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Feb 15, 2022

In Episode 3 of Series 7 of The Rights Track, Professor Diane Coyle, Bennett Professor of Public Policy at the University of Cambridge and co-director of the Bennett Institute joins Todd to discuss the dizzying digital changes over the last 25 years, how it has disrupted the economy and impacted on our lives.

Transcript

Todd Landman  0:01 

Welcome to The Rights Track podcast which gets the hard facts about the human rights challenges facing us today. In Series 7, we're discussing human rights in a digital world. I'm Todd Landman, in our third episode of the series, I'm delighted to be joined by Professor Diane Coyle. Diane is Bennett Professor of Public Policy at the University of Cambridge and co- directs the Bennett Institute, where she leads research under the themes of progress and productivity. Her most recent book- Cogs and Monsters - explores the problems and opportunities for economics today, in light of the dizzying changes in digital technology, big data, machine learning, and artificial intelligence. And today we're asking her, why is it that digital is so very disruptive? So welcome, Diane, it's wonderful to have you here on this episode of The Rights Track.

Diane Coyle  0:49 

It's a pleasure, I'm flattered to be invited.

Todd Landman  0:52 

Well, it's great. And you know, I was reading Cogs and Monsters over the holidays and enjoy very much your dissection of you know, the state of the discipline of economics and where it's going, and some of its challenges, etc. But I was really taken by the section on digital technology and digital transformation. And you, you reference your 1997 book, The Weightless World. And of course, that was 25 years ago. So the time between the publication of The Weightless World and Cogs and Monsters. And you know, factoring in Moore's Law of technological change, a lot has happened over these 25 years. So I wonder if I could just start by asking you, what are the sort of broad brush, absolutely huge changes in this area? And what has been their impact on economics?

Diane Coyle  1:34 

Well, where to start, as you say, it's 25 years since I first got interested in digital technology, and was always sure, it was going to be transformative. But for a lot of economists, that was not obvious for quite a while. And I remember talking to one very senior figure in the UK profession who said, well, this digital stuff, it's going to reduce transactions costs a little bit, but we know how to handle transactions costs in our models so, so what's so special about this? And I suppose they've been inflection points where small changes or what might seem to be small changes bring about very large consequences. One of those was the switch from dial up internet, to broadband. And simply the loss of friction in the sort of *dial-up joining sound* when the modem did the handshake, for those who are old enough to remember, it made a big difference in the kind of services and opportunities that people thought they were able to put online and expanding the audience for them. And then the other was 2007, and the smartphone. Steve Jobs at that iconic Apple press conference, holding up the first smartphone first iPhone, which converged with the arrival of 3G, so that data transmission became cheaper and more possible at volume and speed. And also the kind of market design ideas in economics that enabled the creation of apps and in particular, matching apps and digital platforms. And if you look at what's happened since 2007, both in terms of individual behaviour and economic transactions, the fact that we spend a whole day a week, whole 24 hours a week, I think it's 28 now, online. And the new kinds of business models and the way that markets have restructured, it has been absolutely extraordinary. And I think in many areas, we're only just beginning to think through what the consequences are, and what the implications are for politics and policy and regulatory choices.

Todd Landman  3:38 

Thank you for that. And you know, that rapid expansion just in terms of volume, scale, speed has fundamentally transformed our lives. I remember Steve Jobs, the announcement and I thought what am I ever going to do with that? Why do I need a phone that takes a picture? And equally when the iPad came out, I thought, I'm not sure how I'm going to use that now of course I can't live without one. And it sort of does. It changes our workflow, it changes our productivity, people who are amenable to multitasking find that these devices do help us and of course, being able to share information at rapid speed. As we know, through the pandemic, we've been able to communicate and stay on, on track in some ways in engaging with the sorts of things that we do. And so I wanted to focus a little bit on those that haven't really experienced this incredible transformation. I was recently at an event where a representative from one of the local housing association said well, we have about you know, 10,000 houses in our portfolio, if we add up all the housing associations in our, our portfolio plus other providers that might be 100,000 houses in this region, most of whom do not have access to these digital transformations. So what could you say about the sort of the left out, the left behind or the famous word about the digital divide? How do we address some of those issues, both economically but also maybe in policy terms?

Diane Coyle  4:52 

In different ways it's a different level of the digital divide, and one is just the sheer network infrastructure. And the economics of these networks is such that population density really makes a difference to their financial viability. So to get universal service at high speed, there has to be public subsidy for it. In this country, we've got a government that has since Mrs. Thatcher's time being focused on you try all the market solutions possible first, and then grudgingly, you have some public intervention. And I think there should have been public intervention long ago and much more focused on minimum universal service. Ofcom does set standards and I think the standards that they have set are now outdated by the technology. So that needs revisiting, and then the investments got to happen. And we've had, you know, more or less monopoly of Openreach having the core of the network. And that problem hasn't really been fixed. So there's a set of problems about network infrastructure, and who's going to pay for it, and universal services and utility. And then there's access to devices and the payment plans. And for that, you know, obviously, smartphones are expensive, we've got plans where you can get the handset subsidised if you sign up to a reasonably expensive data plan. But lots of people can't do that. And this is a universal problem in all countries, because they're all pretty unequal. And so the people who are best off have best access. During the pandemic that's been diabolically bad, in particular for schoolchildren who've been learning online. And if you've got a limited plan, limited data, and you've only got a phone, not a tablet or a computer, you're not going to learn, you're not going to learn that learning deficit is going to scar those individuals for the rest of their working careers. So that has been a problem. And I'm not sure I've got an easy fix for this except that this is a necessity of modern life. And if people need subsidising to get necessities, if we subsidise their energy, for example, then we should be subsidising their connectivity as well. And then there's this sort of whole digital literacy bit, which is a whole other kettle of fish. And how do we teach people to be properly sophisticated consumers of whatever it is, whether it's social media misinformation, or whether it's price comparison websites, and how to interpret the information that you're getting from those.

 Todd Landman  7:18 

When I've listened to you, you know, it feels like you're making the case for digital connectivity as almost a public good like access to health care, education, social welfare, social, you know, the social safety net, if you will, is that your view that this really is, you know, akin to the provision of education and health and welfare?

 Diane Coyle  7:43 

I think it is because it's about conveying information really. And this is the fundamental characteristic of information and how that drives economic growth, particularly in what we call the knowledge economy. And all of this is useful because it gives people information to do things that make their lives easier or better in some way that matters to them. A trivial example might be, you've got an app on your phone that helps you navigate around the city so that you don't waste time because your bus isn't running. So that's one kind of valuable information and the time saving that goes with that. But you know, that's, that's the fundamental point of it. It's accessing public services online is almost essential now, leading your daily life, making it more convenient, making it more enjoyable, in business, using the information that you can get to deliver better services to your customers. So it's all, it's all about information. And that is the key characteristic of information - it is a public good, it's non-rival.

Todd Landman  8:38 

Ah it is a non-rival public good and it's very interesting that that crosses over with a lot of discourse of the Human Rights field around rights to information, rights to be informed, etc. But also date obligations to progressive really realise that the fulfilment of social, economic and cultural rights. So there's a really interesting communication or conversation, if you will, that could take place between economists and human rights people around the provision of non-rival public goods. But the other thing that I was struck by what you said was this idea about digital literacy about not knowing in a way, how good all this can be for you, but also what some of the pitfalls are, how is one a good consumer of digital information, but also what's the unwitting phenomenon of people sharing tremendous amounts of information about themselves in the absence of that digital literacy, literacy? And I know you've done some work on you know, how much is your data worth? So how do we calculate what people's data is worth in the marketplace?

Diane Coyle  9:36 

Aha, how much time have you got? Actually, my colleague here in the economics department, Wei Xiong has done some work looking at Chinese data on how concerned users of one of the huge apps are about privacy. And the finding there that is really interesting. You know, there's this privacy paradox. People say they care and then they act as if they don't, and they found that people care more the more sophisticated a user they are. So people who don't go online very much or don't think about it very much don't care about their privacy, but the more people use it, and learn about the pitfalls, I suppose the more they care about, about the privacy questions. But this is this is a really interesting area. And it's an ongoing area of research for me. And, you know it operates at different levels. So one is just what's it worth to the economy? People think data is an asset, because it helps businesses tailor their services better, develop better products, serve their customers better, make more money, which is a good thing in a capitalist economy. And there's a growing gap between the most productive companies and all the rest. So the top 5% In most OECD countries are pulling further away in terms of productivity and also profitability. More and more research is suggesting that's because they are using digital tools better, they using predictive analytics, they are building their own software to use the data, growing databases. So all of those more digital firms are becoming more productive and sort of winning the competitive race, the competitive rivalry that takes place in market economies. So we would like more firms to do that, to grow the economy and grow jobs and make better products and services. But then there's also the individual point that you alluded to. And being an economist, I think about this in terms of externalities. And as the negative externality that you pointed to that your behaviour online, or the data that people accumulate about you online, can reveal things about you that you don't want to be known. Or you can do the same about other people, you can reveal things about people who are like you, or people who are connected with you that they don't want, want known. And there are also positive externalities that come from joining up data, because a lot of the value, a lot of the information value depends on putting data in context. And even something that seems very personal. Like, do I have a temperature right now? Obviously, has positive information value for the people around me. And so to make use of this, to give people, you know, better quality lives better information, we need to think about how do we get data shared in good ways that creates value for people and doesn't invade their privacy? So this debate, I think is in in a pretty terrible state. And I'd be interested to know what you think about this, I think part of problem is that it's always thought about in terms of individual rights, and actually, it's a data captures relationships and context.

Todd Landman  12:38 

Yes, and you know, so a lot of the human rights discourse is around the right of the individual. But of course, there are group rights and collective rights that are equally as important. So one can look at minority rights, for example, and other collective rights. So there is that tension in human rights discourse in human rights law between the absolute fundamental rights of the individual vis-à-vis the state then vis-à-vis non-state actors, including businesses, but also non, non, not for profit organisations. And then collective rights - does a group of people have a right to maintain a certain set of practices, or certain linguistic tendencies or textbooks in mother tongue language? Which is a it's a whole another podcast about that I'm sure. So yeah, I think you put your finger on a very interesting tension between these things. And I, I guess, I want to pivot to this idea of capitalism without capital. So you, you mentioned the idea about productivity, growing the economy, jobs, and which is good for capitalism, as you say, but a lot of people have observed that actually, you know, companies like an Uber or any other kind of online car provider, or Airbnb, these are property companies without property. These are taxi companies without taxis. So they're actually wiping out any of the kind of overheads by having to run a big fleet of cars. And yet, the markup on that is, is very high. I mean, I went to one of these data centres in London, where they command all of the data needed to run a successful taxi company. And they get 26,000 bookings a day, I think, at the time, and they were optimising to the point that even if one of their drivers was on the way home, they made sure that there was a fair in the car on the way home because that meant that that car was earning money on the way home. So this phenomenon of the capitalism without capital, I mean, it's it's a bit of a misnomer, because it still requires infrastructure. It still requires devices and cars, but it shifts, you know, who owns what, who does what and where the margins sits. So, what can you say about this changing nature of capitalism in the face of this new phenomenon of digital technologies?

Diane Coyle 14:39

It's a big question. I think the relationship between the material and the immaterial is really interesting. And the scale of the physical investment needed in data centres, or the energy use is often overlooked, although people are starting to talk about that more. And as you say, some platform companies operate by pushing the need to invest both in whether it's cars, physical capital, but also their own human capital, they're pushing that out to individuals. And what that means is that we're getting under investment, including in human capital, if you're a gig worker, your incentive to invest in your own training, when you're bearing all of the risk of fluctuations in the business is diminished. So that's quite interesting, too. And then we've got this construct of intellectual property or non-material property, hugely valuable, the stock market value put on companies that hold a lot of data or have a certain kind of brand or reputation is absolutely immense. And yet, it doesn't act like normal, old fashioned physical kinds of capital. It's got very different depreciation characteristics, you can, it can lose its value overnight, if there's a hit to reputation, or if a secret gets gets out and get shared. And I think the construct of property, intellectual property, intangible property is just as an individual right to own the property or corporate right to own the property is just highly problematic. And I would much rather we start to think in terms of rights to access - who has rights to access what? And, you know, particularly going back to data, what can, what can who know about somebody? Because part of the privacy issue is that whether it's big tech firms or governments, they're in a position to start joining up all kinds of data about people. And that's the problem. You don't mind your doctor, knowing very intimate details about you and having that data. You don't mind your bank manager, knowing what your bank balances, but you wouldn't want the government to join up all of those different bits of information about you and get that synoptic view, the Stasi, the East Germans had this term glesano which meant transparent people. And that I think, is is a real problem. So I came across this concept that you probably know more about the idea of privacy in public that comes from other parts of social science literature. It operates offline, it doesn't operate online. So can we start to think about those sorts of access rights or permissions rather than absolute property rights? Does that make sense?

Todd Landman  17:21

Yeah, that makes sense. And you know, I was thinking about one of the extreme examples of the the intangibles, which is this non-fungible trading regime. So people are creating digital assets, if you will, that are then trading and you know, a digital asset by a famous artists can can sell on the market for for millions of pounds. And it it again, it gets back to some of the fundamental questions you ask in your book Cogs and Monsters about faith in the economy, you know, we think about coins and currency. Why do I accept the fact that you hand me a £10 note, and I say, that's a £10 note, which is worth something, when actually, it's just a piece of paper. So a lot of the economy is based on that transactional faith that has built up over centuries of people trading. And now of course, during the pandemic, cash and coins weren't used as much, we're going to electronic payment. Apple Pay has lifted its its cap on, you know, pounds per transaction. You know, there's a whole new world of financial transaction that feels even more ephemeral than economics has felt like in the past, and what can you say about sort of where are we going with all of this? What What's the new non-fungible that suddenly is going to have value in the market? 

Diane Coyle 18:27

I don't really know. I mean, for NFT's, I can't help but believe that there's a bubble element to that. And that people, you know the art market is a pretty rigged market, if I can put it that way. So I think there are people in the market who are trying to create artificial value, if you like around NFT's. But I don't know the answer to your question and it sometimes seems that value has become so untethered, that surely it's unreal. And yet at the same time, there are people who haven't got enough cash to go and buy food, they're going to food banks, and how has that come about? Yet equally, there are intangible things that are really valuable. Trust is an intangible, and we wouldn't have an economy without it. Cultural or heritage assets, which I'm thinking about at the moment. You know, it's not that we assign value to the stones in Stonehenge in some normal economic sense, but, but there is an additional cultural value to that, and how should we start to think about that, and, you know, more and more of the economy is intangible. So we have to get our heads around this.

Todd Landman  19:27

More and more, the economy's intangible. I'm gonna have to quote you on that. That's wonderful. I, I think then what the next thing I'm really interested in exploring with you is, is the role of the state and the way I want to enter this really is that you've already hinted at the idea that provision of no-rival public goods where there's clearly you know, a role for the state in that there is also a role for the state in the regulatory environment. And you know, of course, I was very sort of worried about your observation that the state can combine banking information with health information and know something about you in a connected way that re-identification but also that very private revelation about someone's individual circumstance. So what's that balance between the state helping, the state regulating and the state staying away? Because that's a big concern in human rights, we, we often say the state has a has a, you know, an obligation not to interfere in our rights, it has an obligation to protect us from violations of rights by third parties. And it has an obligation to fulfil its right commitments up to available economic capability and, you know, sort of state institutional capability. But boy, there's a tough balance here between how much we want the state to be involved and how much we really say, just stay away. What's your take on that?

Diane Coyle 20:38

It's particularly difficult, isn't it when trust in government has declined, and when democracies seem to be becoming rather fragile? So you worry much more about these trade-offs with an authoritarian state, whose politicians you don't trust very much, I think these issues have become more acute than they might have been 25 years ago, I suppose. And at the same time, we need the state more than ever, because of the characteristics of the way the economy is changing. We've had this period since Thatcher and Reagan, when the pendulum in public discourse about economic policy has swung very firmly towards markets first state fills in the gaps corrects the market failure. And yet, we're in a period of technical innovation when we need standards. Just going back to data, we need somebody who will set the standards for interoperability and metadata so that we can enforce competition in digital markets, or technical standards for the next generation of mobile telephony. So we need the standard setting. And because of the non-rivalry, and because of the returns to scale, I think we're all much more interconnected economically than used to be the case. And those phenomena have always existed. They've always been, you know, big economies of scale, and autos and aerospace, but they are now so pervasive across the economy, that almost everything we do is going to affect other people, I think it's becoming a much more collective economy than it used to be. Or just think about the way that the productive companies are combining all of our data to use predictive analytics to do better things for us. So, I, my strong senses is that it's a more collective economy, because it's intangible because it's got this these elements of non-rivalry and scale. And so we're going to have to have a rethink of what kind of policy discourse do we have around that, and it's not markets first government then fixes a few problems.

Todd Landman  22:40

Yeah and that idea of the collective economy really moves away from you know, the discipline of economics has often been characterised as residing in methodological individualism. And as long as you understand the individual rationality of people, you just aggregate that rationality and then you get market force, and you get supply and demand curves, you get equilibrium prices, and quantities, etc. But you're actually making a slightly different argument here that the interconnectivity of human behaviour is the interrelationships of one person's choices and the consequences or the as you say, the predictive analytics in a way talking about, well, we expect you to like these sets of products, and therefore you will go buy them, or we expect crime in this region, and therefore we put more resources there. That's a different enterprise. That's a much more holistic enterprise of looking at the, as you say, data in context, and it changes our way of thinking about modelling the economy, but also thinking about remodelling our relationship with the state.

Diane Coyle 23:34

I think you're right, you know, we're in a world then of disequilibrium of non-linear, linear dynamics where things can tip one way or another very quickly, where decisions by state agencies will shape outcomes. And give a simple example in my kind of territory, if you've got digital markets that that tip so that there's generally one dominant company because of the underlying economic characteristics, then any decision that a competition authority takes about a merger, or dominant position is going to shape which company dominates the market. You know, if the merger goes ahead, it's one and if it doesn't, go ahead, it may be another one. So they become market shapers. And I think this is why there's more interest now in self-fulfilling outcomes and narratives which started to take off a little bit in economics more in some other disciplines. Because the narrative affects the outcome, it aligns people's ideas and incentives and points them all in the same in the same direction. So I often think about the Victorians and I think they, they had this kind of narrative of greatness, and legacy long-term prosperity, and so they built these huge town halls that you see in cities around the country. Joseph Bazalgette gave us 150 years’ worth of capacity in the London sewers. So they had something going on in their heads. That was not the economics that we've had from 1979 up, up until just recently, they weren't doing cost benefit analysis or thinking about equilibrium supply and demand curves.

Todd Landman  25:07

Yeah, it's a much bigger vision, isn't it? And you know, there's an observation now that data is the new oil. It's the oil of the future. And I wonder if, in closing, whether you could just say a few remarks about a) do you think it is the oil of the future? And what's that flow of oil going to look like? Is it just more and more data and more and more confusion? Or is there going to be some sort of consolidation, rationalisation and, and deeper understanding of the limits of the data enterprise and the digital enterprise? Or is it just too hard to say at this stage?

Diane Coyle 25:36

Economists don't like that analogy at all because oil is a rival good and data is a non-rival good. So we in a very anoraky way say no, no, that's a very imperfect analogy. And I mean of course, the point is that it's going to be ubiquitous and essential. And people still talk about the digital economy. But before long, that will be like talking about the electricity economy. It'll just all be digital and data. But I think there's so much that we don't know. And so much of what will happen will be shaped by decisions taken in the near term, with, you know, the consequences for governance, really, we've talked a lot about the economics of it. But all of this has implications for governance and democracy and rights, which is where you come in.

Todd Landman  26:18

Yes, absolutely and that's what we're exploring in this series of, of The Rights Track. So this has been a fascinating discussion, as ever, I really enjoy your insights and precision your use of language and correcting me about the, the rival nature of data that but that's an important correction and one that I absolutely accept. But you've also raised so many questions for us to think about in terms of governance, democracy, rights, individual rights versus collective rights. And this idea of the non-rival public good that will absolutely, our listeners will want to chew over that one for a long time. So for now, can I just thank you so much for joining us on this episode of The Rights Track.

Chris Garrington 26:55

Thanks for listening to this episode of The Rights Track, which was presented by Todd Landman and produced by Chris Garrington of Research Podcasts with funding from 3DI. You can find detailed show notes on the website at www.rightstrack.org and don't forget to subscribe wherever you listen to your podcasts to access future and earlier episodes.