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EconomicsIntervisteOn Campus

Economic growth and inequalities: an interview with Michael Spence

di Andrea Pradelli e Francesca Sofia Cocco

On November 19th we attended the event “Economic Growth and Inequalities: any place for ethics in a multi-speed world?” organized by the Bocconi association Res Ethica. Guests of the conference were Guido Tabellini, Professor and former rector at Bocconi University, Alan Friedman, economic journalist, and Andrew Michael Spence, professor at our University who was awarded the Nobel Prize in 2001 for his work on the dynamics of information flows and market development. After an intense discussion with the students at Aula Maggiore, we managed to have a brief conversation with Spence.

A recent article from The Economist highlighted the need of “The next capitalist revolution”. In fact, many big firms have reached a level of market power which is very close to monopoly, therefore reforms aimed at increasing competition are needed. Doesn’t this mean that we would need more market, and not more state regulation, to achieve a more ethical society?

That is a very important issue. Everybody thinks that a component of rising inequalities is related to highly concentrated wealth and market power, and the influence that goes with it. In fact, the antitrust law in the US has this name because its goal is to break trusts. I don’t think it is an issue of more market. Competition policy is hard to pursue, you must balance the interest of consumers with that of producers and potential competitors, and some people say that we got this balance wrong. I don’t think of this as something settled. It could be nice to read an article that puts this in a simple way, but the truth is that the issue is much more complicated that it can seem.

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One topic economists are always debating on is whether it is possible to conciliate growth and equality, that is, to increase the pie and at the same time to redistribute it equally. Do you think this can be achieved or is it an unavoidable trade-off?

If you look across countries in the EU, you will find many examples of an extended social security combined with high levels of competition. I strongly believe that if you think you know something, you should always look for a counterexample. Sometimes this means that you must change your theory, because it clearly doesn’t fit. In fact, Nordic countries managed to be innovative and competitive, but at the same time they developed a strong welfare state that really protects people. And they are totally ready to confront with the challenges of the future. Recently an article from the New York Times came out with this title: “Robots are coming, and Sweden is fine”. If this is not a proof…

In the world we are living in, where appearance counts more than substance, there are people who invented new jobs such as the influencer. In their activity the key is not money, but what people think of them and how they appear. Is there a change compared to the past, so that nowadays people try to become influencers to find empowerment to compensate inequalities?

Certainly the opportunity set changed a lot with digital technology. In past the only option to become famous was Hollywood. To be clear, each period had its influential people. However, social media changed everywhere with huge consequences. As regards inequality, I think that the key is where all that money comes from. I didn’t hear so many people complaining about Bill Gates (who was one of my students), the best musicians or movie stars. They complain about those who got rich for the wrong reason. I think influencers are on the good side of it, I mean, they are influencers for a reason! Clearly there is also a bit of “corruption” in it, there is a market for “buying” followers. But I wouldn’t say that influencers who became rich did not deserve it. Moreover, I wouldn’t say that nowadays people are more interested in fame than in money.  More important to gain power or money. Everybody has different motivations: there are those who want to become powerful and influential and others that dream of being rich and unknown. The funniest thing is that when Alan (Friedman, ndr) was criticizing Trump again he was suggesting that we should be back to Vietnam war era, which was very turbulent from a social point of view, pretty much everywhere.  I don’t know, actually, whether those who lived through the Vietnam era would maintain that those were “the good old days”, but Alan says that this period is worse (laughs)…

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