Good morning, thank you everybody for coming so bright and early to our session this morning on economic narratives I want to introduce this by telling you a story about something I heard when I was first it when I first joined the Wall Street Journal as a journalist I was told about a legendary page one editor who told us how to write stories that people wanted to read and he had a Very simple formula people readers are interested in animals people numbers in that order and I said well, that's unfortunate because my specialty goes in the opposite direction I'm good with numbers first people second animals last and I think economics as a profession has a similar problem the point of Economics is in some sense to take the people and the animals out and focus on what we know But that is not how people think people think in terms of stories and things that they can actually picture in their mind And that's why I think today's panel I think it will takes into some very interesting territory because it can help us Understand why there is such a chasm these days between what the Technocracy what the economists with all their numbers and their models believe people should think and and act upon and what is actually going on in the world So we have I think you all had the details in your panel But briefly we have Ragu Rajan from the University of Chicago Deputy Prime Minister Thamon from Singapore Bob Schiller from Yale and Ying Zheng how from the Chinese Academy of Social Sciences still and we're all going to address various Aspects of this issue and then have a conversation and we'll bring you all into it later on Bob Let me talk to ask you first because you actually gave an address at the American Economic Association That dealt with the power of narratives and there was a line in it where you talked about Most people think through narratives, but economists are terrible with narratives. Tell me a little bit about that and why it's a problem Well, I think I dated back to David Hume in the 1740s who first talked about the power of narratives It's been growing in the social sciences particularly anthropology sociology also psychology That you have to understand What stories people are telling what which are motivating but economists have resisted that and I think it's a shame so I got up in front of the whole American Economic Association and Told them so I didn't get booed Happy to say I think maybe even the econ profession is moving back toward recognizing Probably what what is happening is economists are studying digital texts They like to they still like to count things, but at least they're kind of trying to count ideas that spread so what I emphasize in my American Economic Association Presidential address was that narratives as you say they they are enlivened by human interest Maybe animals to I don't emphasize that and they they grow Epidemically so the mathematical model that I brought in was the Kermak-McKendrick 1927 a model of epidemics, but it has two parameters Contagion rate and recovery rate is a very simple model and they're In the 90 years since there have been many versions, but what you have to recognize is that Ideas about how the economy work are linked with stories, especially I think celebrity stories Some famous person who becomes godlike in our imagination and they they have a contagion rate Now the critical difference is the contagion rate has to be greater than the recovery rate at the beginning This is what Kermak and became or it has no chance Lots of great economic theories have no chance because they don't meet that threshold as soon as that threshold This would like in a disease of it as soon as the threshold is reached The epidemic starts to grow and it can eventually hit the whole population Then then eventually it goes down again, even if the parameters are constant The Kermak-McKendrick model also emphasizes that there are fast epidemics and slow epidemics. Some of them occur rapidly And some of them are slow. So one of my favorite examples is the epidemic of Karl Marx. You heard of him? Everyone's heard of him not because he's right because he's Contagious, but it wasn't even in his lifetime when he died in 1883. He wasn't well known Somehow the Karl Marx story Took off and the epidemic grew until the 1970s when it peaked according to my data That's the kind of thing and it's now slowly slowly declining That's the way these things move. So you have to look at the nature of the story why it's contagious and policymakers have to think about what Their policy Implies in terms of narratives and some of the most important policy I mean I'll just conclude on the thought one of the most important things that was done with the financial crisis of 2007 through nine Was when the Chancellor of the Exchequer and the head of the Bank of England Met and decided to bail out Northern Rock Even though they had questionable authority to do it. There was a bank that was going through a run Because they thought we don't want these bank run stories to go viral again It will threaten everything. So they they were in the same thing happened in the US with the Prime Reserve Fund with Ben Bernanke So it was their understanding of narratives that saved us. I think from worst crisis Thanks very much Bob. I'm gonna want to turn to you next and bring this up to date in terms of the policy context one of the Narratives, I think that's been very persuasive at least in in the Western world the idea that the merit matters and that Essentially if you work hard and study and do the right thing, you're gonna do really well What has happened to that narrative and has another narrative taken its place in the Western in developed societies? Well, I think Greg you're you're right To my mind the most powerful narrative If you think of it on a global scale advanced countries developing countries in the last 70 years Has been the idea that through markets and meritocracy Everyone's going to have a chance to have a rising standard of living and Because it actually happened for a period of time in the advanced countries and some developing countries people saw their parents Their aunties their uncles actually doing much better and they expected it will continue Then in the developing world you had some countries that started catching up Actually, there was a very small number of countries in East Asia and then you had China catching up on a much larger scale, but there's actually been an Epochal shift in This narrative for two reasons First what happened in the West in that period following the war Hasn't been sustained has faltered and in some ways is is is broken It's really an epochal shift because if you quite apart from the data which actually shows that median wages at least for men Have have fallen in real terms for anyone entering the workforce by by the late 60s onwards You're earning less over your lifetime compared to the preceding generation, which is which is a remarkable fact But it's also in perceptions It's also in the narrative If you look at what Pew global research It is and that's one of the best surveys we have globally of what Parents think their children are going to earn in their lifetimes We're now at a position where about 60 percent of People in the advanced world think that children will not do as well as parents It's a little lower than 50 percent for countries like Sweden. It's about is over 70 percent for France and Japan That's an epochal shift the idea that progress no longer exists through markets and meritocracy And in the developing world we have to remember because the headlines are always about China or you know, Singapore or Taiwan or Hong Kong the bulk of the developing world is in Africa South Asia and Latin America and It's stagnant. They haven't caught up. They haven't caught up relative to US Productivity levels of standards of wing since the 60s and within those societies as well Not that many people have caught up. So that's a very fundamental shift and it means that new solutions are required If you just permit me to carry on for just a minute and we can come back to it later The there's been a great over emphasis on macroeconomic policy and you know Ragu and I have had a lot of discussions on this part of the reason is the people have lost faith in the Microeconomic and community based and social solutions and they've lost face for two reasons first the solutions of the right Which had to do with leaving things to the markets Haven't worked. They've accentuated the disadvantages and advantages that people start off with they've accentuated Inequalities the solutions of the left on the microeconomic level Economic solutions like nationalization have also failed and the social solutions of the left have run their cause and exhausted their potential The redistributive Solutions have exhausted themselves and there's if anything there's now a hardening of attitudes towards the poor In a range of advanced societies So we need a new policy narrative That's not macro that is micro that's social and that's community and it means reinvesting in people reinvesting in innovation and even disruption because we have far too little disruption taking place in fact Which explains why productivity growth is low and wage growth is low But it means not you know getting past this Recent narrative of compensating the loser. That's a terrible narrative is a defeatist narrative We've got to talk about reinvesting in people at every stage of their lives so that we can have more innovative economies But we also have people adapting to innovation and making the most of it and I believe it is actually possible There is that policy space that relies on social policies that relies on market and industrial policies and that relies also on a political strategy that the political center has to inhabit and has to Breathe a lot of life into That's a actually a perfect opportunity Jing Fang to bring you into this story You know a thumb and mentioned, you know For example, China has always held up as a shining example of rapid development and progress But as you know, there was enormous social turmoil associated with that progress What narratives emerged from that history in China and how does it affect? The Chinese government's efforts to move progress forward today Actually about the narratives Especially narratives in China and there are a lot of stories A lot of competing stories of why China developed so fast how it developed so fast somebody even call it China miracle to study about but So we tend to think that When I were there's a good economic results that indicates that there's good governance There's good institutions or or everything is good. So now people are trying to figure out What are those? experiences that that isn't miraculous that can be Purchased to all the other countries, but actually when we compare compared the the catch-up Process of China with some of those quickly catch up the countries in the history. We found out that it is not that special because for Germany in late 19th century it also experienced a really rapid the catch-up phase After the the reform of business and also for some other country like Japan in the 19th century In early 20th century and also the East Asian countries after the what what to we all found out that they have these kind of firm one decade or more two decade of the rapid growth of about 10% of GDP every year and All these Different models have some kind of similarity They they catch up with they just copied the technological development in their Advanced countries and they just put all resources together and things like this if we do this historical study we found out that perhaps the experience now in China is not that Special it is just because we tried to follow up the others we copied experiences. We just tried to study from others and in that face it is always quite quick in Development but after that if you got into the technological frontier you need to be creative innovative into the other Face then all these countries face the some kind of problems only really few succeed in the next phase They are failures in history as well. So that makes the Chinese government to feel pressure What what will happen in the next phase if we are already on higher level and this Cut the narrative of economics the evaluation completely different and also the the reason for me to Think about the narrative of economics also came from my experience when I was a young girl in 1990s I Witness some of my relatives lost their jobs in I so e reforms They owned enterprises reforms. They lost their jobs. They got no income They they just sell small items in the street and the life was really hard at the time I I think that all the SOE reform that is so bad It makes people suffer a lot, but as I become an economist After my PhD studies I found out that all the SOE reforms in China was really a good reform to Chinese economy because it just helped the Chinese Chinese economy to to transform from The old face into the now a modern a modern state then I started to think about the narratives What is right? What is wrong because it's economics is not Only a positive science though was true or false it is sometimes it's normative with What should we do or what should we not point? Yeah, yeah So so it is the such kind of reforms that it helps the economics on the whole But it makes some people suffer so I started I started to think about How we state these kind of stories whether it's good or whether it's not It maybe depends on the perspective for how you see it, but not as I'm an economist I strongly suggest that a new round of SOE reform should take place in China because I see the Necessity of that reform from all the figures or the numbers or the models Economics, but as you say there's a powerful narrative in the Chinese Population that SOE reform is very convulsive and damaging Right. Yeah, and is that a problem if the government wishes to push ahead further with state-owned enterprise reform? now the government is really Not that eager to push forward SOE reforms in China One reason is because they are afraid of a social problem social objections Especially in the north-northeast provinces in China because in in those provinces the economy relied heavily on SOE state on enterprises, so if there is some heavy reform happened there and The society may be getting into turmoil. So the government is not really hesitant to pushing forward all these Required reforms so the economists always Just Suggest that the reforms should carry out, but that also Needs to face the the problem of trade-off So ragu as you can hear in China There's an issue where the economists want one thing and other people seem to want something else Why don't you to sort of reflect a little bit on how? economists or technocrats more broadly are in some sense in a losing battle these days about the right narrative sure well, let's start with Bob started which is stories narratives When economists hear the word stories they wrinkle their nose and say this is below me I mean in some sense all models are stories and Really where economists try and go further is what's what's the evidence? What's the data how sustainable is this story and that's where they believe they depart a little from the Tradition of narratives. Let me talk about two narratives one which seems to have caught on and one which periodically comes about The first is to Greg's point, which is that post World War two we had a tremendous consensus that The world had been broken apart by divisive politics that we had to come together once again and There was a dominant narrative of let's bring down barriers to trade Eventually to capital flows. This will benefit all of us the new international order And let's leave it to the technocrats to figure it out because we politicians made a mess last time around and And as a result there was there were mainstream voices The radicals were shut out and the technocrats were given a largely free hand for a long time And that worked Now it didn't work only because the technocrats had the right answers It worked to Thurman's point because we had tremendous growth gains from the Second industrial revolution. I think I did my industrial revolution differently from the world economic forum and and that push growth right up till the 1970s when it stopped and Then you started having more frictions more differences between the left and the right on the way forward and That's sort of come to a culmination that at this point when nobody believes anybody else and We are challenging the technocrats. We're asking them what solutions do you have especially after the global financial crisis? And this is very problematic because Explaining what you do is difficult There are no simple narratives build the wall is not a narrative that the that the economists can offer You know Protectionism is something they've always fought against But it's much protectionism resounds much more as a story. I'm gonna wreck the wall I'm gonna keep out imports and you'll have your jobs And so now we have a much harder task as economists of trying to explain Why What we suggest as policies might in fact work and what has gone wrong and how do we fix what has gone wrong? And clearly there are lots of answers that we have explored We need to bring bring up, but it's a much more complicated task than when we could say trust us We know the way and we'll take you forward So that's a narrative which worked for about 30 years 35 years and has started breaking down Another narrative which confronts us today and goes to the issue of what catches and what doesn't is this idea that will be replaced by Machines right it comes up every 15 years The idea of generalized artificial intelligence and super intelligence at some point is Something that's always predicted 15 years ahead right from 1960 you see experts predicting 15 years from now We will be all replaced if you think about the idea of universal basic income We should pay everybody the point that Thurman was making as defeatist. I think Is something that at least I've you can see President Johnson Setting up a commission to worry about that which Proposes universal basic income because in the 1960s. They thought they're all be out of jobs now That's come up again. I think this is a discussion which is going on today Real question is nobody knows how fast this is going to happen even the experts are all In disagreement. We've seen massive progress But the idea that we will all be replaced in some form or the other by by thinking machines Ask the experts. It's still 15 to 20 years ahead Maybe 10 but certainly not the next five when we can be held up to our predictions So the question is why does this narrative come up every so often and you know, we never do anything about it You know, we all This can be dangerous We know the driverless cars and driverless trucks are on the horizon Tremendous numbers of people depend on it for a living. What are we doing about it? Very little and maybe we believe once again this narrative will not That hold in the sense just like it hasn't got hold in the past. I don't know. Let me stop you Bob Actually, I wanted to move to you then because Raghu raises an interesting point, you know economists have these models and Gosh, it's a shame that other people don't believe our models and when I listen to you A lot of the models never have a chance of working because they presume a behavior a rational behavior on the part of individuals It doesn't reflect how they actually operate and reading your work, especially with respect to Financial bubbles and so forth I find myself sort of believing agreeing with you so in your view There's a lot of economic phenomena that just does not obey models because it reflects contagious behavior and I want to bring this up to the present because to Raghu's point protectionism and inward-looking policies aren't supposed to be good But enough people believe that they can make the country great again and that they can respond and animal spirits will kick in Could in fact the narrative change and that we will see very good economic outcomes Flow from a policy that the technocrats say should actually be a failure I have a lot to say on these things. I don't know how to come back. I'm writing a book now So give us the elevator pitch should not be so the idea of Human I don't know where to start on this but sure the idea that machines are replacing humans First became really big in 1811 with the Luddites They came back again. These things are come on somewhat cyclical I realized Henry George's best-selling book called progress and poverty 1879 was about this too because there was a big revolution in agriculture going on and Millions of people were losing their jobs and having to move to the city and try to find some industrial job But yeah, they come and go So right I think that it's not just enough it might be worse this this next Maybe not 15 years Because the the way machines are replacing us now is more fundamental I mean I can talk to this thing in my pocket and ask it questions and it will answer now It will be driving my car You There's kind of an exponential growth path to the technology and we're really I Think that there's more of a primal fear now than there was in 1879 although 18 Progress and poverty was a huge bestseller. It's all Millions of copies and even in the 19th century people were really worried that it's even bigger now And I think a lot of things that are happening now trace their back to this New narrative that this time. It's really going to be bad And it's not and it's supported by inequality data, too. So it's not like it hasn't started happening Well, I actually think I want you to talk about this because you've actually written a short story folding Beijing and in it You sort of imagine a future where automation has actually made a lot of people redundant Why did you write that story? And do you actually believe that will happen? I? don't think that science fiction writers write everything that they believe in is Is definitely to happen We only write about possibilities sometimes it's maybe like a warning to the others sometimes it's Because the dramatic requirement of literature, but this time when I wrote folding Beijing in 2013 I really think about About the poor people especially the low-income low Education people what will be their life like in in a faster technological Developing an era so that's my my starting point I think about what if these people cannot adapt themselves into the next era Then what should that government do and then I wrote the story of folding Beijing It's about to the enlarged Inequality in in the coming era of automation with a lot of people being replaced by by the Technological so I start I created this city to just adopt this question I think it is still a issue even after five years I I've written this story and I'm I also did projects on research of the Automation process now happening in China and we went to those factories we went to those Corporations and asked that the owner old do you think that you will Import more machines to replace workers. They said yes I think we definitely will because that's we got Benefit lot of benefits from this process. So I do See the the the process is going on So that still is a problem of those Education and trainings of those low education people So I really do agree that so we have to empower the people more in the future Or that that is a problem now What do you think technological unemployment a very powerful and deep-rooted narrative? Is it a correct one? first, I think We're not we can know the answer to this question of Whether automation and artificial intelligence and big data is going to replace human beings By looking into a crystal crystal ball The answer to that question will depend on what we do What we do now and and what we keep doing and adapting as we go along in other words It's what economists would call path dependency the outcome will depend on the path you take and That's a point which has a lot of policy implication First we know from actual practice That the types of jobs being created that complement new machines intelligent machines Involve a lot of augmentation of human skills and intelligence that Complementarity is a very interesting new area And we're seeing it in practice in the fourth industrial revolution if I use the World Economic Forum as a chronology I've seen it in in factory plants And it's it's very interesting You won't be able to use those machines if you didn't augment human skills And you won't have those human jobs if you don't augment human skills But if we don't start now in a very concerted way in each of our societies To start young and develop through life Everyone's potential for adapting to a new age. We're not going to get there. So it's not about economic forecasting or Crystal ball gazing It's about what you do now and this the point is there's so much untapped potential There's so much inefficiency and inequity in current day education systems. I Don't have name countries, but you know which high school systems are broken and I would say in general higher education is not Fit for purpose for the future. It's been overly Academy-sized it lacks that blend of Theoretical and practical knowledge that the real world needs and it lacks that sense that Everyone Regardless of your learning style is able to just keep learning It's more of a barrier rather than an opportunity provider. So they're very fundamental issues huge untapped potential Untapped potential not just from a efficiency and innovation point of view But from an equity point of view and until we address that it's no point talking about what could happen 20 or 30 years from now What happens then will depend on what you're doing Bob is it easier to tell and convince people of negative narratives and positive narratives? The only way you can beat a narrative is with a new narrative one thing that I stressed is that Narratives have a human quality That is inscrutable Creating a successful narrative is like creating a successful motion picture Motion picture studio though ought to know how to do it Keep trying and they have a lot of failures They often then will repeat the same Star Wars with the version is it in now? They don't know why Star Wars worked so well, but they keep repeating it because it did That's a that's a problem. That's why we don't Converge rapidly on the truth the true narrative that beats a fake news narrative is kind of dull and it may be Expressed by careful people who don't who aren't flamboyant and don't make good stories In the Qingfeng in China where the government has quite a bit more influence over the information that people consume and they do here That's that less of a problem or does it do the Chinese authorities also have to deal with? You know narrative contagions that are you know a problem for the story. They want to tell yes They do face the problem as well. Oh, although that the government owns a lot of press companies However, now in a information Era people get a lot of news from a ball from the on the Internet so now the the government to really pay attention to what people are talking about on the Internet and they are department That's Observing and monitoring what people are suggesting what people's feelings on the Internet every day in the government and now I At least so I know there is a program Teaching Chinese government how to communicate with the public and a lot of Chinese government are now Started to studying that that's the perhaps the first time in history because In the past there are no so many competitive narratives and the government do not need to learn about what Ordinary people are saying and now they realize that it is really really important because there is It's it's an open arrow with all the information in and out And it is really difficult for you to just keep one story and to let everybody to accept it So I think that in the future Really a story competitive stories will emerge Because the time is changing the era is changing about we as a human being one of our Consistent humanity is searching for a story that is consistent to to just pick up all the different pieces and make it a Complete meaningful story. That's our humanity So actually one way I wanted to bring this under the current situation is that for example when people are looking for an explanation for why The wages aren't going up But it might be easier to believe a narrative that there is somebody out there who means them ill whether it's a foreigner Whether it's imports or something like that. It's easier. It might be politically also more Advantages to push that narrative than a narrative that sort of attributes to impersonal forces of technology And so I'm wondering what would your advice be to a policymaker who's trying to contemplate which of these narratives to try Either to promote or needs to push back on Raghu, do you have any thoughts on let me I think you have to be Sort of cognizant there are three big forces that are hitting us today one is technology But the second is population aging Which is very important and the third is climate change and all of them are coming together at the same point And I think the if you focus on one of the issues for example joblessness You come up with a solution, which perhaps is detrimental to the other two Take for example this, you know, you you you ask Bob if protectionism would be a Good narrative in the sense that it creates jobs creates animal spirits creates investment, etc But protectionism at this stage for the West is perhaps the worst possible solution given that the West is aging and Given that increasingly demand for Western products will be in the rest of the world At this point, we break the international order that we had post-war and go to little fiefdoms When it comes to aging and when demand starts shrinking much as it's doing in Japan At that point the emerging markets are going to say well you the guys who created this system and Why do you ask us to participate once again in a new global order when it suits you? You're the ones who kept out our import our exports at that time So I think that's if we we take one issue and and address that in a in a very imperfect way We risk the others of course we can go into climate change also So it seems to me very important that we find the right narrative Which allows us to address all three and this is where I think Thurman's point that we have to keep emphasizing that the way to do this is in a cooperative Global fashion. We all have our homework to do and there's plenty of homework But if we do this we can address all three problems if we don't We're going to have a fractured world which is going to be incapable of addressing any of the three Thurman, can you think of anybody who's actually got this right who's been able to replace a bad narrative with a good narrative and get good results? I think there are examples all over the world I think this and I'm generalizing here, but I think the Swedes and the Danes do a much better job at Regenerating people Smaller societies like Singapore try very much to do that as well Even if you look at the United States Even if you look at the Rust Belt There's a vast difference between Milwaukee Minneapolis Pittsburgh and the rest of the Rust Belt They're really two rust belts They were all hit by Either globalization or technology or some combination and they lost core industries But some have bounced back And how did they do it? So there are actually lessons all over the world and I think the lessons Involve not just policy but a narrative coming out of people's experience and the experience of being part of a community of learning Where everyone is engaged you're not just waiting for some something to come your way But everyone is engaged The mayor and the local leadership the deans and the teachers and the colleges the business leaders Former schoolmates who knew each other when everyone is engaged at a community level it it enthuses people and One of the real assets you find is that an optimistic ethic and an aspiring ethic tends to compound Just like a pessimistic narrative tends to compound You know part of my job Involves starring at Schiller's PE But that's a very different world because that the world of financial markets and Economic markets in general is one where there is something called reversion to the mean Eventually fundamentals assert themselves and I I've been looking very carefully at Schiller's PE very recently by the way But eventually fundamentals assert themselves and you get reversion to the mean But you have no reversion to the mean in social culture You get a compounding you get and you see this in a range of cities and towns around the world and unfortunately some countries where you get some sort of Social form of what the economist called hysteresis Where it's not just about the economic variables, but social habits tend to get set they tend to get reinforced You see what your classmates were doing You see someone out of a job not able to get back in you see discrimination And you get a hardening of attitudes and once you get that social hysteresis It's not reversible easily. It needs a new activism not just the markets It needs a new activism and that activism has to be about spurring social mobility starting from young Developing networks that can influence people and some of the very interesting research by the way coming out of Social networks and innovation Shows that it's not just Your economic status in life, not just the disadvantages and advantages you have but who you knew the fact that female innovators Disproportionately influenced by other female innovators is a fascinating fact Not just innovation in general the fact that role models matter So there's there's so much we are learning now about the importance of social networks the importance of the neighborhood policies The importance of local and community action But the nice thing is that it is being done in some places, which means it can be done in more That's terrific. We have about 20 minutes left. I'd like to bring you on into the conversation Robert at the back has a microphone if anybody has a question, please raise your hand Just state your name and affiliation and your possible direct your question to somebody on the panel Yeah, yes, okay. Thank you. Hi. My name is Kate Rayworth. I I teach at the environmental change Institute in Oxford I'm a renegade economist because I and I'm interested any member of the panel who died to answer this I Believe that economics as taught in universities. Let's start with econ 101 itself is a very powerful narrative Which is unfit for this century ask any student what they first learn is supply and demand That's a narrative that the economy is the market and it's an equilibrium. That's actually two untruths in the first sentence I don't think that's a good place to begin a degree The economy is the household and the commons and the state and the market If we want to talk about climate breakdown Catastrophic biodiversity loss the destruction of the living world. We talk about it as environmental Externalities But the living world is the foundation of our well-being. It's not external to anything and if we want to talk about success It looks like never-ending growth So would you agree that the very tenets of what we think is positive theory that we teach students is itself an Extremely powerful narrative. That's not fit for this century. We need a new narrative at the heart of economics education Well, there's a very provocative question for a panel of economists Raghu. Do you want to you know? Look, I Think what you're saying is we need to think about a lot more things I don't think you would deny that supply and demand matter in markets And and I think most economists would agree with you that well Maybe I shouldn't speak for most economists that most people would think there are lots of structures that need to be brought Into the discussion over and above markets and that markets themselves are a Social creation and we need to think about, you know, what works what doesn't and so on this dialogue is ongoing it's I think What we try and teach students? Maybe you're saying the starting point should be different But the fact is that these are things that matter, but there are other things that matter over and about By all means absolutely Jingfeng. Yes on this issue. I've also talked about The the fitness of economic model is that sometimes it is oversimplified It is not wrong or and true, but it is simplified. So we perhaps need some more Adding to this one issue is about the supply and demand Of course, we do see those kinds of supply and demand Equilibrium in market so for a lot of goods a lot of products And it it still helps even in the real estate market in the financial market and in the consumer product markets I I think that it is a good law However, it is it cannot be applied to all fields in life because some of our Demand required Just some lies into in our deep humanity such as we all need the medical care We only good education good medical service. We all need a nice home. However We are not all We cannot afford it. So sometimes the demand in economics means that the effective demand The demand that you wanted and you can afford it, but for these all areas Everybody wants it, but not everybody can afford it. Then that's the big gap especially in the medical services and educational services and then the market supplier can only Provide goods for those who can afford it like medical services However, for all the other people so inequality really accounts in these kind of situations and that's Some occasions these economic laws doesn't seem to fit the real world We need some new narratives in these fields and another Issue I want to suggest is about the complexity I used to be a physics student and I knew that Newton's law is It's really a truth that we believe in it. It really Tells the the truth of the world. However, Newton's law can only deal with a single project So and the gravity law you can only deal with two projects if you add three or four projects and Equation you cannot solve it. You cannot find the answer for a more project and The physics are now still studying about the chaos with more multiple objects So it's it's not that the law is false or it's not correct It's that the reality is complex that we just cannot solve it. So also in quantum mechanics So the Schrodinger equation it is true But it can only study one photon one proton if you add up the thrill for together then the equation We cannot find the answer. So then what does the physics to do is that they found out some? systematic Equation that can account for a lot of particles moving is the statistic Mechanics, I think now in economics. We also need this higher level descriptions That beyond the one economic model of rational agent because now we've set up one equation for a rational Agent in the economy and we just multiple for n to describe the hole But it is not like this people have Interactions with each other and there are some systematic complexity in the reality. So we need to account for these kind of Interactions between agents and also the systematic complexity. So I don't think that the economic models are Entrue on Not good. They are good, but we need more. I I'm thinking about to how to just a model our Complex world where Steve different parts with Interactions together. I think that's the next step what we should do in economics Terrific. Thanks. We have a question over here Ricardo houseman from Harvard University A narrative has characters and a little bit what It was just saying is that, you know, the characters are not always individuals There are sort of like emerging characters like for example us the nation or something right and And just like individuals that us has history has a temperament has aspirations has so so my question to you is As you know technology changes globalization this that and the other what is happening to Different interpretations of the us The awesome whose behalf the government is supposed to act the awesome whose behalf You know, we're seeking the good and so on and and obviously, you know Maybe fights over this us that are reflected in you know, the importance that immigration policies having these days as So like an affront to our traditional sense of us and so on and the fights over inclusion versus Not inclusion because it would taint or change us Bob do you want to try that? Oh, this is a very important point that our Sense of who we are and what we belong to is framed by stories Benedict Anderson wrote a wonderful book about this There used to be people called the vandals That was a Germanic tribe that Terrorized Europe at one point So people say well, what's the Vandalic language? There was no it was a story that some politician invent. We're the vandals, okay? It's filled like that only in modern times have nations been focused around language groups reliably You come here in Davos. They're speaking some foreign language that Germans can't understand I understand, but we we have we tell a story about it that these are Germanic people Our lives are filled as you were saying I'm glad you brought up complexity and chaos The world is much more complex than we can comprehend, but we live with stories I mean, I actually would like to hear your thoughts on this. So I think Ricardo's point is a very important one I think we all agree That what used to be us Some decades ago has now become them and us and the question is why And I think it's very hard to explain this purely through the economics of what's been happening or purely through the Sociological and cultural explanations of what's been happening If we hadn't had a Stagnation in fact decline in median incomes In a good part of the advanced world. I don't think we'll be seeing what we're seeing today Even with the same tribal instincts if I use that word conceptually I don't think we'll be seeing it because there's something about absolute mobility that suppresses perceptions of relativity That's a stylized sociological fact When you have no growth in incomes or standards of living or some decline the Relativities become very important and when those relativities are not just about different economic agents But people of one ethnicity cosmopolitan or non-cosmopolitan Versus another type of another group You get a very complex Political brew as we've seen in many parts of the world and it's not just about the US You see it in Germany. You see it in France. You see it in Britain But we must avoid being too reductionist about this and thinking is all about incomes and economics No, is it all about tribal instincts and social formation, but the combination of the two I Think is most worrying today and until we get absolute mobility back Until we are able to grow incomes and wages of ordinary people on a sustained basis. You'll keep seeing these them in us Perforations you'll just keep coming up. I'm actually going to move to him. Let me just add a couple of things here Well, one is You know, there is a possibility for governments to do something about this and I'd like to point to Singapore which has Tried to reduce the sense of divisiveness amongst different communities For example by getting them to live together by housing projects Which have both middle-class as well as lower middle-class people in the same place one of the Concerns in some countries certainly the United States is that over the years that kind of togetherness has broken down the Very poor don't talk to the middle class the middle class don't talk to the upper classes and therefore the kind of Divisiveness that Ricardo is talking about has emerged in a much greater way Of course some countries have always lived with it, but some countries are going that way and that's becoming problematic I think governments can actually do something about this Question right here. Hi, my name is May Lee and until recently I was the Dean for the School of Innovation and Entrepreneurship at a New University in Shanghai. I have two separate but related questions. So this morning we've heard the panelists Talk about different time horizons for narratives. So we started with Marx whose narrative was not Dominant until 30 plus years in the future. We've talked about a recurrent human narrative around human fear And utility and then we've talked that when we didn't talk about but mentioned is the fact that with social media and networks now Narratives can be formed almost immediately And out of the control of specific stakeholders, and I'm wondering I'd like to hear the thoughts on the panelists on how you think Stakeholders can form narratives given these competing Time horizons and then maybe the second question Has to do with the fact that historically narratives were formed by a set of traditional stakeholders government, let's say corporations the church and at least in the United States sports And over the course of the last 50 years we've seen trust and erode in all those institutions and again with the Advent of social media. I wonder if you have a view as to whether a there is a dominant stakeholder And if so who that is We haven't mentioned the marketing department Which every major university has and they're at your service you pay their consulting fees And they will help they will tell you things for example Put television ads with actors and actresses who pretty much look like you're the demographic of the viewing audience and Have them do a little skit That that has word-of-mouth potential So all of these different stakeholders can it can benefit from the power that the marketing department wields It's amazing to me that universities do this and there's no complaint But the good side of marketing is sometimes they do that So for example, it was the ad council in the United States Which is a public interest group of the marketing profession that created this movement an ad campaign For what's called designated driver and the ads were very brief They would show people at a party everyone's drinking and someone is offered a drink and he says no I'm the designated driver end of spot, but it just models the behavior for you It was a very successful ad campaign and this time for the good of society Actually, but I do want to get back to the core question that she had which is is one of the problems is that the Institutions that we look to to tell our narratives are all basically their credibility is shot. I mean And if that's the case What a stakeholder or what institution takes its place and how much of a problem is that? somebody want to jing fang do you have a Do think that's a problem in China and not now But it happens 30 years ago after the cultural revolution and opening up and the reform suddenly people find out what they've believed for 30 years as the market Maxism and also the Other national narratives, perhaps it's not only truth in the world and then what Can we believe so I think the Chinese people have seeking the answers for 30 years? Because we are not that a religious country It's not that that easy to just to take a religious account of the world and it's not that easy to just Take the count from just a Western world. So it is very Fracturous in opinion now in Chinese society. We did not find a dominant narrative for the society for the beliefs for the public opinions and it is still the process is going on I just want mention one small thing related to time scale because the the time I got interested in economics is from I just want to know the Question of the big Divergence in the history how industrial revolution happened and there there was a famous question It's in China why the industrial revolution didn't happen in China that problem has been studied for a hundred years in China We tried to find out what are the weakness or what are the Disadvantages of ancient China and all these kind of studies focused on China But now I see a lot of studies actually found out that it is not China is so Special at that time it is that the Britain might be very special because Industrial revolution didn't happen in any country else. It's only happening in Britain and now in US So what is the specialty of these two countries? so then the focus just switched from China maybe to to Britain and then I think that this changed the whole Consideration of how we consider ourselves because China has a really long history We we need to understand the current situation in China based on our understanding Okay, so we're almost out of time But I want to take the moderators prerogative to ask the final question So Keynes is a famous line at the end of the general theory where he says that everybody ends up being a slave to some long Dead long some defunct economists and what that said was two things first of all that economists were right That their models are the right narratives and second of all that eventually everybody would listen to them And if you're an economist, it's kind of an optimistic story now We're all economists I think so I would actually like to ask each person on this panel Are you pessimistic or optimistic that in the next 10 to 15 years the right narrative will them will will win? I'm not that optimistic As president of the American Economic Association two years ago I feel some loyalty to this profession and I have to say I was inspired by the papers that were submitted They're not as crazy as People make out. They're not as all into one. It's a very diverse and intellectual group the pessimistic or optimistic I'm optimistic, but we won't come to the right answer finally in 15 years Okay, I mean, I think we're gonna have a tussle for many years to come between different narratives and Whether the positive narratives win out will just depend on Actual experience lived experience and if you see a lot more Milwaukee's and Minneapolis's and Pittsburgh's or to be guns or to losers of the world Maybe Singapore's I think People will see that and figure out well, maybe actually we can do the same. So there is now a marketplace There is a competition of narratives and that competition will not be decided on Intellectually or in a debate you'll be decided on by lived experience around the world and I'm optimistic in that regard Raghu Keynes was wrong. I don't think Politicians sort of a slaves to economists They just picked the economic theory that supports their particular stance And so the question is when do the politicians come around to the right view and my guess is we could go through a certain amount of Experimentation some of it which could be very damaging Before we eventually realize that we're all in it together We're in one world and therefore we have to keep an open world where we live with each other and do the right things Eventually that narrative will win out, but hopefully we don't do a lot of damage before that great way to end Thanks very much. I appreciate all the panelists and for all of you for coming in