, Restarting the Future and thank you. 

Stian Westlake (01:17:28): Thank you so much. A real pleasure speaking to you about it.