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We all know the standard story: our economy would be more dynamic if only the government would get out of the way. The economist Mariana Mazzucato says we've got that story backward. She argues that the government, by funding so much early-stage research, is hugely responsible for big successes in tech, pharma, energy, and more. But the government also does a terrible job in claiming credit - and, more important, getting a return on its investment. Below is a transcript of the episode, modified for your reading pleasure. For more information on the people and ideas in the episode, see the links at the bottom of this post.
Our latest Freakonomics Radio episode is called "Is the Government More Entrepreneurial Than You Think?" (You can subscribe to the podcast at Apple Podcasts, , or , get the , or listen via the media player above.)

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Mariana MAZZUCATO: So, I wouldn't say that my path to economics was through Marxism, but it was through reading some very inspirational economists, of which one was definitely Karl Marx.

That's Mariana Mazzucato.

MAZZUCATO: I'm a professor in the economics of innovation and public value at University College London. DUBNER: You also advise, as far as I can tell, a number of governments and governmental institutions? MAZZUCATO: I'm currently on the DUBNER: It says here: special adviser to the secretary general of the MAZZUCATO: Yes, so the OECD is currently rethinking its economic narrative. And so they have a group that's literally called that: the new economic narrative. And I'm one of the people on that group. DUBNER: Gotcha. And also MAZZUCATO: Oh yeah, sorry - I didn't realize you wanted the whole list. There's actually even like 30 more. Sitra's Advisory Panel in Finland. Is that true?, is that right? Council of Economic Advisers for the first minister of Scotland. I'm also the special adviser for Carlos Moedas, who is the research commissioner in the European Union. And I used to be on the advisory board for Jeremy Corbyn. And then I resigned because of Brexit.

How can it be that one university economist has the ear of so many governments and institutions? For a clue, let's get back to why Mazzucato found such inspiration in Karl Marx.

MAZZUCATO: One thing that's fascinating about Marx is that he's known as a critic of capitalism. But actually when you read Capital - Volume 1, 2, and 3 - you end up really admiring and appreciating the dynamic aspect of capitalism, which is technological change. We shouldn't forget that feudalism was 500 years of inertia. One of the defining features of capitalism is, in fact, the way that innovation has really broken down all sorts of walls, that it's constantly changing how industries operate; how production, distribution, and consumption work. And Marx really talks about that. It's quite curious that one of the most famous critics of capitalism actually described it in the most dynamic of all ways. And that's what got me interested in the economics of technological change.

But it's not just technological change that interests Mazzucato. She has a relatively radical stance on the value that's created by technological change. What do I mean by a radical stance? Consider the titles of her books. The first was called The Entrepreneurial State. Those two words - "entrepreneurial" and "state" - typically are not used together. Mazzucato's latest book is called The Value of Everything: Making and Taking in the Global Economy. When it comes to the relationship between government and economic growth, Mazzucato knows how the popular narrative goes. It goes like this:

MAZZUCATO: "My God! The government, what a basket case. A group of bureaucrats. They don't know what they're doing!"

But she sees it differently:

MAZZUCATO: You know, what would Uber be without GPS, publicly financed? What would Google be without the Internet, publicly financed?

Today on Freakonomics Radio: in the modern economy, are governments the ones who are getting a raw deal?

MAZZUCATO: Today, all the discussion is about getting the state out of the way, completely ignoring the fact that these government investments were critical for innovation to happen.

And, when you look at big, rich sectors of the economy like finance and pharmaceuticals - how much value are they really creating?

MAZZUCATO: We have to make it much more difficult for different actors in the economy to call themselves wealth creators without really being asked, "Well, are you, or are you not?"

* * *

Mariana Mazzucato was born in Rome but grew up in Princeton, N.J., where her father took a job as a research physicist at the university. She studied history and international relations at Tufts, and got her Ph.D. in economics at the New School for Social Research in New York. Now she lives with her family in London.

DUBNER: In an interview with The Financial Times, "Lunch with the F.T." where you go and have lunch and a glass of wine, you said -
MAZZUCATO: Well, a very expensive glass of wine. DUBNER: I saw that. The glass of wine you ordered cost £40. MAZZUCATO: I made an error. DUBNER: They made an error, or you did?
MAZZUCATO: Well, I didn't see the price. They trick you. I don't know if it's because I was a woman and they didn't show me the price to be gentlemen, or if it's what the F.T. does, but there were no prices. I was so involved in the conversation, I just pointed to the first wine I saw, and it turned out to be the most expensive wine, that got anyone who read that article to call me a Sauvignon socialist.
DUBNER: So to someone who says,"Free markets are almost always good, and governments are almost always bad," you say what? MAZZUCATO: The first is,"What do you mean by the free market?" And it's curious, if you read Adam Smith, one of the first economists back in the late 1700's, he actually meant by the word "free market" not free from the state, but free from rent-seeking, free from those activities that extract value. So what I say to those who say that we need less state in order to be more innovative, more dynamic, I say, "Let's look at one of the most innovative parts of the U.S. economy, which is Silicon Valley. Did that come from the free market or from an active, visible hand: the state?" My point is, actually, the state was involved in almost everything in Silicon Valley. Not to exclude the role of the private sector, of course - we all know the very important companies in that area. But the role that public actors played was really across the whole innovation chain. MAZZUCATO: Exactly. I'm talking about both agencies that do basic research like the National Science Foundation. But also agencies more downstream, doing applied research like DARPA but also its sister organization, in more recent times, called . The National Institutes of Health, which continue to spend more than $30 billion a year in the most radical, uncertain, high-risk research.

Here's some evidence of the government funding that Mazzucato's talking about. DARPA, or the Defense Advanced Research Projects Agency, created during the Cold War to keep American technology ahead of the Soviets, has over the years produced several kinds of missiles and airplanes as well as the first computer mouse, miniature GPS receivers, HD displays, and a digital personal assistant. ARPA-E, or the Advanced Research Projects Agency for Energy, founded under George W. Bush, has funded a variety of energy projects, including battery-storage tech; the Department of Energy, starting in 1978, invested more than $130 million studying the extraction techniques that have come to be known as fracking. And the National Institutes of Health has helped fund the vast majority of all new drugs approved by the FDA.

MAZZUCATO: These public institutions have absolutely co-created value. It's quite extraordinary that we've become very used to these much more passive words to describe the state. You start having to change the vocabulary that one uses. So instead of saying the public sector de-risks the private sector, it's actually about sharing risks. Instead of talking about just facilitating and enabling business, it's really about taking on the lead investor role as an investor of first resort.
DUBNER: One of the central arguments you make is that government institutions and quasi-government institutions are involved in the investment, are involved in the risk, and yet, you argue, barely share in the return. How big of a problem is that? MAZZUCATO: It's a huge problem and it comes back to how we talk about things. I often remind people that Plato said that storytellers rule the world. So these stories we tell about who creates value has, in fact, created the stories that justify the extraction of value. Let me give you an example, which I think brings home: The U.S. government after the crisis decided to have a proper fiscal stimulus program of close to $800 billion. And part of that agenda was really also to direct that fiscal stimulus towards the green economy. You might remember that Obama financed some companies like through the U.S. Department of Energy, through a guaranteed loan that was for about $500 million. And that company went bust.

Anderson COOPER: There are new questions tonight about a cornerstone of stimulus one. A $535 million loan to a company called Solyndra that makes solar energy panels. Eric BOLLING: Why does the taxpayer have to be the one footing the bill to try to see if sun power, solar power works?

MAZZUCATO: People said, "My God! The government, what a basket case. A group of bureaucrats. They don't know what they're doing. They shouldn't be picking winners, they should just do this kind of facilitating role, construct some roads, education, infrastructure, and then get out of the way." Which, first of all, completely misses the point that actually the U.S. government in terms of energy has been the lead financer of areas like solar and wind - alongside other governments - but also nuclear. Fracking itself came out of U.S. government financing early on. But more concretely, at the same time that it was financing Solyndra, it also financed Tesla for a very similar amount of money. So the Tesla S car got a $465 million guaranteed loan. But why did the taxpayers not know that they had also financed Tesla? Would it not have changed the narrative and the perception of what these bureaucrats in Washington were doing? They actually had a portfolio, like any venture capitalist, which takes on risk - speak to any venture capitalists, they will tell you that for every success there's many failures. However, if you really want to be a venture capitalist you have to construct your portfolio in such a way that you also get some of the upside from the wins, precisely to cover that downside. And the U.S. government didn't do that. So not only had they failed on the marketing side, they hadn't actually communicated to U.S. citizens of all these successful U.S. investments which include everything in your iPhone or smartphone from the Internet, GPS, touchscreen display, Siri: all government-financed. But in this particular case, people didn't know that himself had received financing for Tesla. And Elon Musk, by the way, has received a total of - that's billion, that's nine zeros. And when I say guaranteed, I'm talking about guaranteed by the U.S. taxpayer. So when Solyndra went bust, the taxpayers were pretty angry that they had to pick up the bill.

That $5 billion has been spread across Musk's three companies: Tesla, SpaceX and SolarCity. Mazzucato says that taxpayers should be getting a much better return for investments like these.

MAZZUCATO: What the U.S. government actually did with Tesla was the opposite of what they should do. They said, thinking they were quite wise, "If you fail to pay back the loan, we get three million shares in your company." And you have to ask yourself why all these Goldman Sachs guys who were in Obama's government didn't actually come through when they were needed, because they should have said the opposite: "If you do pay back the loan, we get three million shares." And the price per share, when the loan was taken out in 2009, was $9 a share. When it was paid back in 2013, it was $90 a share. That difference multiplied by three million would have more than paid back the Solyndra loss and the next round. Then the question becomes: how do you share not only the risks but also the rewards? So we don't get what we get with the banks, which is that when things go bad the state has to bail them out, and when things go well, the banks take the profits. DUBNER: So, let me just ask you on this, two specific areas that you talk about: One is information and communication technology, or what we all think of as roughly the digital revolution. And another is pharmaceuticals. You argue that in both cases, there's been a massive government investment in the U.S. and a relatively terrible return on the investment to the government, at least. Is that still a current argument? Is it still the case that agencies like DARPA and NASA, or parallel versions, are still so strongly involved in the innovation? Or was that a golden era of government investment and research that now needs, in your view, to be rebooted? MAZZUCATO: The first part of the answer is: business has changed. It's become increasingly financialized. This is a huge problem. The two sectors where this is the biggest problem is precisely pharmaceuticals, where companies like Pfizer and Amgen are spending over 100 percent of their net income on areas like share buybacks and dividend payouts. And of course energy, with the big possible green-tech revolution. Now in terms of the government investments - on the one hand they continue to be absolutely fundamental. So, in the emerging green economy, it was actually ARPA-E which came out with one of the biggest innovations in battery storage. Again, fracking, which has changed the international landscape around energy, was also financed by government. DUBNER: To what degree was fracking, for instance, funded by the government? MAZZUCATO: To what degree? Well, you should remember that the main thing is when. So, when it was still extremely uncertain, extremely risky, where there was no private finance, government was making those early investments. In terms of the actual amount and percentage of the total, that's not really the issue, it's who took on the early risk. T Now, in terms of all these organizations like So any country that's interested in tackling areas around climate change, or rethinking twenty-first-century healthcare systems, tackling the aging demographic crisis, these are all broad challenges which unless we really frame them as missions then we're not going to be able to tackle any of these grand challenges. That's what we should be learning instead of, "Oh, we need more venture capital." DUBNER: So, you're making an argument that the U.S. government is not getting enough credit for its investment in the past through agencies like DARPA and NASA and in the pharma area and so on. You also argue separately that they're not getting enough return on the investment - which, that sounds believable. But you also argue that the high return and relatively low tax environment for entrepreneurs and investors is not a big driver. And I want to know what the evidence is for that. I look at the U.S. as, you know - one question you ask is where are Europe's Googles? What happens differently in the States than in Europe to produce these companies like Google, Facebook, etc.? There are certainly a lot of people in private equity, in venture capital, in the startup culture who say that because of the capital-gains tax environment, because of the carried-interest loophole, that that helps create the very large incentive to make these companies that turn out to be super rich. And I'm not even saying these handful of companies that turn out to be super rich are necessarily so good for society. I think that's a bigger discussion for another day. But I just want to know what's your evidence that that incentive is not really important and is perhaps a key factor in why this is happening in the U.S. and not in Europe? MAZZUCATO: First of all, what happened in the U.S. is that there was a system of innovation which lacks in many European countries, where you had patient finance but also active mission-oriented agencies which really thought about big problems. So, going to the moon, which required many different sectors to innovate, including clothing, not just aeronautics. And then instruments including prizes and procurement policy which allowed startups to scale up. Startups in and of themselves, who cares? Just because you have a startup? What's interesting is if you have a system, an entrepreneurial ecosystem - I don't believe in entrepreneurs, I believe in entrepreneurial ecosystems, which actually allow startups to scale up. Interestingly, Europe has learned the wrong lessons from Silicon Valley. And this is partly because of how the U.S. talks. The U.S. talks but it acts Hamilton. Jefferson talked more about getting the state out of the way and Hamilton, before getting into his duel with - who is buried, by the way, in the town I grew up in: Princeton, N.J. - was very much about an active, industrial strategy. So, Europe, interestingly, I think has learned all the wrong lessons. China, on the other hand - and this is really curious - China has learned the right lessons. China is actually doing for the green economy what the U.S. government did for the I.T. revolution. At the same time that Donald Trump is dismantling what I call the entrepreneurial state. NSF and DARPA and the National Institutes of Health, they're still spending a lot of money. Especially in the high-risk, high-uncertainty phases, high-capital-investment phases. However, they've been under attack. But the real issue shouldn't just be the budget. It should be the ability of these organizations to continue to really lead the way, to have missions which aren't asked in the Budget Appropriations Committee, what is that economic value going to be? Because had they thought about net present value and cost benefit and economic value as economists think of it in terms of jobs today and patents etc., then there's no way we would have done the man-on-moon mission. That actually required a certain level of ambition, of imagination, a willingness to dream. hat's why we should stop using words like "lender of last resort" for government financing and use more words like "investor of first resort" because that's, in fact, the role it plays.

* * *

Mariana Mazzucato is a professor in the economics of innovation at University College London, and she's the author of the books The Entrepreneurial State and The Value of Everything. She argues the U.S. government in particular doesn't get nearly as much credit for or return on its investments in life-changing technology and life-saving medicines.

To be sure, Mazzucato has plenty of critics. They say she doesn't fully appreciate the risks that private firms take on, and the groundbreaking work they do; they also say she overlooks the waste and corruption and incompetence that plague a lot of government programs.

In any case: she's arguing for a new and improved relationship between government and industry, starting with a better return on the government's investment in public-private partnerships. Like the space-travel partnership between NASA and SpaceX.

DUBNER: Here's something you once said in an interview: "So when Justin Bieber goes into space and unfortunately comes back, part of the price he's paid to SpaceX, which is the private firm, goes to NASA's budget." So, I want to know about the economic setup, the collaboration between SpaceX and NASA, but I first wanted to know are you hoping that Justin Bieber dies in space rather than return, what do you mean, he "unfortunately comes back"?
MAZZUCATO: No, no, no that was a joke. And I have four teenagers who I'm sure would be upset if he didn't come back. That was a joke. No, the real point was we should not make the same mistakes in space that we've made on Earth. And on Earth, we have not gotten these contracts right. So my point is: on the International Space Station, there is And patents themselves are deals between public and private and they are bad deals. They used to be downstream, which is a good thing they can incentivize innovation. They have increasingly gone upstream. So, today we are patenting the tools for research. So the irony is that in a world of open innovation and big data, we're actually going back to the Middle Ages in terms of secrecy, because we're patenting the really basic science. But my point in terms of space is SpaceX has massively benefited from NASA investments, also from NASA personnel, by the way. But just the issue, that example of space tourism. Where does the profit go, was my provocative question, given that it's all on the back of publicly funded infrastructure. DUBNER: Well, where would you like to see it go? If you could be the czar of designing public-private partnerships for the next 50 years - let's say you're going to throw out all the garbage deals that you've been describing and set it up so that when governments invest, they get a proper return and proper credit even, let's say. What would be your choice of either equity payout, financial instrumentation, tax policy, that would give the government a fair return and give us, the citizens, people who actually pay the taxes, a fair return, rather than the return continuing to flow into private and shareholder hands? MAZZUCATO: There's different ways. There's no one way. It would be foolish to think that this is always the same whether it's across sectors or across different phases of the innovation cycle. So with pharmaceuticals, the obvious way to do this is through the prices. The prices set for the drugs, the medicines, that people have to buy in order to survive when they have these terrible diseases, whether it be diabetes or hepatitis C or cancer, should reflect this public contribution. Over 75 percent of new molecular entities with priority rating have actually been financed by National Institutes of Health. So what we actually have is a taxpayer paying twice, both for very, very high basic research spending, and then for these extremely high prices which are actually set by the pharmaceutical industry. today working for free and patenting. That doesn't make much sense to me. Either you charge Novartis to have publicly funded astronauts to be doing experiments for them or you don't allow them to patent. DUBNER: And you're scared of the public blowback. MAZZUCATO: Exactly. So that's one example, prices. Another one would be conditions on profits being reinvested in those areas where there have been very large government subsidies or handouts, they shouldn't be conditionless. I mean, if companies want to go completely free market - fine, go free market, don't get a penny from the state. But if you are going to get these massive pennies - or pounds or euros - from the state, then there should be conditions attached in order for public value to be achieved, because otherwise it's just private value. And I've been thinking about this especially around the big data and the kind of new questions around privacy with Facebook, etc. Instead of having a situation where all the data basically gets captured, which is citizens' data, by companies which then, in some way, we have to pay into in terms of accessing these great new services - whether they're free or not, we're still indirectly paying. These companies call themselves tech companies, but they're not really tech companies. They're often other media or advertising companies that had used this publicly financed technology. Even these words "tech companies" and we say have to be "regulated" completely misses the point. We should be actively co-shaping and co-creating this space. DUBNER: As compelling as your argument is from an economic and political perspective, do you feel that you're losing the argument? Because from what I see, most big governments and industries are pushing pretty hard in the opposite direction of where you'd like to go. Yeah? MAZZUCATO: Yeah, so I think it would be good if I ran the world - no. I actually think these ideas are gaining ground. I think it was much harder some years ago, just take the pharmaceutical companies. They can no longer pretend that they charge these high prices because they spend so much on R&D, because myself and others have shown that actually they don't spend so much on R&D, they spend much more on marketing, much more on share buybacks than R&D. And the R&D they do do is much more downstream than that that the public sector does. So, they have been forced to come up with other kinds of crazy ideas of why they can charge these very high prices, and one is called value-based pricing. Which actually makes even less sense. It's basically this idea that because they can no longer pretend that their prices are due to their R&D expenditures, the idea is that the price is basically in the eyes of the beholder. DUBNER: The value of a life, let's say. Right? Life extension? MAZZUCATO: Yeah, the value of basically not getting that drug. And if you have kids, as I do, you'll pay - it would be infinite. The value of a drug if you don't have access to it because you want to save your kid's life. We should have the data in some sort of public repository because it's citizens' data. The technology itself was funded by the citizens. What would Uber be without GPS, publicly financed? What would Google be without the Internet, publicly financed? So, the tech was financed from the state, the citizens; it's their data. Why not completely reverse the current relationship and have that data in a public repository which companies actually have to pay into to get access to it under certain strict conditions which could be set by an independent advisory council? MAZZUCATO: I wouldn't point to an industry. One could point to companies. There are obviously cooperatives around the world that are very much run in that way. It's quite interesting to look at the difference between DUBNER: Okay, we'll end with this one obnoxious question. You're calling for a greater appreciation of government spending and indeed a greater investment in government spending and greater return, but you are also an adviser to many governments and government agencies including the Scottish Government, the European Commission. So when you accuse private industry of being full of rent-seekers, persuade me that you and your government allies aren't the rent-seekers. MAZZUCATO: So, first of all, I don't want to sound defensive because I have no reason to be, but in none of my roles do I receive a penny. Let me just rephrase my point because otherwise it's very misunderstood. My point is not that government needs to invest more. My point is government needs to better understand what its role is. It is not there just to fix things on the sidelines and wait for things to go wrong, to put a bandage on something. It is to be an active co-creator and co-shaper. So, my role has been to make sure that the private and the public sector, when they talk to each other, that it's an exciting conversation. That's what my role is, and my role is to be a real thorn in the side to the political process, which unfortunately doesn't get captured quite often, to be a thorn in the side to business, to not make it so easy for them just to say things like, "Oh yes, short-termism is due to market pressures." And I say, "What do you mean? The market's an outcome. It's an outcome also of how you behave. So what is the market?"And I get attacked all the time because I'm a thorn in the side definitely of both public and private. And when I am an advisor, I'm an advisor in the capacity of trying to change the comfortable-ness that you might have around the table, the smugness in both the business community and the policy community. And I think there's real difficulties ahead but only by tackling them together can we succeed, and that does mean changing the vocabulary, the narrative, the story, to not one of de-risking but sharing risks and sharing rewards. and . These are two competitors in the same industry where one has always tried to achieve a high profit margin basically through different strategies. But one of the key ones is through exploiting the labor force. If you get a job at Walmart, up until recently at least, you would immediately qualify for welfare benefits because your pay would be low enough to do so, whereas Costco has tried to achieve the same profit margins through innovation, through investment in new ways to deliver high quality goods and services.
So the healthcare budget in the U.S., I often say, it's not really a healthcare budget, it's a subsidization of the pharmaceutical industry budget. Because these prices are just way too high, and they should actually be reflecting that public contribution. And, by the way, in theory, they should be able to do that, because there's something called the Bayh-Dole Act in 1980s, which allowed publicly funded research to be patented because before that, the idea was that if it's publicly funded you can't patent. And once that changed in the Act itself, it says that the government should retain march-in rights - the ability to cap those prices of those drugs that were publicly financed. But what's interesting is the government has never exercised its right to do that. And that comes back to the Plato's storytellers. Because if the narrative is all against you as just an impediment, as just an intervenor, as just a regulator, and not an investor of first resort, you don't have the confidence, you don't have the security and the mandate to also affect the price.

DUBNER: It's so striking to me. You make the argument that we - and including economists, really - misdefine what value is. And you've talked a lot about the ways in which what is said to be value or wealth creation is really not. I'm just curious what's the best example of an industry or a realm where value creation is equitable and where the parties share the rewards justly? Can you point to that?

Thank you to the economist Mariana Mazzucato. Her most recent book is called The Value of Everything.

Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Zack Lapinski, with help from Alison Craiglow. Our staff also includes Greg Rosalsky, Greg Rippin, Alvin Melathe, Harry Huggins, and Andy Meisenheimer. The music you hear throughout the episode was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts.
SOURCES RESOURCES EXTRA
Here's where you can learn more about the people and ideas in this episode:

Fred D. Ledley, "Contribution of NIH funding to new drug approvals 2010-2016," by Ekaterina G. Cleary, Jennifer M. Beierlein, Navleen S. Khanuja, Laura M. McNamee, and PNAS (February 12, 2018).

"Elon Musk's growing empire is fueled by $4.9 billion in government subsidies," by Jerry Hirsch, Los Angeles Times (May 30, 2015).

"Lunch with the FT: Mariana Mazzucato," by John Thornhill, Financial Times (August 14, 2015).

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Is the Government More Entrepreneurial Than You Think? (Ep. 348) - Freakonomics

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We all know the standard story: our economy would be more dynamic if only the government would get out of the way. The economist Mariana Mazzucato says we've got that story backward. She argues that the government, by funding so much early-stage research, is hugely responsible for big successes in tech, pharma, energy, and more.

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I keep getting asked for survey-type books/articles on the economic history of particular regions or countries. In the list below, as much as possible, I stick to works of economic history with a stress on country and regional knowledge, not topical or thematic specialisation. (So no books focused on international trade or income inequality, etc.) But they are all recognisably economic history. I also don't list any "big history" books along the lines of Jared Diamond. Suggestions are welcome!

Also see the companion page: Economic History Papers.

For someone with absolutely no clue about the basics of world economic history of the last 500 years, but who wants something written by an economist, a good primer is Robert Allen's Global Economic History: A Very Short Introduction. It's a little gem, a masterpiece of parsimony, so short yet so much. Every sentence packs a mound of research, going from the "rise of the West" and the "great divergence" to the "big push" late industrialisation of Japan, the Soviet Union, and China. Yet unlike other books of this kind, it has an idiosyncratic touch that's uniquely Allen.

Also recommended: Livi-Bacci, A Concise History of World Population

The Industrial Revolution in Britain

Allen's The British Industrial Revolution in Global Perspective and Mokyr's The Enlightened Economy are the key works. I say start with Allen first. But you definitely need both for a balanced perspective. Allen's book is also a good entrée to the "great divergence" debate, contrasting European and Asian living standards just before the modern era. Clark's A Farewell to Alms offers a very heterodox take, but it's also the best elementary introduction to the neo-Malthusian model. Deirdre McCloskey's Bourgeois Dignity, which is basically a chapter-by-chapter criticism of nearly all theories of the Industrial Revolution, serves as an excellent if idiosyncratic survey of the literature on the IR.

With the exception of the above volume, I prefer McCloskey from the early days of cliometrics in the 1970s to the early 1990s. The two editions of The Economic History of Britain since 1700 that Donald McCloskey edited with Roderick Floud (2 volumes, 1981; and 3 volumes, 1994) are great. I treasure my unfortunately outdated, but dog-eared, copies of the 1981 volumes. The 2004 update by Floud & Johnson, The Cambridge Economic History of Modern Britain (3 volumes) continues in that tradition.

The 2014 successor, Floud, Humphries & Johnson, The Cambridge Economic History of Modern Britain (2 volumes) is important as introductory material and updated literature survey. An interesting change from previous editions is that the chapter on overseas trade originally written by Knick Harley has been replaced with one by Nuala Zahedieh which makes a nod to Immanuel Wallerstein.

Morgan's Slavery, Atlantic Trade and the British Economy, 1660-1800 is an excellent review of the debate surrounding this question, but as of 2000.

For some Europe-wide perspectives on the "rise of the West", see Broadberry & O'Rourke, ed., The Cambridge Economic History of Modern Europe (vol. 1). Unlike its predecessors in the same Cambridge series, this one is a very reader-friendly source. Another comparative look is Prados de la Escosura, ed., Exceptionalism and Industrialisation: Britain and its European Rivals, 1688-1815 .

Books which review and summarise our current understanding of the "Great Divergence", which used to be called the "Rise of the West":

Findlay & O'Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium offers the most nuanced perspective on the contribution of the external to European economic development. Not only does it serve as economic history of the world since the fall of Rome, but you might also notice in it a more sophisticated version of Beckert's "war capitalism". (What exactly was wrong with the word mercantilism anyway???)

van Zanden, The Long Road to the Industrial Revolution reviews the latest evidence as assembled by economic historians on why the great divergence took place.

Vries, Escaping Poverty: The origins of modern economic growth, reviews all the theories and all the evidence for the "Great Divergence" as assembled by economists, California school historians, and global historians. Vries is critical of all them.

Persson, An Economic History of Europe: Knowledge, Institutions, and Growth 600 to Present, does not tell a conventional history or narrative; rather it is a lecturish or textbookish exposition of the main stylised facts of European economic history, explicated through modelling concepts.

Hatcher & Bailey, Modelling the Middle Ages, an overview of the "super models" (Malthusian, Marxist, and Smithian) used to describe and explain economic change in the Middle Ages, with special emphasis on the late mediaeval "transition to capitalism" debate

Some books which focus on more specific aspects of European economic development in the long run:

Hoffman, Why did Europe Conquer the World?

Goldstone, Why Europe? The Rise of the West in World History 1500-1850

Epstein, Freedom and Growth: The Rise of States and Markets in Europe, 1300-1750

Bateman, Markets and Growth in Early Modern Europe

Mitterauer, Why Europe? The Medieval Origins of its Special Path

Herlihy, The Black Death and the Transformation of the West

Iyigun, War, Peace, and Prosperity in the Name of God: The Ottoman Role in Europe's Socioeconomic Evolution

Tilly, Coercion, Capital, and European States 990-1992

De Vries, The Industrious Revolution: Consumer Culture and the Household Economy, 1650-present

Ogilvie, Institutions and European Trade: Merchant Guilds, 1000-1800

Jones, The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia

Grafe, Distant Tyranny: Markets, Power, and Backwardness in Spain, 1650-1800.

The spread of the industrial revolution

After my recent post on the Hobson-Lenin thesis, someone asked if there's a good book on the "first globalisation" of 1870-1914. My answer: Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy, by Kevin O'Rourke and Jeffrey Williamson, the best summary-analysis of the econ hist literature on the epic movement of people, goods, and capital in the long 19th century. If you're interested in the impact of the "first globalisation" on today's developing countries, then Williamson's Trade and Poverty: How the Third World Fell Behind.

Scylla & Toniolo, ed., Patterns of European Industrialization: The Nineteenth Century is a collection of surveys with chapters on France, Russia, Italy, Germany, and Austria-Hungary. Trebilcock, The Industrialization of the Continental Powers 1780-1914, also covers Germany, France, Russia, Austria-Hungary, Italy, and Spain.

There are surprisingly not that many general economic histories of France or Germany in English with a quantitative orientation and updated findings.

France:

Hoffman, Growth in a Traditional Society: The French Countryside, 1450-1815

Horn, The Path Not Taken: French Industrialization in the Age of Revolution, 1750-1830

O'Brien & Keydar, Economic Growth In Britain And France 1780-1914: Two Paths to the Twentieth Century

Lévy-Leboyer & Bourguignon's The French Economy in the Nineteeth Century: An Essay in Econometric Analysis dates from 1985/1990.

Heywood, The Development of the French Economy (1992)

Dormois, The French Economy in the Twentieth Century (2004)

Crouzet's survey article, "The Historiography of French Economic Growth in the Nineteenth Century" (2003), describes how the cliometric revolution was introduced into French economic history (and resisted by the older generation). But Grantham's article (1997), "The French cliometric revolution: A survey of cliometric contributions to French economic history", actually summarises the research.

More of a cultural history with an economic history backdrop, Eugen Weber's classic Peasants into Frenchmen: The Modernization of Rural France is a narrative of how a 'backward' country transformed into a 'modern' one.

Germany:
United States
The most general survey is Atack & Passell, A New Economic View of American History (1994) or Hughes & Cain, American Economic History (a fairly simple undergraduate textbook).

For the economic history of slavery, don't read Fogel's Time on the Cross. Instead, read his Without Consent or Contract: The Rise and Fall of American Slavery. It's updated and corrected compared with the first, taking into consideration the extensive debates Fogel had with economists and historians after Time on the Cross was published. But you should also read the sceptical assessment of F & E's claims by Gavin Wright (2006), Slavery and American Economic Development.

The "Fogel of Emancipation" is Ransom & Sutch, One Kind of Freedom: The Economic Consequences of Emancipation. Olmstead & Rhode, Creating Abundance: Biological Innovation and American Agricultural Development is an agricultural history of the United States which touches on many themes from slavery to innovation.
Russia & the Soviet Union
Gatrell, The Tsarist Economy 1850-1917 is now rather old, but Gregory, Before Command: An Economic History of Russia from Emancipation to the First Five-Year covers roughly the period from the abolition of serfdom in 1861 to the end of the New Economic Policy in 1928. Mironov is mostly about biological living standards in the prerevolutionary period, but has a chapter or two on wages and prices.

Gregory & Stuart, Russian & Soviet Economic Performance is a textbook covering the entire period of Soviet and post-Soviet Russian history from 1917 to the present.

Other current-OECD:

McClean's Why Australia Prospered: The Shifting Sources of Economic Growth

Ó Gráda, Ireland: A New Economic History 1780-1939

Since Irish late developent is so interesting, I add: Ó Gráda, Rocky Road: The Irish Economy since the 1920s

Magnusson, The Economic History of Sweden

Fenoltea, The Reinterpretation of Italian Economic History: From Unification to the Great War and Toniolo, The Oxford Handbook of the Italian Economy Since Unification.

De Vries, "Dutch Economic Growth in Comparative Historical Perspective, 1500-2000", an article, is much much shorter than De Vries & van der Woude, The First Modern Economy (Netherlands, 1500-1815), which is very detailed.

Costa et al. An Economic History of Portugal, 1143-2010

Kalyvas, Modern Greece is not strictly speaking a work of history; it's rather an FAQ-type backgrounder for the Greek financial crisis, with a lot of historical and country information.

Prados de la Escosura, Spanish Economic Growth, 1850-2015 (free & open-access), which is mostly a quantitative description.

Tortella, The Development of Modern Spain is more of a narrative. But Spain badly needs an updated book in English that incorporates the major themes of European economic history, such as the response to the Black Death and the "little divergence" between northern and southern Europe, but also covers country-specific issues such as the new understanding of Hapsburg state capacity, late industrialisation, the Franco years, etc.

Comparative historical development

Nathan Nunn " Historical Development" (a chapter in The Handbook of Economic Growth) and " The Importance of History for Economic Development" are indispensable readings. For the "deep roots" literature, Spolaore & Wacziarg's " How deep are the roots of economic development " is the best entry way.

VoxEU has also just issued a 3-volume series of free e-booklets called The Long Economic and Political Shadow of History (~150 pages in each volume). It brings together very readable summaries of the "deep history" literature by some of the key researchers themselves. Parts one (global), two (Asia & Africa), and three (Europe & the Americas).

Epstein, An Economic and Social History of Later Medieval Europe, 1000-1500 is probably the most general mediaval econ history. The Brenner Debate: Agrarian Class Structure and Economic Development in Pre-Industrial Europe - the greatest fucking debate in economic history ! A synthesis of the Malthusian and the Brennerian-Marxist approaches is contained in Turchin & Nefedov, Secular Cycles, which models "structural-demographic cycles" in ancient Rome, medieval England and France, and Russia.

Routledge Handbook of Global Economic History (Boldizzoni & Hudson, ed.) is rather uneven, but this is a sui generis volume: there is no other place where you can read about the history of the economic historiography for the major regions and countries of the world.

The Cambridge History of Capitalism (2 volumes) has all kinds of short synoptic essays about many countries and regions, such as by Bresson (ancient Greece), Jongman (Roman empire), Pamuk (the Middle East), Roy (India), Jerven (Africa), and Atack (USA). I think Gareth Austin's chapter in the 2nd volume, "Capitalism and the Colonies", is the single best short treatment of the economic relationship between the imperial metropolis and the colonies. Harley's chapter on British industrialisation stresses the crucial role of "agrarian capitalism" (big capitalist farms, as opposed to the peasant agriculture of France).

Asian economic history

China

The recent The Economic History of China (2016) by von Glahn has no equivalent. There is no other book at the moment which simultaneously contains a readable narrative of the full sweep of Chinese economic history; and reflects recent scholarship both Chinese and international (although the most important scholarship on Chinese economic history is actually Japanese, which is what von Glahn relies on); and covers the major themes and controversies of the historiography. Von Glahn's book might have dealt a little bit more with the controversies surrounding the revisionism of Pomeranz's The Great Divergence, which really changed the terms of the debate and is an absolute must-read.

A bit dated but for the "big issues" approach, Elvin's The Patterns of the Chinese Past is still worth reading). Also recommended is Lee & Feng, One Quarter of Humanity: Malthusian Mythology and Chinese Realities, 1700-2000, a demographic and family history of China.

For China after 1949 -

India

In my opinion, the absolutely necessary first stop: Chaudhary et al., A New Economic History of Colonial India. As the title suggests, it embodies the most modern research by economic historians.

Tirthankar Roy's The Economic History of India 1857-1947, which is used in both India and the UK as the South Asian intro, is more detailed. It can be seen as an updated, reader-friendly version of the even more detailed The Cambridge Economic History of Modern India, volume 2. Roy himself is responsible for a major new take on Indian economic history.

I cannot emphasise enough the importance of these two books by Roy and Chaudhary et al. In 1963, Morris D. Morris, an American economic historian of India, wrote:

It is dismaying to realize that even within very broad ranges of error we do not know whether during the past century-and-a-half the economy's performance improved, stagnated, or actually declined. The fact that we have no satisfactory basis for any judgments has not prevented the emergence of a widely-held interpretation of the career of the Indian economy in the nineteenth century. This conventional doctrine starts with a notion of "traditional India," a subsistence economy which was self contained and static. Into this traditional socio-economic order came the shattering influence of market forces represented by Western commercial and industrial competition, reinforced by the power of the modern imperial state... Indian writers typically stress the exploitative features of British rule as the cause of nineteenth-century decay.

That's no longer (as) true. Many things about the 19th century remain quite patchy, but the picture we now have is much more nuanced than "Britain impoverished India" - even though that crude and antiquated view still predominates in Western history departments or amongst nationalists and neo-Marxists in India.

For pre-colonial Indian economic history, see Moosvi, The Economy of the Mughal Empire c. 1595: A Statistical Study.

Parthasarathi, How Europe Got Rich and Asia Did Not: Global Economic Divergence, 1600-1850 (2011) tries to do for India what Kenneth Pomeranz had done for China. But Parthasarathi doesn't quite make the cut, and I can't recommend the book for reasons I touch on here.

But the historians Pomeranz and Parthasarathi (as well as Joseph Inikori) are so much better at writing economic history than others trained in history departments! In fact, if the " historians of capitalism " all reasoned and wrote like Pomeranz, Parthasarathi, and Inikori, I would probably still disagree with them but I would bitch less about them !

Given Japan's status as the premier non-Western late industrialiser, there should be more books on Japan's economic development with updated research. An ideal volume would start from the late Tokugawa period with Japan's own version of the "industrious revolution" and the Meiji Restoration. It should also cover not only Japan's pre-war industrialisation but also assessments of Japan's post-war industrial policy and state planning (as described by Chalmers Johnson). Nothing really fits that bill in English:

Overall, the best economic history of Asia is still mostly found in papers. (See this list.) Personally I think the relative dearth of East Asian economic history must be related to the near-absence of East Asia in development economics - despite the 'historical turn' taken by development studies in general. Acemoglu & Robinson's Why Nations Fail is very sketchy about Japan or South Korea! And many political economy of development syllabi are all about Sub-Saharan Africa or South Asia or Latin America and very little about East Asia.

Akyeampong et al., Africa's Development in Historical Perspective

Frankema & Hillborn, ed., The History of African Development, an open access online textbook

Some articles: Austin & Broadberry, "The Renaissance of African Economic History"; Hopkins, "The New Economic History of Africa" & a reply by Fenske, "The Causal History of Africa"

Jerven, Africa: Why Economists Get It Wrong. Although this is a criticism of the way economists have done research on Africa (past and present), you learn a lot of African economic history & development from this book. An article worth reading: Austin, "The 'Reversal of Fortune' Thesis and the Compression of History", an historian's critique of various economists' theories of African development.

Bates, Markets & States in Tropical Africa

Bates, When Things Fell Apart: State Failure in Late-Century Africa

Herbst, States & Power in Africa

Austen, African Economic History: Internal Development and External Dependency: Internal Development and External Dependancy

Hopkins, An Economic History of West Africa - old but classic

Feinstein, An Economic History of South Africa: Conquest, Discrimination, and Development

Latin America:

Engerman & Sokoloff, Economic Development in the Americas since 1500 qualifies as the "deep origins" analysis of Latin American economic development, examining the legacy of colonial institutions, geography, slavery, etc. You can also read an article distillation of the book in "Institutions, Factor Endowments, and Paths of Development in the New World"

A chronological economic history of Latin American is covered by Bertola & Ocampo's Economic Development of Latin America Since Independence, which goes from independence to the present.

More in-depth, with country-specific chapters: Cárdenas, Ocampo & Thorp, ed. volume 1 (roughly 1870-1930s); Thorp, volume 2 (the 1930s and 40s), and Cárdenas, Ocampo & Thorp, volume 3 (the post-war era to circa 1980, a lot of coverage of import-substitution industrialisation).

Much less in-depth is Franko, The Puzzle of Latin American Economic Development, a textbook (very simple) covering roughly from the 1930s to the present.

Dornbusch & Edwards, The Macroeconomics of Populism in Latin America deals with individual country experiences under populist governments in the post-war period.

Haber, ed. How Latin America Fell Behind: Essays on the Economic Histories of Brazil and Mexico, 1800-1914

della Paolera & Taylor, ed., A New Economic History of Argentina

Baer, The Brazilian Economy: Growth & Development which goes from colonial times to the present, but 3/4 of the book covers the post-1980 period.

Moreno-Brid & Ros, Development & Growth in the Mexican Economy: A Historical Perspective.

Bulmer-Thomas, The Political Economy of Central America since 1920

Bulmer-Thomas, The Economic History of the Caribbean since the Napoleonic Wars

Kuran's The Long Divergence: How Islamic Law Held Back the Middle East is essential reading, but it's not a survey. But Jared Rubin is coming out with a new book. Stay tuned

Owen & Pamuk, A History of Middle Eastern Economies in the Twentieth Century, which is insufficiently analytical, but the pickings for the Middle East aren't prodigious.

Owen, The Middle East in the World Economy, 1800-1914

There's a crying need for an economic history of the Middle East & North Africa that covers both the 19th & 20th centuries, especially Egypt, Turkey, and Iran. Charles Issawi's books are now too old !

Esfahani & Pesaran (2009), "The Iranian Economy in the Twentieth Century: A Global Perspective" [article]

Not historical, but worth mentioning: Cammett et al. The Political Economy of the Middle East.

In the late 1980s and early 1990s, the World Bank & the Oxford University Press published a series of comparative country case studies edited by Lal & Myint; one of which was Hansen, The Political Economy of Poverty, Equity, and Growth: Egypt and Turkey. This starts in the 1920s.

Nugent & Pesaran, eds. Explaining Growth in the Middle East

Developing countries in general, the Global South

The Spread of Modern Industry to the Periphery since 1871, edited by Kevin O'Rourke and Jeffrey Williamson, is now the standard reference for the spread of industrialisation from the western core to the periphery, both European and non-European, with chapters on most major regions by specialists. Also see their VoxEU column.

Other books which had previously covered this period:

But there isn't a specifically post-war economic history of the "Global South" taken as a whole, that's really up to date. Radelet's The Great Surge: The Ascent of the Developing World doesn't quite fit the bill. Ideally you want a book which covers the colonial period, the postwar boom, the fad for import-substitution industrialisation and other kinds of state-led development, the external shocks of the 1970s and 1980s, and structural adjustment in the 1980s and 1990s. But I'm not aware of a book which fills this woeful lacuna.

Little et al.'s Boom, Adjustment, and Crisis: The Macroeconomic Experience of Developing Countries (1993) is excellent but has a narrower focus than I'm talking about.

I must say, the finest fusion of economics and psychology is not some book on nudges or biases, but The Hive Mind by Garett Jones. It's also the first time that differential psychology has been substantively applied by an economist to the questions of economic development and political economy. The book is also a masterpiece of cunning ambiguity, causing different readers to have diametrically opposed interpretations of it!

Ancient Economies:

Temin, The Roman Market Economy, definitively defends the idea that Rome had a market economy, contrary to the post-war view that it didn't.

Ward-Perkins, The Fall of Rome and the End of Civilization, a material history documenting through archaeological data the collapse of a civilisation

Bulliet, Cotton, Climate, and Camels in Early Islamic Iran: A Moment in World History

Ekelund & Tollison, Economic Origins of Roman Christianity

Morris & Scheidel, Dynamics of Ancient Empires: State Power from Assyria to Byzantium

Laiou & Morrisson, The Byzantine Economy

Scheidel, Morris & Saller, The Cambridge Economic History of the Greco-Roman World. This volume reflects the "new ancient history", which is heavily influenced by neoclassical and institutional economics. It's more than 900 pages long so it's hardly light reading but it's a standard reference.

Ober, The Rise and Fall of Classical Greece. It conjures up some Mickey Mouse economic growth 'numbers' through a combination of archaeological data and deductive sleight-of-hand. Then this 'effluorescence' is explained through the theoretical framework of new institutional economics.

Culture and cultural evolution

After my post on the origins of " pro-social institutions ", I have been asked about books on culture & economics, and the new(ish) interdisciplinary field of cultural evolution.

For the economistic perspective on culture, the key summary articles are Nathan Nunn, " Culture and the Historical Process"; and Alesina & Giuliano, " Culture and institutions". Also see Sriya Iyer's survey, " The New Economics of Religion ".

The best book on cultural evolution is by far Joe Henrich's recent The Secret of Our Success: How Culture Is Driving Human Evolution, Domesticating Our Species, and Making Us Smarter. (You can also see Henrich's 15-minute presentation of his book.) It offers many delights, but my favourite bit is this. Henrich has a very interesting way of looking at (premodern) technology as a designerless-yet-designed, culturally evolved product for which no single person has any idea why it works but users have confidence in ancestrally transmitted methods. The best example is manioc processing - manioc is toxic yet the detoxification process is completely non-intuitive and users have no idea why any of the steps in the incredibly labourious system work. They just blindly imitate ancestral customs, but somehow this blind cultural evolution has an 'intelligence' and is highly efficient. If you skip one step in the process the whole thing fails. The manioc processing example is all the more evocative for its causal opacity - the damage from failure to follow all the steps in the traditional process (such as merely removing the bitter taste) is only apparent in the very long run, so there is no way individuals could have put 2 and 2 together and said it prevents toxin poisoning. I haven't read a book with as many eureka! type insights in a long time.

Henrich's book is compelling as narrative. But if you want more nuts-and-bolts description of what cultural evolution is about, especially in relationship with biological evolution, then Mesoudi's Cultural Evolution: How Darwinian Theory can explain human culture and synthesize the social sciences; and Boyd & Richerson's Not By Genes Alone: How culture transformed human evolution. The mathematical theory is translated into ordinary language; it's argued that cultures evolve in a way analogous with Darwinian biological evolution; and evidence (mostly) from the social sciences such as anthropology and sociology is put forward. Rest assured: this movement upholds culture as the driver of human social evolution, not genes or biology, but they reject the dichotomy between cultural and biological evolution, considering it a single process.

However, most of the cultural-evolution guys (Henrich, Mesoudi, Boyd, Richerson) are quantitatively orientated anthropologists who are more comfortable trucking in evolutionary game theory or talking about foraging bands like the Aché of Paraguay. You won't get too much about the role of culture in history or economic life. For cultural evolution and recorded human history, the best (and almost the only) book-length exemplar is Peter Turchin's with arguments drawn from anthropology, archaeology, religion, ancient history, as well as contemporary life. It's also got a chapter with the War and Peace and War: the Rise and Fall of Empires. This is the popularisation of theoretical modelling and empirical work he has done elsewhere. Not only does it apply the principles of cultural evolution to the dynamics of state formation and decay, but it also has the best single chapter describing the science of human sociality. Also worth a look is Turchin's Ultrasociety: How 10,000 Years of War Made Humans the Greatest Cooperators on Earth best explanation-illustration of cultural group selection.

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First posted 18 January 2015; last updated: 8 February 2017 I keep getting asked for survey-type books/articles on the economic history of particular regions or countries. In the list below, as much as possible, I stick to works of economic history with a stress on country and regional knowledge, not topical or thematic specialisation.

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Over Christmas, I was lucky to have chance to review Brett Christophers essential new book on land privatization in Britain -The New Enclosure. The Appropriation of Public Land in Neoliberal Britain (Verso) - for the FT. It was...

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The smaller columns for the parties represent the data with 'Would not vote' and 'Don't know' included.

The first point is that the anti-Brexit parties are polling at around half the level of the pro-Brexit, anti-People's Vote parties. The key problem, as it has always been for the Remain cause, is that the Labour vote is mostly made up of Remainers. In this poll, 77% of Labour voters voted Remain in the 2016 referendum, and some of the other 23% may have changed their minds since then. Labour is an overwhelmingly Remain party in terms of who votes for it, but its leadership is in favour of its own form of Brexit and appears ambivalent towards a People's Vote.

The second point is that the elections for the European Parliament is actually about voting for MEPs, so seats matter as well as the popular vote. The D'Hondt voting system used in British elections for the European parliament combined with voting for MEPs on a regional basis does penalise smaller parties. The Liberal Democrats only received 1 seat out of 73 in 2014, even though they got nearly 7% of the overall vote. As a result, if the Remain vote splits badly it is conceivable that the total seat count for the Remain parties combined may only be a few seats, which will not look good compared to the double figures that Farage will get.

A very good question is why the anti-Brexit parties have not cooperated. It would be difficult to choose just one of the three parties to stand in each district, but it would not be impossible. Without this cooperation, tactical voting is unlikely to prevent the anti-Brexit vote being split three ways in each England region. It would seem these parties think it is more important to fight among themselves than unite in sending a clear message on Brexit. That will be sad if this failure leads to MEPs only being in the job for a few months. Remain can get a million on the streets and 6 million signatures, but it seems getting small parties to cooperate is a more difficult task.

Another possibility would have been for the People's Vote campaign to do as Nigel Farage has done, and put up candidates themselves on a pro-EU ticket. Unlike Farage, the People's Vote campaign would face problems in doing so. Electing individuals on a simple pro-EU ticket only makes sense if these MEPs only have a very short tenure. If the campaign is successful, you want proper MEPs representing different political perspectives. That is probably one of many reasons why the People's Vote campaign will not field candidates of its own, and is perhaps another reason why the smaller parties do not cooperate.

Given Labour's position and the lack of cooperation among the anti-Brexit parties, Remainers should not turn these European elections into a vote about being anti-Brexit, because they will lose badly. The combined vote for UKIP, the new Brexit party and the Conservatives is almost certain to exceed the combined vote for the LibDems, CHUK and the Greens. A smarter tactic would be, through the People's Vote campaign, to make these elections into a vote about a People's vote. The key difference of course is that Labour can potentially be counted as being in favour of a People's Vote, and so making the European elections as a kind of referendum on a People's Vote might succeed. Using the poll numbers above, the pro-People's Vote parties have an overall majority.

However no other option looks like getting over the line anytime soon either. Brexit has become a war of attrition. Brexiters are in no mood to accept May's deal, and instead some have pinned their hopes on replacing her. Even if they succeed, it is unclear how this changes the parliamentary arithmetic. The Tories also fear a general election for the same reasons Brexiters fear a People's Vote. Talks between Labour and the government are unlikely to get anywhere because a compromise that didn't include a People's Vote would be devastating for Labour, and any compromise by the government would pour oil on the fire of Tory divisions. Finally the new October deadline set by the EU is unlikely to force anyone to change their mind, because there is a belief in the UK that the EU will always allow another extension rather than risk an exit with no deal.

In these circumstances, a People's Vote (PV) is going to be seen more and more as the only way out. In parliament it is already the option with most votes. It is just possible that the European Elections could change some minds if it was seen as an endorsement for holding a PV. But for this to happen the PV campaign needs to persuade the smaller parties to stop talking about this election as being about Brexit and instead start talking about a People's Vote.

That will be painful to watch for Remainers, but ironically it could indirectly help the People's Vote cause. Moderate Conservative MPs will see the poor showing of their party in the European elections and begin to understand more clearly the bind they are in. For as long as Brexit is an issue, they will be in danger of hemorrhaging votes to pro-No Deal parties, but if they accept No Deal the Conservatives will not be in government for decades. A People's Vote on May's deal may be the only chance they have of changing that situation any time soon.

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The smaller columns for the parties represent the data with 'Would not vote' and 'Don't know' included. The first point is that the anti-Brexit parties are polling at around half the level of the pro-Brexit, anti-People's Vote parties. The key problem, as it has always been for the Remain cause, is that the Labour vote is mostly made up of Remainers.

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Past papers for AQA, Edexcel, OCR, CIE and WJEC Economics A-Levels

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For years, economists promised that global free trade would be mostly win-win. Now they admit the pace of change has been "traumatic." This has already led to a political insurrection - so what's next? Below is a transcript of the episode, modified for your reading pleasure. For more information on the people and ideas in the episode, see the links at the bottom of this post. And you'll find credits for the music in the episode noted within the transcript.
Our latest Freakonomics Radio episode is called "Did China Eat America's Jobs?" (You can subscribe to the podcast at iTunes or elsewhere, get the RSS feed, or listen via the media player above.)
[MUSIC: Pearl Django, "Boheme Auberge" (from New Metropolitan Swing)]
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David AUTOR: I entered the profession late actually. I had several failed careers prior to economics.

AUTOR: I'm a labor economist at M.I.T.

And what does a labor economist do?

AUTOR: I work a lot on skill demands and changes in labor markets having to do with technology and with trade as well.

As Autor said, he came late to academia.

AUTOR: I did software development for a while and I also spent several years directing a nonprofit in San Francisco that did computer education for the poor. I also did a lot of work in fast food. I spent a month working at McDonald's and half a year working at Papa Gino's, which is a kind of pizza franchise in the Boston area. I did a lot of blue collar work. I also worked as a temp, I did you know light construction and cleaning. I did clerical temping. I also fix cars and motorcycles and electronics.

So Autor hasn't spent his entire adulthood in the ivory tower. And that's reflected in his choice of economic specialty.

AUTOR: I think we labor economists like to think of ourselves as being closer to the people. I think I'm pretty cognizant of how tough the labor market has been for them for the last 35 years.

For the past several years, Autor and several colleagues - including Gordon Hanson, David Dorn, Daron Acemoglu, Brendan Price, and Kaveh Majlesi - have been analyzing huge data sets to try to answer an important economic question.

AUTOR: The objective was to understand how China's very rapidly rising exports to the United States were affecting U.S. labor markets.
[MUSIC: Apalog, "Transfiguration" (from This Is How We Know What Love Is)]
Today on Freakonomics Radio: the answer to that question; how it relates to American political rhetoric; and ... what economists got wrong:

AUTOR: I think if we had realized how traumatic the pace of change would have been we would have at a minimum had much better policies in place.

* * *

Our previous episode looked at the degree to which the American Dream has been damaged.

Raj CHETTY: You're twice as likely to realize the American Dream if you're growing up in Canada rather than the U.S.

This topic was a main feature of the 2016 presidential campaign:

Donald TRUMP: Sadly, the American Dream is dead!

As for who killed the American Dream - Donald Trump had a long list of suspects. But very near the top was China:

TRUMP: We can't continue to allow China to rape our country - and that's what they're doing. It's the greatest theft in the history of the world!

It was a theme that President Trump returned to during his inaugural speech.

TRUMP: We've made other countries rich while the wealth, strength and confidence of our country has dissipated over the horizon. One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

During the campaign, many people had been so focused on Trump's outrageous persona that perhaps they saw his claims about China and trade as similarly outrageous - hyperbolic at best, outright wrong at worst. Wasn't the U.S. a willing partner and an architect of the huge push toward globalization? We endorsed sending low-wage manufacturing jobs overseas, believing we'd get cheaper imports and newer, better jobs to replace the off-shored ones. So how well has that dreamy scenario worked out?

AUTOR: I'm much less sanguine about it than I used to be.

Let's start with a bit of history between the U.S. and China. The adversarial relationship kicked off by the Communist Revolution in 1949 blossomed into a full-blown Cold War - which began to fizzle out, quick shockingly, in 1971. That's when President Richard Nixon, a devout anti-Communist to that point, reached out to Chairman Mao as a partner:

President NIXON: The meeting between the leaders of China and the United States is to seek the normalization of relations between the two countries. AUTOR: China was sort of in a perpetual state of economic crisis from the Mao Zedong era forward and really didn't have its act together as a trading country or producer, and it was largely closed.

David Autor again:

AUTOR: And it wasn't till Deng Xiaoping took power and began changing things in the late 1970s and began what he called "Reform and Opening," which meant setting up export zones in the southern parts of China, across from Hong Kong, allowing foreign direct investment, allowing use of market prices, allowing for mobility of labor. So over the course 20 years about a quarter of a billion people migrated out of a relatively unproductive rural agriculture into cities to do production. Just incredible.

Between 1991 and 2013, Chinese exports grew from roughly 2 percent of the world's total to nearly 20 percent.

AUTOR: And China marched from being, you know, 30 or 40 years behind the frontier of production to being really a world-class producer with at that time lots of available labor and lots available land. And you know, lots of resources.

Other countries had taken the same route as China. But China was different. In several ways; but most significantly, in size.

AUTOR: So, you know, if a country like Vietnam or Cambodia or something went through the exact same developmental process as China, it would quickly run out of capacity and after a very little while it would have made all the, you know, the iPhones and the apparel and the toys and so on it could. And then wages would rise, prices would rise, and it they would just be a blip on the world scale. But because China is so enormous and had so much slack, it took decades for that string to play out. And in that time it was just producing goods, high-quality goods, at low prices that were extraordinarily competitive by world standards. And this had the effect of displacing a lot of competitor countries' production - including the United States. Stephen J. DUBNER: So David, you and some colleagues have AUTOR: Sure. So economists have known forever, or you know since the 1950s, that globalization, or the integration between trading partners, raises GDP, raises national incomes in both countries - if they're consenting partners - but can have adverse distributional consequences. taken a hard look at how globalization has had some profound effects. So tell us broadly what you know and how you know it.

"Adverse distributional consequences" being economist-speak for a rising tide that does not lift all boats.

AUTOR: So even as it makes a country wealthier it can make some people in that country poorer in absolute terms. So it can grow the size of the pie but make some slices sufficiently smaller that in net they contract. However, literature had failed to find any strong evidence that those adverse distributional consequences were coming to pass.

"The literature" being the economics literature. Meaning that as economists watched globalization accelerate, it seemed to be working out pretty well.

AUTOR: Labor economics sort of 15 years ago, a lot of people saw it as, "Oh well, now we're sort of studying well-functioning markets. It's about characterizing equilibria and explaining why it's all efficient and we should turn our attention to the developing world where all the problems are.

That view turned out to be illusory, or at least short-lived.

AUTOR: But now we have lots of problems. People recognize that and they see labor as being part of the big challenges facing lots of countries, including the developed world, in terms of income distribution, opportunity, the sort of a changing share of national income going to capital versus labor, the role of globalization in shaping opportunities, and even the way that labor markets feed into political outcomes and people's sense of party identity and the type of candidates that they vote for.

That said, David Autor is not willing to throw his profession under the bus.

AUTOR: I don't think the old evidence was incorrect. There are two big differences of the last two decades relative to earlier periods. One is that a lot of our trade prior to China's rise, a lot of it was North-North trade. You know, trading between wealthy nations. So you know, we sell aircraft engines to France and we buy cheese and wine and Renaults or maybe we buy Mercedes from Germany. And so it's a lot of high-skill people trading high-skill goods and we're trading on the basis of taste. Like, "I like your vehicles. You like my aircraft." It's not trying to see who can make the cheapest version of X, Y, or Z. We're often focusing on a set of expensive goods in which we all are differently good at different subsets.

But when China opened up, that changed.

AUTOR: A lot of what we're trading there is labor-intensive goods. Nothing that China was selling the United States, especially up until recently, couldn't be made in the U.S. It just couldn't be made as cheaply. So this was actually about price competition rather than simply having a better or different variety.

On the surface, that might seem fine - again, it would mean Americans, and many others, getting to buy cheaper goods because they're made in China. But of course the calculus is trickier than that.

AUTOR: So when the United States trades with the developing world, we're going to typically export skill-intensive products: aircraft engines, electronics, movies, and TV programs and things that use a lot of highly educated labor. And we're going to tend to import low-skilled or what we call labor-intensive products like you know footwear and textiles, leather goods, things that require a lot of hand assembly. And so what does that do? Well, when we export those high skill-intensive goods we're basically raising demand for skilled or educated workers in the United States . When we import those labor-intensive goods, we're going to reduce demand for blue-collar workers, who are not doing skill-intensive production. Now we benefit because we get lower prices on the goods we consume and we sell the things that we're good at making at a higher price to the world. So that raises GDP but simultaneously it tends to make high-skilled and highly educated labor better off, raise their wages, and it tends to make low-skilled manually intensive laborers worse off because there is less demand for their services - so there's going to be fewer of them employed or they're going to be employed at lower wages. So the net effect you can show analytically is going to be positive. But the redistributional consequences are, many of us would view that as adverse because we would rather redistribute from rich to poor than poor to rich. And trade is kind of working in the redistributing from poor to rich direction in the United States. The scale of benefits and harms are rather incommensurate. So for individuals, you know, I have less expensive consumer items because of imports from China. But it hasn't affected my employment or my wages. For many others - on the order of at least a million U.S. manufacturing workers - it meant the end of their jobs and in many cases the end of their industries.

But that wasn't even the worst of it. Coming up on Freakonomics Radio: the true breadth of the problem - and we talk about solutions.

AUTOR: I don't think there are any easy solutions. I don't think if I were, you know, labor secretary I would just be able to get in and you know turn this ship around.

That's coming up, right after the break.

* * *

David Autor, a labor economist at MIT, has spent the past few years working with fellow economists to measure the effects of global trade, especially between the U.S. and China. A lot of political rhetoric argues that China has damaged the U.S. economy via currency manipulation, making Chinese goods even more attractive to American consumers.

TRUMP: It's the single greatest tool they have, currency manipulation, and they're grandmasters. They do a great job. I congratulate them. I'm not angry at China. I'm angry at our country for allowing them to do it.

Autor's research reveals a story that is in some ways more complicated than Donald Trump's explanation, and in some ways simpler.

AUTOR: What occurred is not primarily the result of currency manipulation or cheating or unfair trade deals. It was a function of China's extremely rapid development - which, by the way, is a very good thing. You know, it brought 400 million Chinese out of poverty, raised incomes in Central and South America, caused investment throughout Africa, right? This is sort of the best thing to happen to the global middle class in at least a millennium, right? But it was it was tough on U.S. manufacturing.

Very tough - especially after 2001, when China was accepted into the World Trade Organization.

TRUMP: China's entrance into the World Trade Organization has enabled the greatest job theft in the history of our country. AUTOR: We would conservatively estimate that more than a million manufacturing jobs in the U.S. were directly eliminated between 2000 and 2007 as a result of China's accelerating DUBNER: And are you controlling for the effects of technology here? AUTOR: Well, yes to the best we can. To the best we can. We do have measures of sort of exposure to automation and so on. And as far as we can tell that that's not really the main driver. Now I think it's reasonable to argue, well, you know given 15 or 20 more years it would have been. DUBNER: Right. AUTOR: So then the question then is, "Well, what happens? Where do those workers go?" In a canonical economic model they just costlessly reallocate to their next best opportunity. trade penetration in the United States. Now that doesn't mean a million jobs total. Maybe some of those workers moved into other sectors. But we've looked at that and as best we can find in that period, you do not see that kind of reallocation. So we estimate that as much as 40 percent of the drop in U.S. manufacturing between 2000 and 2007 is attributable to the trade shock that occurred in that period, which is really following China's ascension to the WTO in 2001.

Ah, the lovely language of economics once again. "Costlessly reallocate to their next best opportunity": meaning that some American who loses his manufacturing job just hops over to the next good job, which just happens to be available, near where he's already living, and for which he just happens to be perfectly qualified for ...

AUTOR: ... which is, you know some other sector elsewhere in manufacturing, elsewhere in services. And kind of that plays out across the entire United States. So even though it's very concentrated locally, it defuses over space so it's small relative to the entire labor market. And so it shouldn't really have a big local effect, it shouldn't be very long-lasting.

So that's the economic theory. Is that what David Autor and his economist colleagues saw in reality?
[MUSIC: Justin Marcellus, "Light Aperture" (from Deep Signals)]
AUTOR: That's not what we see. We see those falls in manufacturing employment correspond to about equally large falls in overall employment rates over the first 10 years in those trade-impacted locations. So every half a point that manufacturing falls, we see a total decline of about a half a point. So some people are leaving the labor market, some people are going into unemployment. Some people are going on to disability. And so the reallocation process seems to be slow, frictional, and scarring. DUBNER: Okay, so until "scarring" those words sounded fairly clinical and academic. But what you're describing here it is really bad. A) Correct? AUTOR: Yeah. Yeah. DUBNER: And B) I'm just curious before we move on - you looked at a whole lot of different manufacturing ecosystems. I'm sure there's great variance, or I'm assuming there's great variance from one to the next. Can you talk about some ecosystems, some manufacturing industries or jobs where people did do a better job adapting? AUTOR: You know actually the real differentiator is the kind of skill level of the worker, so higher-paid and more highly educated workers, they seemed to reallocate successfully out of manufacturing into other jobs. So the shock to manufacturing affected everyone in the immediately targeted industry. But the differentiator is not what industry you were in specifically, but how skilled you were initially. DUBNER: So the H.R. person at a big textile firm gets an H.R. job elsewhere and the manufacturers on the line are probably not. AUTOR: The line workers are much less likely to do so, exactly. DUBNER: Right. AUTOR: And what's important to emphasize if I say a shock to furniture, that's not just one plant, right? There are multiple plants in you know Tennessee that have 10,000-plus workers and they all kind of shut down within a few years of each other. And so you can think of this as it's like you know there's a certain element of blight that sets in, right? Look, there are 3,000 counties in the United States. If 10,000 workers were eliminated, you know, three from each county, you wouldn't even notice it, right? But if 10,000 workers are eliminated simultaneously from your you know local labor market, DUBNER: AUTOR: Yes. Yeah, that's what we find actually that you see a kind of decline in the wage level not just in manufacturing. You also see people using public transfer benefits like unemployment and trade adjustment but actually much more numerically, quantitatively large, are disability, Medicare, Medicaid, food stamps, TANF, early retirement. So those programs actually are or numerically, you know fiscally, much much larger. Maybe this is not a multiplier, maybe i'm defining it wrong, but, what about with all those relatively low-skilled workers out there floating around looking for jobs, presumably that could lower the wage of other existing jobs or no? that's very noticeable, and it has kind of add-on effects. Because gee, well those manufacturers also stop you know buying the delivery services and the catering services, people have less income so they go out to dinner less. So all kinds of kind of adverse multipliers, not huge, but noticeable and measurable, set in.

Look at all those downstream effects from China's manufacturing growth that David Autor identifies in the U.S.: job loss; wage depression; higher welfare spending. In another research paper, he and his colleagues found yet another downside. Many economists had suspected that greater competition with China would create incentives for American companies to invest more in research and development and become more innovative. But it hasn't worked out that way. Instead, Autor and his colleagues found, Chinese competition has lowered profit margins for American manufacturers, leaving less money for R&D and resulting in less innovation.

DUBNER: People like you - meaning economists, not like you David Autor necessarily - you know have been telling us for several decades now that globalization would be largely a win-win. I'm not so naive as to think that there are no losers. I get that. But that overall, we Americans should kind of sit back and relax, that it would be good for the median U.S. resident. So I don't feel that way anymore and tell me if I'm wrong to not feel that way. And additionally if I'm wrong maybe to blame you and your cohort a little bit. AUTOR: I think if we had realized how traumatic the pace of change would have been, we would have at a minimum had much better policies in place to assist workers in communities that suffered these very severe and immediate consequences. And we might have tried to moderate the pace at which it occurred. And let me add another factor that really augments this is we also had a huge trade deficit and that meant we simply did a lot less manufacturing. So that meant that workers had to make a tougher transition out of manufacturing, into something altogether new. And I think that upped the challenge. It made it harder for people to reallocate. It was one thing if they are going you know they're getting out of textiles and moving into automobiles or tools. But that's not what happened, they're getting out of textiles and moving into Wal-Mart, you know, moving into fast food. I think the other thing that we have to recognize, and that economists have tended not to emphasize is that jobs aren't purely income. They are part of identity. They structure people's lives. They give them a purpose and a social community and a sense of relevance in the world. And I think that is a lot of the frustration that we see in manufacturing-intensive areas. We saw a lot of that actually in the recent election. People feel like their place in the universe, or at least in the economy, has really been kind of reduced, made less valuable. And I think that that's costly even beyond the direct financial costs.

DUBNER: So President Trump did not choose you, David Autor, as labor secretary. DUBNER: But he did choose someone else with a fast-food background: Andrew Puzder, who's chief executive of the company behind Hardee's and Carl's Jr. DUBNER: So if it had been you and maybe someday it will be: What to do about it? You acknowledge that you're not as sanguine as you were or thought you might have been. You acknowledge that the degree of pain and the pace of the change has been really severe. Tell us some things that are potential remedies or at least better thinking frameworks to approach the future of labor in this country. AUTOR: So it's a challenging question. I don't think there are any easy solutions. I don't think if I were you know labor secretary I would just be able to get in and you know turn this ship around. But a couple of things I'd do: one thing is I would expand the Earned Income Tax Credit, which is a federal wage subsidy for people with low incomes. It's a really generous and effective program but it is targeted at adults with dependent children, primarily women. So if you're a mother with two dependent children you can get up to $6,000 a year in EITC support, up to a household income of about $40,000. So it raises incomes and it also causes people to participate more in the labor market. It makes low-paid work better paying, effectively. But if you're a man without dependent children you can get about $400 a year total from the EITC, not $6,000 - $400 a year. And many of the men that are you know struggling for employment, in fact many of them do have children. They just can't claim them as dependents. They're frequently not married to the mothers. So this is a group that is experiencing falling wages. Labor-force participation rates are declining among less-educated men, even less-educated young men. So one policy I would use is to provide the Earned Income Tax Credit. Basically makes it more rewarding, financially rewarding, more worthwhile to work. That's one thing. I do think there are tax changes that we ought to make that could be beneficial. One of them is actually being talked about in the Trump Administration is the so-called "Border Adjustment," which is a way - it's a complicated story - but it's like a value-added tax. And if it were used to offset other taxes like our payroll tax, for example - right now our payroll tax raises the cost of producing in the United States. But foreign countries when they import here they don't pay our payroll tax. If we had a value added tax that would be levied both on things produced domestically and on things that are imported. If it were used to offset the payroll tax why that would have the effect of basically making imports a little bit more expensive relative to domestically produced goods. I don't think that's a terrible idea. Many countries do something that looks a bit like that. I think the other things are importantly are skills investments and then I think also things that make the quality of life better for people with low incomes including I'm afraid to say it, the Affordable Care Act, which is a very good policy that we will be saying goodbye to soon. DUBNER: So those all sound interesting and perhaps viable and perhaps useful - but most of them are coming primarily from one direction, which is basically there are costly ways to support the people who have lost out because of this economic change. What about reversing that dynamic? So obviously this president, that's his gospel on the labor front, to date, which is reshoring, or I don't know what you call it in the case of Carrier where you don't let them get away in the first place. What's your view on that? AUTOR: Well, so the border adjustment that I talked about actually would have the effect of encouraging domestic production. I think you know a number of things for many of those labor-intensive jobs are not going to come back. Even if the production returns the United States - it would be done with a lot more machinery and robotics. I think manufacturing will continue to occur in the United States. I just don't think it's going to use that much labor. I think it's perfectly reasonable to aggressively enforce our trade deals. There are certainly countries that dump products, that steal intellectual property, that create anti-competitive barriers in their own country so the U.S. can't export to them even though it's importing from them. But I don't think we can turn back the clock. And moreover, remember that many of those imports - for one they do make consumer prices lower and two they're often inputs into things that we're making and then exporting or consuming domestically, right? So you know as soon as you start taxing you know Chinese goods you're taxing car parts that end up in you know GM and Ford and you know Fiat-Chrysler automobiles. You'll quickly find that there's a lot of opposition from U.S. manufacturers to restrictions on trade or tariffs. You might think, "Oh no we're doing a favor, we're you know making your products more competitive." Well not if you're importing a lot of your components.

DUBNER: President Trump has been accused of ignoring evidence on a lot of fronts. In this case, when it comes to the costs of globalization, it strikes me that his views are kind of align quite closely with the views of economists like you who do see evidence that supports some of at least his proclamations about the costs of globalization. Where do you find yourself on that spectrum whether politically per se or just philosophically? AUTOR: Well I want to be clear: President Trump makes a lot of unfounded claims about trade that I do not agree with. For example that NAFTA was a disaster for the United States. Very very little evidence to suggest that was true - was actually mostly a win for the United States and but pretty modest. I also you know strongly disagree with the idea that we ought to be slapping extremely high tariffs on importers. I think that would be quite damaging to the U.S. Similarly I don't favor strong-arming companies to keep employment here if it's going to deter others from creating jobs here out of fear that they'll then be forced to retain them. So I don't even think trade has been a net bad for the United States. I just think it's created real concentrated adverse impacts, which I you know Trump was right to recognize. And TRUMP: The TPP is a horrible deal. It is a deal that is going to lead to nothing but trouble. It's a deal that was designed for China to come in - as they always do, through the back door - and totally take advantage of everyone. AUTOR: I don't think he even realized at the point that China was not a signatory to the TPP and China was the country cheering loudest to see it crash and burn it because it was basically establishing rules of the game among with Asia and North America and the United States that would uphold intellectual property agreements, freedom and transparency of contracting, market access, and so on. So if we don't set the rules of the game in Asia, China will, and I don't think we'll like those rules nearly as much. So that's just this kind of bluster against trade that is ignorant and harmful to the U.S. interests and really harmful to our allies, including most especially Japan. DUBNER: So David I know you've said that economics wasn't entirely wrong on this prediction that global trade would kind of work out okay. But I do think a lot of people would disagree. Obviously it's a matter of degrees. So if that's my view and I think that you know many or most economists were wrong on something as basic and important as this, why should we ever listen to what you wonderfully educated egghead economists have to say when it comes to something as important and broad as macroeconomic issues that will affect my actual life? You can predict all you want about currency stories abroad, etc. But if it's my life, my livelihood, my job, my family, and my ability to provide for them, you guys are supposed to be the nonpartisan, smart, apolitical cohort out there. And I trusted you and now I'm sorry I did. Because if I hadn't, I might have changed course 15 or 20 years ago. And while I might well I might not be in great shape I'd certainly be in better shape than I am now. AUTOR: Well, I don't know that you'll be in better shape. You'd be in different shape and a different group of people would be benefiting. I don't think we'd be wealthier but you know I think it it's a really good question. I mean I think economists have learned a lot from the data and it's actually a credit to the profession that we're you know we're not just asserting, we're testing. And when the facts change we change our opinions and the evidence that economists were relying on up through the 2000s wasn't incorrect for its time. It just turned out not to be fully predictive of what happened next. And that's you know that's sort of cold comfort I realize. But you know we're in the position where we now understand better what the consequences were. And we can make better policy going forward. And also if we didn't have economists sort of trying to assess and answer these questions, we'd be relying on a lot of wrong and bad ideas about the gold standard, about "trade is only good if you export and bad if you import." That you know the most important thing to do in a recession is stop spending so the country you know saves. You know there's tons and tons of bad economic reasoning out there. Contemporary economics is quite imperfect but I think it's at least guided by evidence and economists are fully capable of changing their views based on evidence. I do not think the profession actually is nearly as ideological as it was 25 years ago when it was guided so much by theory. Now it's really guided by data and you know case in point the work that we've done here it's been somewhat controversial but by and large economists have really embraced and said, "Oh yeah, wow, we're surprised and this changes how we think about it," and again I don't want to claim that we were you know some upstarts. We just happened to look at the right data and come away with conclusions that none of us were expecting. But I think that's you know that's about as good as social science does. We're not working with natural laws that are can be as neatly summarized as Newtonian physics. but that's where I'm more in sympathy with the administration than on other points. I'll finally say that a good example of where bad thinking and bad trade policy has come in immediately is in this whole debate around the Trans-Pacific Partnership, which was basically a forward-looking trade agreement that was set up as a bulwark against Chinese domination of Asia. You know, Trump said on the campaign trail you know "China will take advantage of us through the TPP like they always do."

I have no idea if you'll agree, but David Autor strikes me as a particularly keen and fair-minded analyst, and observer, of the U.S. labor markets. It doesn't seem as if he's got a horse in the race; it doesn't seem as if he's got his thumb on the scale. And his insights seem useful - at least as useful as a diagnosis can be once you're already sick. There's just one caveat I'd add to his message. It has to do with the predictions economists made about how Chinese manufacturing would affect the American labor market.

AUTOR: The evidence that economists were relying on, you know, up through the 2000s wasn't incorrect for its time. It just turned out not to be fully predictive of what happened next.

This program has gone on and on about the folly of prediction. In fact, there's a Freakonomics Radio episode from years ago called " The Folly of Prediction." We talked about how one of the most common explanations of smart people, when their predictions turn out to be inaccurate was that "Well, we did the best we could considering the information we had at the time. If we'd had better information, we could have made a better prediction."

But you know what? If you had better information at the time, you wouldn't have to make a prediction; the future would be obvious. But that's the thing about the future - it's rarely obvious. Which leaves a lot of room for all kinds of people to make all kinds of predictions that may or may not come true.

I'm not calling out David Autor here - again, I really appreciate his transparency and his doggedness. But the story of Chinese manufacturing and American labor is yet another reminder of how humble we should all be when we make a prediction, and how cautious we should all be when we hear one.

Think about this: if the vast, vast majority of political pundits and TV journalists and even the most revered analytics geeks got the 2016 presidential election so wrong - and that's a simple, binary choice, the Blue Team versus the Red Team - then how much harder is it to predict the downstream consequences as something as vast and broad as a global labor upheaval? I don't mean to get all preachy on you; that's not the Freakonomics way. But I will say this: beware the punditry, no matter how well-degreed they are, or well-spoken, or well-coiffed. Don't assume they can know the future any better than you do; and don't assume you're such a genius either.

Coming up next time on Freakonomics Radio: "An Egghead's Guide to Watching the Super Bowl." How can you optimize the experience, whether you're a football addict or a total newbie? We talk to some of the smartest NFL players, past and present: two-time Super Bowl champion Justin Tuck; Eric Winston; and Baltimore Ravens lineman John Urschel, who's getting his Ph.D. in math at MIT.

John URSCHEL: So if you look at a wide receiver - what is that wide receiver doing on pass plays where the main route combination is not to his side? What is he doing when it's a run play? Is he running them off, is he just jogging, is he talking to the cornerback?
SOURCES RESOURCES
We also talk to our resident Freakonomics egghead, Steve Levitt:
ETC
Steve LEVITT: The other thing that's really special about the Super Bowl and if you are not a fan but are forced to attend the Super Bowl party - I would highly recommend gambling.

And there's one thing all our eggheads agree is the best part of Super Sunday.

URSCHEL: You will enjoy the commercials, I can assure you. JUSTIN TUCK: I will tell them to pay attention to the commercials. ERIC WINSTON: The commercials are really funny LEVITT: I give special attention to the ads.

That's next time, on Freakonomics Radio.

Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Greg Rosalsky. Our staff also includes Shelley Lewis, Christopher Werth, Stephanie Tam, Merritt Jacob, Eliza Lambert, Alison Hockenberry, Emma Morgenstern, Harry Huggins, and Brian Gutierrez. You can subscribe to Freakonomics Radio on iTunes or wherever you get your podcasts.

Here's where you can learn more about the people and ideas in this episode:

"Foreign Competition and Domestic Innovation: Evidence from U.S. Patents," by David Autor, David Dorn, Gordon H. Hanson, Gary Pisano, and Pian Shu, MIT Working Paper, November 2016

"The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade," By David H. Autor, David Dorn, and Gordon H. Hanson, Annual Review of Economics, 2016

"Import Competition and the Great U.S. Employment Sag of the 2000s," by Daron Acemoglu, David Autor, David Dorn, Gordon H. Hanson, and Brendan Price, Journal of Labor Economics, 2016

"The China Syndrome: Local Labor Market Effects of Import Competition in the United States," By David Autor, David Dorn, and Gordon Hanson, American Economic Review, 2013

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Did China Eat America's Jobs? (Ep. 274) - Freakonomics

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For years, economists promised that global free trade would be mostly win-win. Now they admit the pace of change has been "traumatic." This has already led to a political insurrection - so what's next? Below is a transcript of the episode, modified for your reading pleasure.

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How much is an hour worth? The war over the minimum wage

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The long read: Some economists say it should be raised. Others say it's already too high. But what if both sides are missing the point?

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BBC Documentary Business 2015 HD   Panorama Trouble at Tesco English subtitles

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About

Soumaya Keynes (The Economist) and Chad P. Bown (Peterson Institute for International Economics) cohost a podcast about the economics of international trade and policy. From trade wars to trade deals, this podcast covers trade developments with insights and economic analysis from two of the world's top trade geeks.
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Episodes

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About Soumaya Keynes (The Economist) and Chad P. Bown (Peterson Institute for International Economics) cohost a podcast about the economics of international trade and policy. From trade wars to trade deals, this podcast covers trade developments with insights and economic analysis from two of the world's top trade geeks.

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When I was studying Economics at A Level and at University, I often wondered why, given the current state of technology and communication, there were never any recordings of class or lecture content. Revision was difficult, grasping key concepts was at times difficult - it was hard to stay ahead of the game.

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Award-winning podcast about the economic forces shaping our world, with Ayeisha Thomas-Smith and guests. Brought to you by the New Economics Foundation - the independent think tank and charity campaigning for a fairer, sustainable economy. New episodes on Mondays.