Economics: The User's Guide | Ha-Joon Chang | Talks at Google

MALE SPEAKER: Good morning Welcome to Authors at Google in Cambridge Today, it’s my great pleasure to introduce Ha-Joon Chang, author of “Economics, The User’s Guide.” In his bestselling “23 Things They Don’t Tell You About Capitalism,” Dr. Chang, the Cambridge economist, brilliantly debunked many of the predominant myths of neoclassical economics Now, in an entertaining and accessible primer, he explains how the global economy actually works in real-world terms Writing with irreverent wit, a deep knowledge of history, and a disregard for conventional economic pieties, he offers insights that will never be found in the textbooks Dr. Chang teaches in the faculty of economics at Cambridge University His books include the international bestseller “Bad Samaritans, The Myth of Free Trade and the Secret History of Capitalism,” “Kicking Away the Ladder,” winner of the 2003 Myrdal Prize, and again, “23 Things They Don’t Tell You About Capitalism.” In 2005, he was awarded the Leontief Prize for Advancing the Frontiers of Economic Thought Please join me in welcoming Dr. Ha-Joon Chang [APPLAUSE] HA-JOON CHANG: Good morning My great pleasure to be here As a recent recruit to your Android system, I thank you for inventing a very good one Yeah, I went– I come from the other Cambridge, which is a few hundred years older than here Yeah, but then there are places like Oxford, where there’s a college called New College, which was founded in the 15th century So yeah, a lot more advanced than that Today, I want to talk about this book, “Economics, The User’s Guide.” And the reason why I got to write this book is many people agree that economics is very important Economic events like 2008 financial crisis, or the rise of China, the invention of the internet, and so on, I mean, they seriously affect our lives for better or worse And how our business and political leaders deal with those changes also affect how people live, how they grow old, how they retire, and so on So everyone agrees that economic issues are very important But when it comes to talking about those things, when it comes to talking about economics, which is supposed to tell you how these things do work and should work, there’s widespread perception that it is too complicated Economics is too complicated for non-specialists Actually, it’s very interesting because we have very strong opinions about all sorts of things, Iraq War, gay marriage, Afghanistan, climate change, nuclear power I have got strong views on all those things But then are we actually qualified to make those judgments? That the only thing I know about in terms of politics is this introduction to international relations that I took as an undergraduate student back in South Korea in 1983 And then I’m saying all kinds of things about US foreign policy, and the Middle East, and the role of Britain in that So we are not actually afraid of saying those things without having the necessary qualifications But when it comes to economics, people say, oh, yeah, that’s too difficult That’s for the experts And indeed, the experts themselves say, yes, that stuff is so difficult You wouldn’t understand it even if we tried to explain it to you So don’t worry Everything’s under control Go away Don’t look into this Yeah? [LAUGHTER] But why? Why should economics be different? I mean, it’s only because my professional colleagues have been fantastically successful in convincing the rest of the world that that stuff is so difficult, that it’s not going to be understandable to mere mortals But I believe, as I said in my earlier book, “23 Things They Don’t Tell You Capitalism,”

I believe that 95% of economics is actually common sense Of course, they’re made to look difficult with the use of mathematics and graphs and the jargons And even the remaining 5%, I would argue, can be understood in their essence, if not in all technical details, if somebody bothers to explain them in an accessible way, which is what I tried to do in this book Yes, I tried my best to make it interesting So there is “Mary Poppins,” “The Simpsons,” well, at least Ned Flanders, my favorite “Simpson’s” character, “The Hitchhikers Guide to the Galaxy,” “The Matrix,” “My Fair Lady,” “Gone With the Wind,” and whatnot However, being accessible doesn’t mean that I’m trying to give you some kind of baby version or dummy’s version of economics to you So when we remember these 15 things, 7 things you need to know about inflation, or that kind of approach I take my readers very seriously and talk about all kinds of fundamental things So what is economics? We can talk about that, but I don’t think we have enough time to do that Whether economics can be a science, as some or indeed many economists claim, the ethical foundations of economics, and then we can separate economics from politics, different approaches to understanding the economy, and so on So if I briefly– this is the cover of the British edition, which is same in content but a different format So it’s a pocket-sized book So if I show you– ah, yeah, I’m, yeah, trying to do something completely different from the existing economics books As you can see from this table of contents, I mean, you will find a lot of things that you normally do not see in introductory economics book So the definition of economics, the history of capitalism, different schools of economics, topics like production and work, which do not get talked about very much For example, in standard economics we are mainly conceptualized as consumers, yeah? So we make consumer choice, forms that provide the products, and so on And the form is there but is seen as a black box, as this thing called production function, which describes this relationship between some abstract concept called capital and labor And then there’s really very little talk about how to actually organize production, whether for the material things or immaterial things like what you produce here, and so on So I tried to talk about these things I’ll talk about some of them in a few minutes, but let’s go through some of the basic things My book also introduces the readers to what I call real life numbers People think that economics is a numbers subject And yes, I mean, if you look at economic articles, you see a lot of numbers But these numbers are dealt in a very kind of abstract way, in aggregate ways So it is quite common these days that people graduate with an economics degree without knowing really much numbers about the real economy So economics graduate would be hard pressed to know what the national income of their country is, how big the world economy is, and what proportion of that is produced by the US or China or Germany Now, [INAUDIBLE] why do you need to know these numbers? Because of you You have created this amazing search engine where you can find anything But even to know what to look for, you need some sense of these numbers And if you have no sense of these numbers, you can make very serious misjudgment A great recent example is the Eurozone crisis So a number of European economy using the common currency

euro got into economic trouble, and especially bad was the situation in Greece And when the Greek crisis erupted, there was this very widely-accepted narrative, mainly coming out of Germany, they started saying the Greeks are in trouble because they are lazy Ah yeah, those Mediterranean types, they always eat and drink and dance, and they don’t work, and they want to leech on the hardworking Germans, and the Dutch, and the Finns, and so on But actually, did you know that the Greeks work 30% longer than the Germans and 40% longer than the Dutch, who happen to be the laziest people in the world? They have the shortest working hour in the world Once you know that, you realize that the Greek crisis is a crisis of productivity, not work ethic Greeks actually work very hard It’s that the whole Greek economy that has a low productivity, to address which we need to talk about investment in infrastructure, research and development, things like that The Greek economic problem is not going to be solved by shouting at the Greeks that you have to work harder While talking about misunderstood numbers, in this country Mexicans are seen as the quintessential lazy Latinos But did you know that Mexicans actually work 25% longer than the Americans? I mean, this is just one example But if you get these numbers wrong, you can have a pretty distorted sense about the real-world economies And for that reason, I emphasize that we need to know many of these real-life numbers, and I actually give a lot of them Of course, emphasizing the importance of numbers doesn’t mean that you have to take them too seriously I suggest that numbers have to be taken with a pinch of salt and sometimes with a bag of salt The German writer, and apparently he was also a scientist writing books on the theory of color and things like that, Johann Wolfgang von Goethe once said, “Everything factual is already a theory.” Economic numbers, I mean, same with other numbers, but economic numbers are constructed on particular theoretical assumptions So take the case of GDP, our Gross Domestic Product, which is a way of measuring what an economy produces in a given period This number doesn’t include unpaid household work and care work that people do at home Well, one standard justification is, oh, you know, they are not marketed It’s very difficult to calculate their economic value But this is not true In constructing the GDP data, the national statisticians go at a great length to impute– that’s the technical term– impute the market value to services and goods that are transacted in the markets So for example, if you own a house and live in there, they actually try to estimate the rent that you would have paid yourself if you are renting it from yourself So when you are even trying to include those things, why do we not include household work and care work, which then leads to gross underestimation of women’s contribution to the economy, because most of this work is done by women? And in the standard estimate that this kind of ignored contribution is estimated to be around 30% of national output in any country Unemployment numbers Well, if you want to be counted as unemployed, you should be willing to work Not everyone who is not working is willing to work One example is students They want to get education They do not want to work So even if they are not working, they

are not counted as unemployed They are counted as people who are not participating in the economy, not active in the labor market There are people who might stay home but who take care of children who are not seeking paid employment So that you aren’t counting only people who are willing to work and do not have a job when you are counting the number of people who are unemployed But how do you know whether this person is willing to work or not? You don’t just ask them, are you willing to work? You have to prove that you are willing to work, which in standard methodology is done by showing that I have actually applied for paid employment within the last four weeks In normal times, this is not an unreasonable approach But in difficult economic times, like we have been through in the last several years, there are a lot of people who are known as, technically, discouraged workers These are people who have applied for 100 jobs, 150 jobs, got rejected over and over and over again, and they just give up So when the statisticians that [INAUDIBLE] come and ask them, have you applied for a paid job in the last four weeks, they say no But that doesn’t mean that they are willingly unemployed Anyway, you can debate all these numbers, but the point I’m trying to say here is that all these numbers are based on particular assumptions, and you can’t take them in the way you take, I don’t know, the temperature of water or weight of an elephant and so on Although if you ask a scientist, they’ll say even those numbers can be debated Now, talking of science, many economists will try to tell you that economics is a science in which there’s one right theory, or at least one best theory But in this book, I devote one long chapter to explain that there are at least nine different schools of economics, each with its own unique strength and weaknesses And for free market economics alone, there are three different varieties One is classical economics of Adam Smith and David Ricardo, neoclassical, which is the dominant school of economics today, and Austrian This is represented by the, well, Austrian economist Friedrich von Hayek I mean, this school is sometimes known as libertarian in the United States Well, the complication is the neoclassical economics isn’t the same as free market economics Some neoclassical economists, like Paul Krugman and Joe Stiglitz, they are not free market economists I mean, we can talk about that if you are interested But the majority of neoclassical economists these days advocate free market policy, but the way they advocate free market is all different So the classical economists, they do not talk about the individuals They do not really talk about consumers because their analysis is based on class analysis Their theory is that there are three classes, capitalists, workers, and landlord And the best way to maximize national output is to give the maximum amount of surplus to the capitalists, will invest and generate growth and jobs And in order to achieve that, the best way is to leave it to the market Neoclassical economics doesn’t have the notion of class Actually, a lot of neoclassical economists will say, well, class is wrong analytical category We are all individuals There is no such super individual thing like class The Austrians also have a very different defense of the free market To simplify it, the neoclassical defense of free market is that everyone knows what he or she is doing, so leave people alone The Austrian defense is no one really knows what’s going on, so how dare the government thinks that it can tell people what to do These are quite different views of the world Because the Austrian views that the world is full of uncertainty Our rationale is limited, and therefore there cannot be some

centrally planned or at least centrally-directed policy The neoclassical view is that the world is very certain People are rational They know what they are doing, so why should government meddle with it? Yeah, so there are all these different ways of conceptualizing the economy And if you know that there are three different ways of defending the free market, you know that this is not a science like physics or chemistry But I give you these different schools not to create division, not to create factional fighting Because my view is that all these diverse approaches to economics is necessary in order to explain the complexity of real-world economics And to illustrate this point, I give you what I call “The Singapore Problem,” or “life is stranger than fiction.” Now, if you read standard things about Singapore in, I don’t know, the “Wall Street Journal,” the “Economist” magazine, standard economics textbooks, they don’t need to tell you about its free trade policy and its welcoming attitude towards foreign investors, which it has But you will never be told that 90% of land in Singapore is owned by the government, and 85% of housing is provided by government-owned housing corporation, and a staggering 22% of GDP is produced by state-owned enterprises including Singapore Airlines So I put it to my students, look, give me one economic theory– it doesn’t matter what it is, neoclassical, Austrian, Marxist, Keynesian– one economic theory that can single-handedly explain Singapore Well, they can’t because there is no such theory Singapore combines the features of extreme free market capitalism and socialism, and where is a theory that can reconcile these two? So in the book, I argue that we should let a “hundred flowers bloom,” as Chairman Mao Zedong once said And of course, he said it with ulterior motive He wanted everyone to speak their mind, and then get rid of people he didn’t like I don’t have such intention I don’t have such power So this is a genuine plea Well, moreover, I argue that we should let them cross-fertilize because different approaches to economics can actually benefit a lot from learning from each other, making our understanding of the economic world richer And my advice to the reader is that they should try not to be a man or a woman with a hammer There’s this famous saying sometimes attributed to Mark Twain that, “He who has a hammer sees everything as a nail.” Yeah, so if you acquire one theory, you keep applying it to everything So if you acquire a hammer, you keep banging things I mean, it’s great if it’s a nail It would just about work if it’s a screw But it would be a disaster if it is the egg And it would be totally ineffectual if it’s jelly So we need a Swiss army knife approach, yeah? We need a range of tools, and of course, the sense with which to decide what tool to apply to what problem, which is provided by our knowledge of history, politics, and ethics, and so on And this is what we need because, unfortunately, economists have become the proverbial man with the hammer I mean, they have only one theory that they try to apply everywhere We’ve seen what kind of mess that it can create in the last several years Now, as I said earlier, my book deals with a number of topics that are not usually discussed in economics books these days So I mentioned production and work Let me elaborate on only one of them, work Most people of working age spend at least half their waking hours at work

And for white-collar workers like you and me, the boundary between work and personal life has been blurred because of the internet, the mobile phone, what have you And if you begin to count the commuting hours, some people are spending basically 2/3 of their lives for working In South Africa under the apartheid regime, they built these so-called townships for black people, which are built in a far-flung place from the nice, white cities And apartheid regime didn’t really provide any public transport for these townships Even after the end of the apartheid, the South African government haven’t invested enough to solve this problem So people in some of these townships have to rely on these strange things known as taxis in the country, which are basically minibuses run by organized crime gangs So they charge an arm and a leg, and they have to travel in very bad or sometimes non-existent road For some people, one-way commute takes three hours So it’s six hours both ways Even if they work only eight hours, which few of these people do, you are spending 14 hours just going to work, working, coming back a day Despite the fact that work takes up so much of our lives, there’s really little discussion of work in economics books these days Work is, in a way, discussed only when it’s absent, when there is an unemployment The work itself is not discussed, and this is because people are mainly conceptualized as consumers, as I mentioned earlier, in relation to production Because in the standard economic theory, neoclassical economic theory, work is seen as disutility that people have to put up with so that they can earn something income with which to buy things, goods and services, whose consumption gives the utility, their ultimate pleasure in life The work is only a means But we know that what happens in the workplace tremendously affects us Work can be interesting I hope that at least most people in this room think that their work is interesting Can be deathly boring I mean, you’ve seen Charlie Chaplin in “Modern Times.” I mean, it can really affect your psychological well-being because a lot of companies have introduced this performance monitoring regime, which really drive people hard, or they have reduced job security, and so on And ultimately, work can also affect our identity and self-fulfillment Despite that, we don’t talk about work So government policies and economics advises that economies [INAUDIBLE] all gear towards income So a lot of people in the rich countries over the last 20 years have become richer, but many of them are feeling less happy because their work has become more stressful The work intensity has increased, the commute has become longer, that there is less job security But then these people are told, oh, you should be happy Your monetary economy is 20% higher But should they? Well, we need to discuss these things at least Throughout the book, I emphasize that economics is a political subject It’s not a science Of course, many economists, neoclassical economists, will try to tell you that what they do is a value-free science But economics can not be separated from politics in the end Actually, very interesting, all the name for economics was political economy There’s an explicit recognition that politics and economics are inseparable

The neoclassical school, which came into being in the late 19th century, didn’t like that They wanted to make economics science So they tried their best to rid economics of politics So they renamed the subject from political economy to economics They introduced this ethical criteria, which they think is apolitical, known as the Pareto criterion This is named after half-Italian, half-French economist in Switzerland in the late 19th century and early 20th century called Vilfredo Pareto And Pareto argued that we should call a social change an improvement only when it makes at least some people better, but makes no one worse off And this actually is a very important principle because it’s a defense of individuals against the tyranny of the majority So to explain this– I don’t do this in the book– I often use this story that I call the one-finger example Suppose there’s someone knocks on my door tomorrow and says, oh, Dr. Chang, we’ve invented this wonderful technology that will solve the global climate change problem overnight The machines are built It’s ready to go We only need one tiny input, which you, we hope, can provide And I said, what is it? He says, well, we need one live human finger to start the machine Yeah, I’ll gladly walk into my kitchen, chop off my finger, and give it to him But what if it’s one arm? I think I’ll do it But what if it’s my life? What if it’s the life of all my family? What if it’s the life of all 50 million Koreans? Where do you stop? So Pareto was terribly concerned about this and said, look, we can’t say you have to sacrifice some people for the greater good So this is a very important principle However, it still is our political position because the converse of this position is that you cannot make a social change that will improve the lives of many people if one person objects And suppose there’s a country with one very rich guy, and you try to introduce some welfare program for poor people This guy can say no, and there’s no way you can make this guy do it on the basis of the Pareto criterion I’m not saying that this is easy It’s a terrible dilemma What do you do? I mean, do you force that one person to give up a lot of things for the greater majority? Maybe you should But then how about 10 people? How about 100 people? How about a whole group of people, and so on? So it is a terribly difficult issue But what I’m trying to say is that you cannot rid economics of politics Actually, the political nature of economics goes even deeper In my earlier book, “23 Things They Don’t Tell You About Capitalism,” I have this chapter, well, the first chapter, titled, “There’s No Such Thing as a Free Market.” The point I tried to make there is that there is no objective, scientific way to draw the boundary around the market Yeah So 200 years ago, in this country and lots of other countries, it was perfectly normal to buy and sell people Child labor was considered normal Today, I haven’t met any free market economists who say that we need to bring back child labor to truly make our economy a free market economy Well, there is one person who almost said that, although he is not an economist Newt Gingrich, yeah? AUDIENCE: Yes [LAUGHTER] HA-JOON CHANG: You know the story He said poor children should work as janitors in their school But other than him, I haven’t met any advocate of free market who want to bring back child labor But in the 19th century when social reformers wanted

to regulate child labor, many free market economists were up in arms They said, this is undermining the very foundation of a free market economy, namely the freedom of contract These children want to work These people want to employ them What is your problem? It’s not like that these people kidnapped these children and used them as slave laborers Yeah, so if you take the ethical position there’s nothing wrong with child labor, well, a lot of people have come to accept that, no, actually children need childhood They have the right to education They need protection up to a certain age Once you accept that, it is inconceivable that we are debating whether to relax our regulation on child labor so that we can become an even more free market economy So economics is a fundamentally political subject, the one that any economist will tell you that it is a science But finally, my book is not just an explanation of economic theories In fact, it’s also about the role of economics in public life And in this regard, I have three sets of observations to make So the first one is, never trust an economist, and that includes me Yeah, of course, that creates the kind of paradox that the Greek philosophers used to love So if you don’t trust any economists, how do you trust this guy who says don’t trust any economists? I’m not a philosopher I’m not going to bother with that This is my advice Professional economists do not have a monopoly over truth, and it is entirely possible for people who are not professional economists to have sound judgments on economic issues And sometimes judgments might even be better because they may be more rooted in reality and less narrowly focused Indeed, I would argue that the willingness on the part of ordinary citizens to challenge profession economists and other experts is a foundation of democracy Just think about it If all you have to do is to entrust it to the professionals, what’s the point of having democracy? Yeah, let economists run economic policy Let the international relations scholars run foreign policy Let philosophers run, I don’t know, your policies on religion and marriage And the rest of the population don’t need to bother Well, some people think that But I think that that’s a terrible idea because then there’s no point in having democracy I also argue that– well, I’m not even trying to pretend that I can read Latin I mean, apparently this is a passage written on the walls of the city halls of Gouda, the town famous for its cheese I don’t know how they invented this thing in the middle of all the cheese making, but they did And I think that this is the thing we have to bear in mind when you’re having this debate about economic issues, which, I mean, inevitably involve political and ethical judgments Now, I’m not saying that we should not have a strong opinion of our own I mean, we should But given the complexity of the world and given the necessarily partial nature of all economic theories, we should be humble about the validity of our favorite theory and should keep an open mind about it And finally, throughout the book, even while I constantly make reform proposals, I emphasize how difficult it is to change the economy reality Sometimes the difficulty is due to the active attempts by those who benefit from the current arrangements who want to defend their positions Bribing, lobbying, media propaganda, and even violence are used But the status quo often gets defended even without some people actively being evil You don’t need Dr. Evil to have the world that is evil because the one dollar, one vote rule of the market drastically constrains the ability of those with less money to refuse undesirable options given to them So poor workers choose to work in a dangerous factory But is that a real choice? Yes, I mean, [INAUDIBLE] is a choice

because the alternative is starvation But if you had different social arrangements, these people would not choose that kind of thing So in this regard, I’m always reminded of this famous saying by this Brazilian bishop called Dom Helder Camara who was one of the leaders of the liberation theology, which is the radical left-wing Catholic theology that was quite popular in Latin America in the 1950s and ’60s And Camara said, “When I give food to the poor, they call me a saint But when I ask why these poor people do not have enough to eat, they call me a communist.” Yeah, I mean, we should all become a bit of a communist You should question the social order, the economic order, underlying the surface phenomenon and try to question whether this order is just, or efficient, or whatever, and whether it can be changed Moreover, we can be susceptible to beliefs that go against our own interests The Marxists used to call this false consciousness Today, we call it “The Matrix.” The best example came from this country when they tried to introduce so-called Obamacare There were pictures of these pensioners demonstrating against Obamacare with placards saying, “Government, hands off my Medicare program.” Hello, Medicare is a government program But these people have been so brainwashed by the medical insurance lobby that they think it’s a private program because it works, because they’ve been told all the time that government program never works So we have a lot of difficulties in changing the social order because of the active obstruction of people who will benefit from the status quo, the limitations of choices that the markets give to poor people, and down to false consciousness But acknowledging the difficulties should not make us give up the fight to create a better economy and in the end, a better society Yes, changes are difficult But in the long run, when enough people fight for them, many impossible things happen Yes, I mean, 200 years ago, anyone who in this country that said we should abolish slavery, would have been branded unrealistic at best Yeah, and makes sense I mean, the US economy at the time was totally dependent on the export of cotton, tobacco, and other agriculture products produced by Southern plantations that used slaves So saying that we should free all the slaves, that can be easily seen as an attempt to undermine the foundation of the US economy And 100 years ago in Britain and other countries, they put women in jail for asking for vote Only 50, 60 years ago, all the founding fathers of most of today’s developing nations, well, actually including Israel, were hunted down by the British and the French as terrorists And 25 years ago, not that long ago, Margaret Thatcher famously said that, “Anyone who thinks that there will be a black majority rule in South Africa is living in a cloud cuckoo land,” which is where she was living Yeah, so all these impossible things have happened because people fought for them And this is why I often quote Antonio Gramsci, the Italian political thinker, that we need “pessimism of the intellect, but optimism of the will.” And let me conclude by showing you my favorite quote from Nelson Mandela who said, “It always seems impossible until it is done.” Thank you very much [APPLAUSE] All right I’ll be happy to take any question and comment you may have AUDIENCE: I have one question So a lot of us are evolved in technology that it seems to me simplistically is driving up productivity And it seems that if, just the normal progression of things just from a mathematical perspective, might be the case that the needed employment to supply

goods and services, I don’t see any guarantee that it needs to stay high That, in fact, we could have fewer and fewer people, like in agriculture or something So I’m just curious Is that something that in modern free market economics people are looking at that assumption? It seems as if we always regard lower employment as something that needs to get fixed And [INAUDIBLE], with just the right policies, we can fix it What’s the proof that says that there is gainful employment within a free market [INAUDIBLE]? HA-JOON CHANG: OK Well, thank you for that interesting question Yes, in the long run, we have always found work for the majority of people AUDIENCE: Right But it is still is the same. [INAUDIBLE] years ago [INAUDIBLE] So basically, [INAUDIBLE] HA-JOON CHANG: Yeah, yeah No, let me continue So not so long ago, even in the fairly rich countries, 15% to 20% of people worked in agriculture Today, it’s 1% or 2% In South Korea, my native country, when I was born in the early 1960s, nearly 80% of people worked in agriculture Today, it’s like 3% Yeah, so if you believe that these people who say technological progress destroys jobs, I mean, we would have a terrible employment crisis over the last 200 years So in the long run, we keep finding new things to make, new services to provide, and people have jobs The trouble is in the transition period when the change is very fast, when a lot of people lose jobs They need to get retooled, if you like, and that takes time That takes income support and so on And in some countries, they manage this better than others through various government-assisted retraining schemes and so on So yes, I mean, technology will create– sorry, destroy many, many jobs, but it will also create many But then during the transition period, you need some kind of social arrangement to help people to retool themselves to find new jobs Some countries do it better than others Yes AUDIENCE: Well, the jobs that are replaced are not necessarily equivalent jobs that are lost, right? There’s a lot of evidence that certain change in jobs in the middle is being taken on by automation and jobs that are too cheap to automate or too expensive to automate, right? And [INAUDIBLE] to middle class jobs HA-JOON CHANG: Yes, I mean, this is a new phenomenon, because in the past the jobs that have been destroyed were mainly to do with manual labor, sort of so-called low-class jobs Now, it’s encroaching the middle class area And this is probably why that we see more anxious comments in the media because those are people who are writing for the media who give opinions to the media But once again, jobs can be created through different social arrangements For example, in many European countries, a very large number of people work in public welfare services And yes, they were created deliberately by government intervention, and I don’t see anything wrong with that So yes, I mean– well, basically, my view is that, yeah, the technology and other economic forces are difficult to control But they are not like earthquake They are not like typhoon I mean, there are different ways of dealing with them And for example, a lot of people have argued that because of globalization, inequality is rising everywhere This is not true It hasn’t risen in Switzerland Also, if you look at the data, before taxation and welfare transfer many European countries actually are as unequal as the United States Sweden, Belgium, Germany, they are very unequal before those things And they tax and redistribute so much that their income inequality after those things is much lower than in the US So you can change those things This is not to say that those countries were not

affected by globalization and technological changes [INAUDIBLE], but there’s actually a lot more that you can do than people suggest So please don’t think that, I mean, it’s all because of technology or whatever, middle-class jobs will have to disappear No, they don’t have to Yes AUDIENCE: I was wondering, isn’t– to me it has also some similarity to some of the philosophical change [INAUDIBLE] we have in this country from, say, the 10-hour workday to the 8-hour workday, where, at first, it was union fights, whatever, to do that And companies say, well, we’re going to cut your pay and we’ll cut your hours And strikers say, no, [INAUDIBLE] hours And where the money was coming from, just a change in who’s driving what The scale might be a little bit different, but it seems that just the underlying assumptions of, we earn our food, whatever, from work, these jobs exist, and they go away And you said, who suffers? Even though the assumptions of almost seem to be [INAUDIBLE] needs to change just sort oif like they changed in those times HA-JOON CHANG: Yeah, absolutely, I mean, yeah I mean, I have this beautiful example in the chapter on work in this book In 1905, New York State introduced this law restricting the working hours of bakers, bakery workers, to like 10 hours Typically, bakers work 14 hours in those days, some of them 16 So New York State thought that this is outrageous, wanted to regulate it The Supreme Court struck it out as unconstitutional as it deprives the workers the freedom to work as long as they want Yeah, so that there was a time when even 16-hour work was considered OK And yes, people have fought for it and, I mean, got these rights And I mean, it’s exactly where politics comes in Of course, I mean, there were also economic forces People are, relatively speaking, becoming more valuable than when the country was poorer So there was also economic forces But economic forces only give you the outer boundary Exactly where you end up within that boundary depends on your political action, union activities, or democratic pressure, and things like that Yes AUDIENCE: So I think, in response to the productivity question, there’s always stuff for people to do The issue is whether society– or how much society values that be done When I was in Hong Kong 20 years ago, there were people whose job it was to go down the street every morning with a broom and a basket sweeping everything up from the night before HA-JOON CHANG: That’s right, yeah AUDIENCE: During the Depression, the WPA, the New Deal, created jobs by saying, we need infrastructure in our national parks We need a bathhouse on Revere Beach, right? And it’s a question of whether you have to what extent the work is valued, right, the work is of value HA-JOON CHANG: Yeah, exactly, yeah, yeah Well, that’s absolutely why, I mean, the economic values of jobs are, I mean, in large part, created by the society So if you begin to hire all lot of, say, [INAUDIBLE] nurses to available– sorry, to enable women to leave their children and go out to work, that creates a certain dynamic But if the government isn’t willing to fund that kind of thing, only rich women will be able to afford those things So the value of the women’s work itself is dependent on the political action of the governments And that’s another example, but yes, you’re absolutely right I mean, what is valuable work is partly socially determined Yes AUDIENCE: So inequality is increasing, and I think my understanding is that mobility is decreasing, in the United States at least Is there any way that that can be reversed without significant policy changes, or is that something that will sort of, in theory, depending– HA-JOON CHANG: Yeah No, no, no I mean, it is a general phenomenon I mean, with increasing inequality, mobility falls I mean, it’s a well-known regularity Now, I think that what we have to think about here is that people who say, well, inequality should be accepted, usually tend to focus on equality of opportunity Yeah, so as far as you had the same opportunity,

you shouldn’t complain because the more competent people will rise to the top and less competent people with fall to the bottom This will be correct if you lived in Aldous Huxley’s “Brave New World,” and everyone was raised under same condition But they are not So if you have richer parents, you get more attention You get better education You get better nutrition, and so on So it’s not like a race where no one is allowed to have a head start It’s equality of opportunity But you don’t mention that some kids have only one leg So is it a fair race? So we need to think about these trends, the generational transmission of inequality And yes, I’m afraid on this you equalize the– I mean, not necessarily the parental income, but the life opportunities that children have when they’re young, we are not going to solve this problem And I mean, there’s a lot of research showing how social mobility in, for example, Scandinavian countries is much, much higher than in countries like Britain and the United States because they provide those conditions when children are young Whereas in the US and Britain, they don’t do that to the same extent So yes, I mean, we need that policy intervention I mean, we’ll need some reduction in income inequality But you should have more focused intervention in terms of childhood stimulus and nutrition and opportunities Yes, miss AUDIENCE: I’m significantly shorter than the person who was here before me In the beginning, you kind of mentioned that we, as people, have opinions on all kinds of topics that we’re probably not qualified for And I think part of that’s because various forces have kind of allowed us to mobilize around one element of it, right? So if we think about global warming or issues of environmentalism, we focus on global warming, not like the 12 other issues that are part of this broader need to fix what’s happening environmentally So what would you say are the one or two economic issues that we, as laypeople, or me, as someone who has a liberal arts background, could maybe mobilize around to invoke more conversation? HA-JOON CHANG: Well, this sort of depends on the exact society we are talking about, because does some organization A have to address the questions that are the most important for that particular society? And also, different people react to the same thing differently So it is well-known that in this country, typically, the tolerance for inequality is a lot higher than, say, in European countries, which doesn’t necessarily mean that inequality shouldn’t be an issue here But you need to consider these things And yes, you’re absolutely right I mean, what people find difficult in their attempt to be an active responsible citizen is that there are so many issues And I sometimes joke that the most difficult job in the world is to be a responsible citizen of a democratic country because you have to care about everything from global warming to your country’s income inequality, balance of payments, monetary policy, the defense policy, what have you So yes, I mean, if you tell people, well, we have like 727 issues, let’s all think about it, they’ll not do it So you need to focus But exactly what are those one or two issues will depend on the time and the country And yes, I think that in the US, the concern for inequality has actually become very strong I wouldn’t have imagined it to be so even, say, 10 years ago But yes, I mean, this might be your chance to address some of this inequality problem, even though the final outcome might be you are still more unequal than, say, Sweden So yes, I mean, you’ll have to think about those things and try to focus people’s minds, because when I said my intellectual hero, Herbert Simon once said, “The most scarce resource in human society is attention.” Yes, please AUDIENCE: Now, what happened to UK on Friday’s [INAUDIBLE]? HA-JOON CHANG: Ah [LAUGHTER] AUDIENCE: Economic [INAUDIBLE] end of the world HA-JOON CHANG: Yeah Well, I am not a UK citizen, so I don’t have to worry about that The UK equivalent of a green card Yes, but I think this is quite a complicated issue

because if you read about the history of the United Kingdom in the last three centuries, actually the Scots were crucial in building the UK economy All the early economists, Adam Smith, well, except for David Ricardo who was a Jew, were Scots The guy who set up the Bank of England was a Scotsman called Paterson I mean, the way that these two countries work together was quite amazing And yeah, now the Scots are saying, we want to leave I think that one difficulty here is that the Scots, many Scots see it as a way to get rid of the Conservative Party rather than truly be a separate country So yeah, they might be in for a shock Because my view is why not? Yeah, there are a lot of small, very prosperous countries Finland has less than 5 million people Denmark has 5 million people Austria has 7 million Switzerland has 7 million So why not? But this will create quite a disruption in the short run And yes, the UK economy might suffer because of all this short-term turmoil And can it survive that given its weakened state? I don’t know I mean, because the UK economy was damaged a lot more by this 2008 financial crisis than even the United States because its reliance on finance was much higher And yeah, I shudder to think what will happen, but it’s not for me to say Any more? Well, thank you very much for listening [APPLAUSE]