Andrew Scott is a Professor of Economics and former Deputy Dean at the London Business School. In addition to that, he is also a Fellow of All Souls, Oxford University and Fellow of the Centre for Economic Policy Research. He has previously held positions at Harvard University, London School of Economics and Oxford University. In this interview, we have touched on a wide range of subjects from Brexit to his favourite books, spoiler alert – one of them is Ulysses by James Joyce. It has been an absolute pleasure to interview Andrew and we hope you enjoy reading it.
Q: What is your dinner party monologue for when someone says “and what do you do?”
A: It’s a bad dinner party when that question is asked and its an even worse one if I respond with a monologue! If I am asked I usually just say I am an economist and then brace myself for a bunch of questions around Brexit or house prices.
Q: Could you tell us about where you grew up; were you a rural or city dweller?
A: I grew up in Enfield in North London. Its urban rather than city and just before countryside begins
Q: What subject(s) did you excel at in school, and which did you find most challenging?
A: Maths, English and Economics were my strongest suit. Latin was incomprehensible. I was never even taught English grammar so trying to learn Latin was bewildering at best
Q: Can you recall any reoccurring comments from your school reports?
A: Like most teenage boys I think “Could try harder” featured highly
Q: Did you ever have a eureka moment where you thought, “this is the subject I want to study”?
A: I stumbled into Economics at 16 because I wanted to do something different but once I started it hooked me – a combination of theory, data and an obvious practical importance that could help make society better was for me deeply motivating. It was neither too abstract or too practical and that combination really grabbed me.
I gave the results to the economist I worked with, Gus O’Donnell, and within 30 minutes interest rates went up 2%.
Q: Can you remember the point at which you fell in love with your subject?
A: I worked for a year in between school and university. I was lucky enough to get a job at the UK Treasury in the early days of computing working with the team who oversaw monetary aggregates in the days when the Chancellor was a monetarist. There was a moment when I was given data from the Bank of England which I put into the programs I had written to calculate certain aggregates. I gave the results to the economist I worked with, Gus O’Donnell, and within 30 minutes interest rates went up 2% as a result of the number. The idea that theory would frame research and that data would then be an input and that would shape policy really galvanised me. The fact that ideas could have impact was what excited me.
Regarding your undergraduate studies:
Q: Which University did you study at, and was it your first choice?
A: Oxford University and Yes.
Q: What undergraduate degree did you study for at University, and in hindsight would you select the same subject again?
A: Politics, Philosophy and Economics. Yes. It combines so much that is useful for social science. I specialised in Philosophy and Economics and I found that focus of building an argument up from first principles suited my thinking. For an economist it lacks the maths focus you need for latter research but its breadth of focus I think more than compensates although that’s not particularly a common view in the Economics profession.
Q: Can you remember a University lecturer who really inspired you?
A: Oxford isn’t really based around lectures more tutorials. The great thing about it was the freedom it gave me to pursue what I was interested in. Whilst you are given specific topics to focus on the reading isn’t very prescriptive so you can read widely. I had two very supportive tutors in John Wright and Paul Fenn who nurtured and guided my enthusiasm. I did go to a few lectures by Jim Mirlees which gave me an insight into a future world of research and thinking. The idea of using models to create insights and to respect them and their reasoning was eye opening.
Regarding your postgraduate studies:
Q: What motivated you to further pursue academia?
A: Very simply that there was so much more I wanted to learn and understand and I didn’t want to stop while that was the case.
Q: What institution(s) did you study at in your pursuit of postgraduate education?
A: I did an MSc at the London School of Economics and my doctorate (DPhil) at All Souls in Oxford.
Q: What was the title of your PhD thesis, and how would you explain your findings to a novice?
A: Essays in Aggregate Consumption. The trouble with so much economic research is that when you explain it to a novice it sounds ridiculously simple. In essence the thesis had two components . The first was about trying to understand why consumption doesn’t respond as much to income as core theories suggest. Consumers, for various reasons, seem keen to smooth their consumption over time even though income fluctuates and they do this even more than standard theory predicts. The second was demonstrating and explaining that whilst consumers keep consumption smoother than we expect in response to income they deliberately produce large fluctuations in consumption for other reasons – particularly seasonality. These fluctuations are huge and largely ignored.
Q: If you had your time as a student again, what would you do, if anything, differently?
A: I learnt an awful lot and was lucky to mix with a huge range of people who influenced my thinking. However a lot of it was self-directed which has its good and bad parts. It would have been good to have spent some time in the States in a large program and do more post graduate courses. My Oxford background has given me a big focus on reading, writing and debating. However the US schools force their graduates to do a lot more model building. I wouldn’t want not to have done the reading and writing but more on cracking models would have been good. My first instinct on any issue is to read about it and that way think about the issues. I sometimes wish I was more impatient to pick up a pen and start writing a model.
Q: Tell us about your current research focus?
A: My research is currently straddling two topics as one long running strand comes to an end and another is about to begin. I have for around 10 years been working on government debt and debt management with Albert Marcet and other co-authors. The two big questions for fiscal policy are what is the right level for government debt and what type of debt should governments issue. We do not have sharp answers for either question and this is what Albert and I are trying to provide insight on.
The existing literature says that governments should issue overwhelmingly long bonds but this isn’t the case. Our work focuses on improving our technical armoury so we can model more complicated and more realistic scenarios about debt management so we can better understand the options and issues governments face. It’s complicated because we have to both model a world where governments have far less flexibility than the models assume and explain why this is the case as well. When we do this though we find that the advantages of long bonds are less than previously expected and short bonds provide distinct advantages.
Many demographers plausibly claim that children born today have a realistic chance of living to a 100.
The new strand of work I am interested in is longevity. Life expectancy has risen continuously over the last two hundred years and many demographers plausibly claim that children born today have a realistic chance of living to a 100. Whilst there is a large literature looking at the impact of ageing on public finances and pensions there isn’t a real focus on what it means for the economy when we live for longer. How do we reshape our working lives? Our financial behaviour? Our education? Our relationships? There is a surprising dearth of work on the impact of living longer on the economy. We tend to focus on how higher income helps us live longer but hardly anything on how the length of life itself affects things.
Q: What do you believe is your single most important piece of research?
A: It’s actually not my most cited paper but I have an article in the Journal of Economic Theory with Albert Marcet (“Debt and deficit fluctuations and the structure of bond markets”) which proposes a test for the structure of bond markets and shows that optimal fiscal policy should involve very long and large swings in government debt and that debt should show the longest run swings of any variable in response to fiscal shocks. I value this paper because the test of bond market structure is closely derived from theory but easy to implement in practice and the results have real relevance to what has happened over the last decade since the financial crisis.
Q: Within your area of study, what breakthroughs are on the horizon?
A: I am hugely proud of economics and the insights it has provided and continues to create. As a subject we are much maligned and often by people with only a minimal knowledge of the subject. However it’s also true that economics is often more about a way of thinking than a specific body of knowledge (hence the Nobel prize in Economics has never been given for an empirical fact) and so I am not sure we can talk about breakthroughs in the sense that natural sciences can. The other challenge is that if economics is about a way of thinking then sometimes we shift in how we think as new methodologies take over. There are signs of that in macroeconomics right now – there is a growing dissent about too much prior theory being used to shape the data and policy implications. However at the moment no clear alternative is beginning to emerge and more just a sense of unease with how the economy has behaved since the financial crisis and the continued lack of success in using monetary policy. It’s an area ripe for new ideas and new frameworks so a great subject for graduate study.
I can already see an agenda emerging that takes market imperfections and incompleteness seriously and that integrates learning mechanisms into expectation formations. However we need to develop much better models of the institutions that create credit and finance as well as those that produce technology and need to integrate distributional issues into the heart of our core models. We also as a profession need to get better at understanding not just pricing but volume and liquidity in financial markets.
Whilst there are some isolated signs of progress in general the response has been slow since the crisis and the macroeconomic struggles that have ensued. We still lack any new canonical model and it’s not yet clear that a proper debate has even begun from which one will emerge. Perhaps though the big breakthrough in macro this time will be in not relying on a canonical model but more case specific thinking?
Q: Let your imagination take over for a minute and tell us what you hope your successors will be researching in 2116?
A: A forecast from an economist? Hundred years ahead? It’s a really interesting question and I guess my strongest hope is that they won’t be researching the same issues as we do today. Either the world changes or economics changes the world but either way the hope has to be that the same issues aren’t so prominent. So I guess that means that real success in economics means I am not likely to be able to reliably forecast what will be the hot topics of the future!
Presumably the economy will still show cyclical fluctuations and long-run growth will still be an issue. However in a 100 years time might growth be less important because of diminishing returns? Similarly with higher income levels will fluctuations be so important? We are clearly entering into a much more data-rich world not just in terms of measuring economic activity but measuring our own emotions, experiences and activities. I suspect in a 100 years time there will be a closer link between models and data in terms of how they are analysed and we will be focusing less on just markets and money and more about allocating time and effort and focusing on money, health and happiness.
We are clearly entering into a much more data rich world not just in terms of measuring economic activity but measuring our own emotions, experiences and activities.
Keynes thought “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.” I have mixed feelings about that quote. At one level it’s a great way to measure progress and the usefulness of the discipline but at its best economics also looks at the systems that shape our world (Acemoglu and Piketty would be good contemporary examples) and without wishing to denigrate dentists that aspiration needs to be maintained.
Q: What do you feel your professional legacy will be?
A: I love ideas and I love the way ideas can have an impact on the world. I hope my professional legacy will be as someone who helped in some way helped great ideas have a good impact.
Q: Are you working on any extra-curricular projects at the moment, such as books, podcasts, websites, or speaking?
A: I am increasingly getting engaged in such activities. Partly through work around my book (aimed at a non-academic audience) with Lynda Gratton “The 100 Year Life – Living and Working in an Age of Longevity” and partly through my more long running activities around macro policy. Recent events including Brexit have shown the dangers of a research community that speaks only to itself. What that expert community knows is not well communicated to a wider community and the concerns of a wider community may not be reflected in the research agenda of the expert community. Economists need to spend more time talking and listening with policy takers as well as policy makers.
Advice and Tips
Q: If you could give your 18-year-old self one piece of advice, what would it be?
A: Take your time and keep your mind open.
Q: What advice would you give someone looking to start, or progress his or her career in your field?
A: Read widely and not just in economics. Realise that your generation will change the research questions and models and paradigms that the profession uses so whilst you should respect your Professors you should change what we work on. Respect the past, change the future.
Q: Which book would you say has had the biggest impact on your life?
A: It’s not an economics book but James Joyce “Ulysses” and for many reasons. The idea that an ordinary person going about their daily life can be seen as a hero in the way they face everyday challenges is I think a great way of looking at the world, especially for a social scientist.
Q: If you could recommend one book to a novice in your field, what would it be?
A: I get asked this question a lot and have no good answer. “Freakonomics” by Levitt and Dubner is an obvious one to mention as it’s a best seller so clearly appeals and helps wake people up to the idea that economics isn’t all about financial markets. However for that very reason it doesn’t cover macro which is my area. I do think Acemoglu and Robinson “Why Nations Fail?” is a great book as it blends clear thinking, good theory, historical sweep and nice case studies to illustrate some really fundamental issues. However it’s more political economy.
I don’t know if its an issue of incentives in the profession, lack of a market or the unsuitability of the subject but we really lack the equivalent of a Charles Darwin “Origin of Species”. I am not necessarily talking about a book that provides groundbreaking insights but a deep book that provides a broad overview for the lay reader that explains the subject and the discipline. On the plus side the novice has access to a raft of good websites, blogs and newspapers – VoxEU, Project Syndicate, FT to name a few – which provide plenty of insight across a range of topics. However it’s hard to think of one really good deep read that is broad ranging.
Q: And finally, we are back at the dinner party. Someone offers you a drink, what do you ask for?
A: If we are talking about Brexit “make it a large one”.
If you’d like to find out more about Professor Andrew Scott you can check out his academic profile and Twitter page.