 Welcome to economics and beyond I'm Rob Johnson president of the Institute for New Economic Thinking I'm here today with gals you're all who is a senior researcher at the Center for Scientific Research in Paris he is about to be the founder and leader of the Georgetown University Center for Fire Mental Justice he is also I'm glad to say a member of the Commission on Global Economic Transformation that is founded and administered by the Institute for New Economic Thinking Gil thank you for joining me here today thank you for giving me the floor well your work for the the Global Commission was it mid it was in midstream and many of the themes that I have come to understand through knowing you seem now to be how we say more intense in more vivid as we talk on the 14th of May and the pandemic has made very very profound changes in the the nature of our understanding of world world systems the role of governments and the what you might call shortcomings unmasked in a highly efficient just-in-time global private sector as you look at this world how has it changed your perceptions and what do you see being done well and particularly I know because you're in you're in Dublin now but you're in Europe how do you see how the pandemic is affecting countries like Italy France Ireland in the UK what I would say I mean there are two levels I could answer two levels the first one is the let's say the surface and the political issue many open countries have had a very bad reaction to the pandemic they didn't prepare themselves they didn't have any strategic plan like Taiwan South Korea or Vietnam so that they were rapidly overwhelmed by the pandemic hence the consequences in terms of the tolls and also the need to lock down the economies with the terrifying consequences that these has today of course there are some exceptions I mean Iceland for instance began to test one month before the first case the first positive case came in on the island Malta also had a very good very good strategy against the pandemic and to a certain extent Germany and Netherlands and Sweden also had a good strategy but Italy France the UK Spain definitely have had the need to implement the medieval reaction which is the lockdown because they were entirely overwhelmed so I guess this will create a huge debate in these countries about the need to reinforce the public health system with of course a number of people saying no it's exactly the opposite we should now destroy the public health system because we have made the proof that it's inefficient and we should privatize everything this debate is already occurring today in France and I'm sure it will be very very harsh in the coming weeks and months in many European countries so this is let's say the surface beneath the surface it seems to me there is a big challenge which is raised by this crisis which is the fact that I mean mainstream economics being built on the idea that everything is at equilibrium to begin with cannot deal with this kind of problem where we have a big crisis where we both have a collapse of the supply side and the demand side at the same time and it's very hard to think about it in terms of an equilibrium model so that's why it seems to me I mean this pandemic opens a big window for not for non-orthodox alternatives like you know dynamical systems are using microeconomics theory in order to try to deal with this complexity of an economy which is certainly not at equilibrium and which now in many European countries but also in the US unfortunately if it's going to an equilibrium it might probably be a depth deflationary equilibrium in the sense of you know even Fisher and Heimann Minsky so a very bad equilibrium so yeah from this viewpoint paradoxically enough I mean the pandemic might be a good opportunity for the academic sphere in economics to get rid of the mainstream paradigm and to start something new so let's let's talk about the questions related to global supply chains what what has happened I mean obviously when there is a system that's highly integrated and operating on very thin margins and that system comes apart in this case for health protection yeah it it creates short-term what I'll call inelasticity scare cities and it's not responsive are we now in a place where this is a one-time episode and we suffered the consequences are we in a place now where people are going to want to do the equivalent of self-insurance by localizing relocalizing I think is the phrase you've used production so that the depth and duration of the suffering that we could contingently incur is diminished in each region of the world yeah this debate is raging today in many countries in Europe and I mean clearly in favor of relocalization of our industry at least in countries like France or as you know industry is just amounts to 12% of the GDP the same in the UK or in Italy well my answer would be it's obvious that this pandemic is not the one-shot big you know black swan that will never come back in the sense that first it might turn into a seasonary pandemic in case the virus would mutate and come back second there will be other panics due to the erosion of biodiversity let's say for instance the deforestation the deforestation is bringing human beings close to white animals against which we have no immunology and no way to protect ourselves in the same way the to the markets in Wuhan for white animals are make bringing us closer to these to these animals so there will be other panemics and more generally climate change and the erosion of biodiversity we must probably provoke the same kind of big problems at the international level in the coming years and decades so definitely it seems to me we have to rethink the way we have organized globalization in the last 40 years which as you said was based on on big supply chains with no stocks and very thin margin in order to maximize profit in the short run so we are just making the experience that this is not resilient at all against any kind of exogenous shock like this pandemic and that we definitely need to rethink it in another way and from my viewpoint to relocalize part of our industry of course these raises huge problems in the sense that in many sectors the question is that in many in many different countries we don't have the label forces the qualified label forces that could work in the same way as some people in other in certain countries in the globalized southern countries would work today in these big supply chains so this will probably increase the label cost for a number of industries and create a huge number of microeconomic problems in the future but I don't see any escape code the status quo would mean that we would be very fragile and non resilient against shocks that will occur most probably in the near future I remember in preparing for this I read a very vivid statement that came out in an article you wrote recently on starting anew after COVID-19 and you said that preventing events like a pandemic is not profitable in the short term hence no provisions were made for mass tests or tests to be carried out massively yeah we've reduced hospital capacity in the name of the ideology of demand dismantling public services which is now showing itself for what it is an ideology that kills yeah that's a strong statement but that seems to be quite an accurate statement why does why did society get into a place where it convinced itself that cutting all of these public services to the bone was the right path well you know it seems to me to a certain extent I mean the neoliberal the ideology has convinced a number of people including a number of high civil servants that the state is definitely something inefficient that the regulated markets should be much more efficient and that we should delegate to markets as much as possible the entire society I mean all the processes in the society the point is that at the same time we did not realize that most of these industries have fixed costs that cannot be taken into account by the private sector as we know even from the the most orthodox neoclassical economic theory as soon as an economy sector of let's say a company has fixed costs then then you can't just assume that it's going to maximize its profit in the short run because it makes no sense if you have non-convex production so to a certain extent what we have done is that we have asked the state to pay for the fixed cost and then the sector private sector would that just take benefit from the convex part of the production function and this doesn't work in the situation where we are now simply because the pandemic shows that if you privatize health the health system then there would be a cost for that I mean and there will be poor people unable to pay this cost if this price the price of the health the sanitary system and these people of course will convey the virus to the others even the richest who could have a thought you have a good health system so the best way to remain healthy is for the rich to pay for a public system for the poor I don't I don't see any alternative to that but but I must confess at the same time that the way the debate is organizing is organized today in many many western countries partly goes in the opposite direction saying as I said earlier I mean the public system of health system is very bad and we should get rid of it and privatize anything which is a pure nonsense well I think it's a nonsense that comes from a lot of different directions the deification of markets is almost like there's some divine arbiter in markets that allocates or fulfills the wishes of people magically one of the problems in markets is when you're poor you may have what economists call preferences but you have no demand function you got to have money to be heard by the market secondly this is what I call the demonization of governance everything it does is a dimension of inefficiency well I find this very problematic particularly in the country where I live the United States there is a former musician and artist who once appeared on a blog named Stuart Zekman and he pointed out in this blog post which I'll be happy to put online associated with this episode was that this division between markets and government good and bad in the United States is a false consciousness yeah and when you go to the gallop polls in the United States why do people think government is bad because they think wealthy people and large concentrated corporate interests control the government to subsidize themselves at the expense of the taxpayer so it's not one is an efficient mechanism and the other is a clumsy or error prone mechanism it's that the power of the neoliberal vision in markets has commodified the appointments of politicians who in the United States depend on tremendous amount of fundraising the making of laws the making of regulations the public relations the appointments the enforcement and all of these things lead to what after the financial crisis of 2008 and 9 which spawned occupy wall street on the left tea party on the right and a change in control of the house the senate and the white house what was called the mother of all moral hazards and i guess as i look at the structure of central bank centered fiscal assistance i think many people are going to be concerned that all of those who were doing stock buybacks running on very thin margins or banks speculating aggressively we're doing so because they thought they had the political muscle to use contingent fiscal capacity to bail themselves out because of their influence in the government and leave the people the broad population out to the side there's a gentleman named ian welch in america who's really has has just written a blog post which i'll put up also with this called uh how neoliberalism has destroyed capitalism and he basically talked about how all the small businesses are going out of business and all the big airlines and big private equity companies and big financial institutions are being fortified and the stock market is not in disaster when the economy is so i think i think we're in a very confused state and i did this long-winded preface in the in the spirit of asking you a question there's a very dangerous fork in the road now between authoritarian response and reinvigoration of democratic representation and how do you see how we're going to restore the integrity faith and trust and expertise the integrity faith and trust in public service when the episode screams at us that we are not providing adequate public goods in many places in the world most noticeably the united states in the uk well i i definitely agree with you that there is a big risk of shifting towards authoritarian regimes actually this monster that would be an authoritarian neoliberal state and to a certain extent even france is slowly going in this direction in the sense that the state of emergency looks like an alibi in order to to implement you know a police that is much more much more in crying about what the private life of people that it as it did earlier same story in a number of european countries um i would say you know in equal to what you just said um just a few remarks the first one is you spoke about the deification of markets i totally agree and that's a product in the sense that even if you look at the most orthodox neoclassical economic theory namely it's known since more than more than 40 years actually since the 80s that incomplete financial markets are always or almost always inefficient and deeply inefficient they are not even certain best efficient so that's a product that at the same time in the 80s you have people like john jenakopoulos or andrew mascolan proving mathematically speaking that incomplete markets are inefficient and even that even if you you have some financial innovation in the sense that you add a new financial derivative then this is not necessarily reduced in efficiency of markets um this is a beautiful result by ronal elu in the 90s and at the same time in most western business schools you would find people teaching you know that financial markets are efficient that they know everything that they predict everything and that we should just rely entirely on them so this is this is a big product the second remark i would like to make is that um yeah i totally agree with you that the the alternative the dilemma between the state on one hand and the market on the other hand is quite simplistic in the sense that um you know it's an heritage of the old dichotomy inherited from law between between the public and the private but as was shown by by elinor ostrom there are a number of other categories of goods and services and for instance decommence and and this provides me an answer to your last question which is what would be the road towards an alternative um from the authoritarian neoliberal state uh the the authoritarian neoliberal state is a way to combine the state actually to capture the state that is the public instance in the society uh to to make it serve some private interests and that's to my from a viewpoint the essence of of neoliberalism which is which has nothing to do with the liberal project of of the political liberal project of enlightenment in the 18th century which was to protect people from tyranny thanks to the law so neoliberalism does exactly the opposite it captures the state it captures the law the public instance in order to force it as to serve some private interest um serving a minority of people now the the project the political and social project of the commons goes exactly in the in the other direction saying everything depends upon the the resources that we want to to manage and to deal with and of which we want to take care as a community and that we want to turn into a commons that is it it means that there must be a community which invents its own rules in order to take care of the commons be it let's say a free software be it education be it the money the money could be viewed as a commons be it even label why should label be considered as a private commodity um which is exchanged on the market um and why not as a commons which take part to an interesting project um socially useful uh embodied in a company um and also of course naturally of course ecological ecosystems uh ecosystem services could also be viewed as as commons um and by seeing this of course i'm i'm referring to carol polany's famous trilogy the earth ecological ecosystem services and money and and labor so this opens a huge a huge research program which is both intellectually fascinating and politically very um i think very revolutionary it's consistent saying well we need a third a third party in the in the old dilemma between the market and the state namely the civil society which creates commons to give you an example when i was the chief economist of the french development bank i served there for five years um uh we discovered that actually in a number of situations if you help communities underground organize themselves in order to take care let's say of water as a commons this is much more efficient than privatizing the water or than asking the state the bureaucratic state to take care of water let me just give you an example in um 2017 actually lapath in bolivia which is one of the two captains of bolivia as you know and which is located very high at 4 000 meters high lapath had a big problem with um with water the distribution of water and namely lapath went through what is called the day zero during the summer that is the the day where you don't have water and tap with what you know is is a is a very complicated situation for many people um so that this means that rich people in the center of the city didn't have any access to drinking water but at the same time poor people in the suburbs of lapath which had organized themselves in order to deal with water as a commons they still had water during the whole summer so they didn't suffer from this terrifying situation where you don't have any access to drink water and this it seems to me i mean this is the way we understood it at the french group and bank this is a very fascinating example of the fact that actually taking care of a number of resources as a commons is much more efficient than trying to privatize it or to ask the state to take care of it of course water is just one example but we could also think of as i said earlier a number of other other issues so you know not to be too long let me also give you another example which is money we could read you know the the experiment of the eurozone in europe as a way actually to privatize money in the sense that the european central bank doesn't have any political counterpart to which it should talk in order to make a decision uh that's the the famous dogma of the independence of the central bank which i believe doesn't have any analytical support even from a purely orthodox viewpoint because i mean asking the central bank to be independent from the political power means that money should be neutral in the sense that the quantity of money circulating in an economy doesn't have any impact on the microeconomic variables of the economy except the level of prices the absolute level of prices which is the standard quantitative monetary theory but as you know this is entirely wrong and perfectly speaking we never observe money and neutrality repeat in a short or the medium run or even the long run which means it makes no sense to disentangle fiscal policy from monetary policy but nevertheless we have done it in the european in the eurozone so that the ecb today is on its own to make decision which means actually the ecb is talking to the private sector and those who really have the power to create money without having to rely on the state in in the in the economy these are the private banks so to a certain extent we have privatized money in the eurozone now the question is is an alternative so if you think of the classical dilemma between the state and the market you would say well the alternative is to increase the the reserve requirement from one person as it as it is today in the eurozone to 100 which means then that the ecb would decide directly what type of credit private banks could emit or not which to a certain extent would mean that the ecb would have the total control on money creation through credit but i don't believe this would be the necessarily the good the good answer there is an alternative to this dilemma which is money as a commons and all the complementary monies i mean currencies and that are created everywhere in europe or in latin america or in africa today i don't know yet about the us but probably it's also occurring in the us as an example are all the examples of communities that try to recover some power on the money creation so they create their own money on their own and they manage it in the way they want to do it so they may have artificial inflation because they do believe that this is a good thing these these forces people to to transact with money and not to try to keep it at home and there are some very successful stories as you know i mean in sardin for instance in the south of italy you have to so-called the sardin which is one example of a complementary money whose volume of transaction each year per annum is one one trillion euros so that's a lot of money um and so this is an example and it seems to me that's the real alternative to the authoritarian neoliberal state that might emerge from this big pandemic you know by the way i note uh ragu rajan wrote a book recently the former uh he's a professor at chicago business school and indian central bank governor called the third pillar and it sounded very very similar when you said in between the state and the government there's uh the third pillar in his mind was that local society but i think i think it's fascinating to me you know you're talking about water i come from detroit michigan and around the great lakes and the bankruptcy of detroit the flint water crisis i mean is it not absurd that at the time of the detroit bankruptcy they were cutting off the water for poor people and trying to sell the uh detroit water and sewage which is the largest freshwater uh public utility in the world to a private french company actually called suez so that they could then not have to pay the pensions of all the workers because you you had to pay public pensions but if you privatized then there would be a windfall and at the same time in flint michigan which is about two baseball throws away from lake uran which is an enormous body of very high quality fresh water they managed to pollute the children with lead in the entire society so it's it's almost like we didn't see the warnings in michigan and i'm sure in many many other places of how this system is is how would i say doing something monetary that is different than providing value through service but i i uh i also am very intrigued because you were talking about money and you're talking about the privatization money central banks the relationship of the state prior to the onset of the pandemic you were doing i mean you have been doing but many people were building a great momentum towards what we might call the green new deal a monetary financed fiscal expansion that would invigorate aggregate demand and transform the structure of energy on planet earth in ways to make our environment sustainable and obviously it was a global project and it required collaboration between many many countries but particularly the eu the united states china and india and japan how do you see now where people are disoriented by the pandemic we're using a tremendous amount of fiscal capacity to address that challenge how do you see the prospects for resuming the whole call to action to address climate sooner rather than later it seems to me there is already a big argument between on the one hand a number of people in the civil society saying well we can't we don't want to resurrect the old world after the look down and after the pandemic so we need to take this opportunity to to accelerate the transition towards society based on renewable energies and and protecting and taking care of the the economic and services and on the other hand you have a number of people including some political leaders including in france uh who are saying exactly the opposite namely you know we are going to have a lot of unemployment probably something like 25 persons in front of jobless people um the unique way to to provide them with jobs really rapidly is to resurrect the old world because we don't know how to differently from that and and at the same time we have a huge public debt i mean just to take the example of france i mean the public debt of france was 98 person of the gdp before the pandemic and probably it's going to jump to 115 uh italy is probably going also to jump to 160 maybe even more than that and probably financial markets would then just say well you have a public debt problem as usually um and then this will serve as an alibi to say well we have to reduce public spending and we don't we don't we can't afford to finance something like a great new deal which would be just catastrophic but this would mean that uh we are once again losing time as you probably know the last simulations that are run by some climatologists from ipcc and some friends of mine tend to show that just before the pandemic um we were running not just on this most pessimistic scenario of the ipcc which is the lcp 8.5 as you know which leads us somewhere between plus four and plus five degrees um of increase of average temperature on earth at the end of the century but we were even above that so we i mean because there was an acceleration of global warming in the last in the past few years so not taking this opportunity to implement a green new deal would just be catastrophic and would probably bring us back to this very i mean to the this business as usual scenario which is very frightening um at the same time of course we have to find solutions um in order to to to provide some funding uh ways i mean to to provide some ways to fund the green new deal in the near future my viewpoint is this is what i tried to to emphasize in the in the last debates we had in europe is that we should think about canceling part of the public debt of a number of countries including in the eurozone i know that this is a taboo today but but actually if you think about it i mean the dcp in the last five years about something like two trillion of euros of public debt from sovereign countries in the eurozone for friends this is 400 uh billion euros this debt now is in the balance sheet of the ecb suppose we cancel it what's happening actually nothing i mean this does not prevent the ecb from from creating money and there is a report that has been published by the the bank of international settlements in switzerland which shows that a central bank can perfectly work and does and do his job with no equity at all or with negative equity so the equity of the ecb today is just uh something like 80 billion euros that's nothing so it's not the equity of the ecb that provides credibility to the euro i mean that's just a fairytale so um so that's what provides credibly credibility to the euro is the the fact that the eurozone is a wealthy economic area um and then the best way to save the euro is on the contrary to implement a great new deal um and certainly not to say to say oh we we don't do we can't do anything because we have to to save the the equity of the ecb so so if we were to cancel the the public debt of the eurozone countries which is in the balance sheet of the of the ecb i mean nobody would lose any money no private actor would lose anything the ecb would make a big loss but that's life and in the european treaties it's not even written that countries would be forced to recapitalize the ecb so we could just leave with it and this would save a lot of a lot of money and give a lot of freedom in terms of you know fiscal freedom for and above countries or so for friends it would be something as i said like 400 billion euros that's a lot of money and with this you could easily finance a big great new deal uh in the next in the in the next decade um there is a small debate in this direction now in the number of countries but of course as you can imagine as i said this is entirely taboo and a number of people in germany and netherlands will just be really shocked if this happens one day but i but you know thinking about it i i truly believe that if the alternative is between this and it is non-orthodox measure and on the on the one hand and on the other hand a big depression worse than the one we had in the 30s during 10 days i definitely chose the first option in the uh how would i say uh process of the green new deal i feel like we're uh we're we're suffering a little bit from what i mentioned earlier the lack of faith in credibility in government yeah we're suffering a bit from the fact that the former system the one you called neoliberal that demonized public service and deified the markets yeah uh even even before was not shared by the largest country in the world which is china not the largest economy i think it's still the second largest economy yeah but but we have a clash between systems a clash between philosophical systems between the western cartesian enlightenment and the uh chinese and eastern philosophies yeah and we have enormous pain and dysfunction we have a place which in india is about 20 of the world's population and it uh needs to have higher standards of living but it can be at the margin one of the greatest uh either contributors to climate change or uh dangers to sustainable climate change depending on the path they choose and whether they get multilateral assistance but in your and my conversations prior to this conference uh this this broadcast we've talked a little bit about how the multilateral system needs itself may be dying needs to be resurrected is caught in all of these cross currents how are we going to bring global collaboration which i believe you tell me if you think otherwise i think is a necessary condition to achieve the goals the ipcc and others uh have told us are necessary to our survival yeah totally agree with you and and i would even say this is the main the main political and philosophical challenge we have to face in the next decades which is on the one hand you have to relocalize part of our production system uh which goes in the opposite direction of the globalization the way we have implemented it in the latin news and at the same time we have to improve considerably the type of cooperation among states that we can we can experience today um in a situation where multilateralism in the way we have constructed it in 1945 with the united nations and the breton woods agreement um this is collapsing today i mean the united nations um uh security council could not even make any declaration about the pandemic and that's the first time since the second world war that it's we observe such a paralysis of this body um the leadership of the us is gone as i said and then we have to reinvent a new a new multilateralism in a in a situation where as you just mentioned we seem to have a big clash of of of civilizations well china india and western countries to to be very simplistic or simplistic it seems to me the way i would try to deal with it and to think about it is is the following um it seems to me if you think of the different categories of of commodities and goods namely private public comments and there is a first one which is tribal or network goods so economists used to think about it as let's say for instance an iphone um or internet wikipedia this is a network good in the sense that the the more numerous people are connected who are connected to this the more valuable it is but we could you could also think about it as a tribal good um which means that in order to access to have an access to it you need to pay a fees to pay some fees and once you are in the tribe then then it's a public good but just for the tribe so if you if you have in mind these four categories private public comments and tribal um then we could say to a certain extent this clash of civilization if you want um means the following um china actually never really invented the public instance china never had the the what we had in western countries namely the gregarian reformation in the 11th century were actually the church invented for the first time this the modern state um creating a law which was canon law at this time creating a body of civil servants namely the clergy which was an international class of of civil servants and so that i mean all the western countries including the us have to a certain extent just replicated what the church invented in the 11th century what we have done in this in this context is that we have formalized the public instance um of course at the same time we had also the private um let's say category which never disappeared which was already there in the roman empire namely private ownership and of course the comments and of course the tribal also which was present in europe and in in the us but china it seems to me never had the public momentum never had a state in the sense who understand it since the 11th century um the the main the the most important category in china at least according to conventionism is the family that is the tribe it's a tribal category and the the reason i think for which it's so difficult for chinese to think of a democratic state is that um they don't have in their own culture as far as i understand it and maybe i'm not a patient of china of course but the way i understand it they don't have this uh philosophical instance of a public body uh which would be the state in the way we understand it in western countries i would say the same story for for india to a certain extent so these are two big countries whose civilization is based on on tribal concepts namely for instance the family in conventionism and which are in count i mean which are just meeting our own countries where we do have a public body um a private sector comments and also tribes and then this is the place where it seems to me we could enter into a fruitful dialogue trying to show to the chinese and i'm sure they can understand it and they have already understood it that having a legitimate strong public sector uh is efficient for everybody even for the private sector so it seems to me that's the big the big challenge that we have to uh to win in the coming decades in in the dialogue we are we are having with china of course in this big game there is a an actor which is uh to say the least very ambivalent namely namely russia russia knows something about what a state means but at the same time russia is is i mean embarked today uh thanks to let me put in in a in a pan slovic political program which i'm afraid to say is not really compatible not really compatible with any democratic efforts that we could try to implement in western countries so uh we've covered a lot of the issues that you uh have illuminated for our commission in light of the uh in light of the pandemic and and i find this very very nourishing but this uh global commission was looking at essentially the four we've called it the four sources of disruption and then induced disruption meaning technology financialization climate and what we might call the uh challenge to the nation's state of globalization and then finally the induced disruption is migration when things don't add up people try to leave out of despair and that itself is quite disruptive how uh how do you think this commission that we're all co-architects of together should reorient its priorities in light of what we've learned and what we've discussed today well i would say you know the four the four main topics you were just mentioning are the right ones i mean are the most relevant ones what i would say from my viewpoint is that um i would personally try to emphasize something i mean a big research program to which i try to contribute which but of course i'm not alone in this in this game namely something like reconstructing macroeconomics towards um what we could call an ecological task-ennisian macroeconomic theory um for the for the following reason if you look at the mainstream microeconomic theory but that's also of microeconomics um it it deals with capital and labor and claims that we can produce wealth um just with capital and labor which is of course a nonsense i mean if you just think in terms of the first two loads of thermodynamics we know that nothing can occur without energy and we know that in the process of dissipating energy the quality of energy is declining that's the second law i mean the the necessary growth of entropy and once i had a discussion with um with valérie mason delmot who is the president of group one in ipcc that is the group which is dedicated to the physics of climate and she she asked me in a very provocative way well you economists you're violating the first two loads of thermodynamics every day with your models and and you don't care you can sleep peacefully and um while i had to admit she was right um and this is this is one of the main reasons i believe why microeconomics is unable to deal with the big problems that are raised by climate change and the erosion of biodiversity simply because in most of our models i mean climate does not exist nature does not exist energy is plays a very minor role and matter does not exist so it seems to me what we have to do definitely is to to think of microeconomic theory as formalized through dynamical systems because as i said earlier i mean equilibrium theory does not make sense i mean there is no reason to believe that an economy is at equilibrium and we have very very good reasons to believe that it's not at equilibrium but that it's you know wandering maybe towards an equilibrium but then we have to study the conditions under which this equilibrium is locally stable or not first and second to understand the impact of a number of physical constraints on on microeconomic theory to just give you an example i mean if you try to try to understand why since the the second oil shock at the end of the 70s and since actually the 1985 where the price of oil came back to the level it had before the first oil shock western countries never succeeded in getting back to the growth rate that we had during the 13th glorious years even though there was apparently no market constraint on on the oil and one explanation one possible explanation is that we have reached the conventional peak oil in 2006 at the world level as you know with something like 98 billion merits per day which means that there is a i mean the scarcity of oil extraction might have been felt earlier and why not in the 80s so to a certain extent it might be the case that the reason why we never had the kind of growth rate in western countries that we had earlier we have in every country at the same time an increase a huge increase of both private and public debt and a huge increase of inequality all this might be linked to the fact that there is a growing scarcity of oil extraction beginning in the 80s so that to a certain extent we were without knowing it we were compensating the lack of not the lack of oil but the lack of the impossibility to accelerate the rate of oil extraction we were compensating it by increasing debt as a way to to feed to feed growth in our economies debt increase of course which feeds in turn financial bubbles housing bubbles and inequality so this means that not taking into account the physical constraints that we are facing might be the big elephant in the room that we have totally ignored in microeconomic theory since since decades so I would be my my view point is that what we should emphasize is this especially because as you know in the in the near future there will be a number of resources natural resources whose the question might reach a peak also in my own research with with physicists geophysicists we have found for instance that copper might reach a worldwide peak in in 2060 so and this would be very problematic because we need a number of we need a lot of copper especially for green infrastructures and you know probably that green infrastructures need an average much more copper than infrastructure dedicated to fossil fuels so if we don't pay attention to the way we use copper today if we don't organize recycling procedure procedures in a very efficient way it might be the case that we will be running not running out of of copper because there will still be a lot of copper but we won't be able to increase the quality of copper extract from from earth every year in a sufficient sufficiently rapidly rapid way so as to be able to implement the the energy shift to what to what's renewable energies which would be very very silly so so yeah I would say this ecological post-canadian microeconomic theory would definitely be a huge research program that I would try to emphasize I would add one word regarding climate um within this research program there is a big issue which is how to understand the impact of of climate change on our macroeconomic systems as you know there are some economists I mean mainstream economists like Bill Nordaus who keep repeating since 30 years that while we might have something like plus six degrees as an increase of average temperature at the end of this century and this would cost something like you know minus 10 percent of the world GDP world real GDP well this is less ridiculous if you think if you talk with climatologists I mean they just they just laugh when when you tell them this story and they just say you know plus six degrees that's that's the end of the world to a certain extent so um of course there are some alternative damage functions that are less ridiculous than the one that has been used by by Bill Nordaus for instance uh Weizmann has an alternative function and and Dietz and Stern Nick Stern also have alternative functions which seem to me much more realistic but we don't have a really I mean convincing scholarly I mean founded debate on on damage functions so that actually we don't know how much it will cost us if we don't do anything uh along the business as usual scenario even on on purely monetary terms um and this is cumbersome because it prevents us from taking good and strong decisions today just because we don't know we are we are blind about the I mean the cost of not doing anything in the near future so there is a big research area here which is to understand um to have more more realistic damage functions and to understand how much it will cost to us not to do anything just as an as an illustration with with two colleagues of mine we have written a paper that we are going to publish now which makes the following start experiments so we we take two of the probably most convincing damage functions that are used today in the literature both by economists and climatologists and we test them not on a global warming but a global cooling so we make the the third experiment let's suppose that we we face two more morning minus four degrees cooling on earth which would be exactly the the reverse situation of the the one we are going to experience in the coming decades why minus four degrees because this is exactly the the temperature of the last global glaciation that we had something like 20 000 years ago and we have a lot of information but the way I mean the about the the the earth in in this period so that we know exactly how the earth would look like if we were to explain some minus four degree cooling so it's there is no way to escape from that and to say well you know there is some uncertainty about about the impact of climate change if we had this cooling we would know exactly we would know exactly how this would look like and actually half of western countries would be just under ice under a big layer of one kilometer ice so we know this would be certainly a huge collapse of the world economy and nevertheless the damage functions that we have tested claim that growth at one level would still take place i mean GDP would still increase which is ridiculous so that definitely is an area of research it seems to me which consists in trying to have much more realistic damage functions as i listen to you i uh recall a movie whose title was six degrees of separation and that title takes on a new likeness uh six degrees might separate us as human beings from planet earth and uh i think this uh the urgency i i there was a former you probably knew an italian economy and finance minister uh tomas so potty a skill and he he gave the last speech at the very first inet conference in uh at king's college cambridge in may of or april of 2010 yeah and when he got done and he by the way later codified this in writing in the pair jacobson lecture for the imf about a month or two later uh and what tomaso said was the challenge for inet was that there were three types of sustainability financial resource and social social and that they would all interact and when he sat down which he later elaborated in the pair jacobson election he sat next to me at the dinner he sat down and he said robert this conference will deal with financial sustainability that has been revealed not to be on track yeah it will create a great deal of suspicion about the relationship he said between croceus and the emperor between governments and the power of money and this will sow the seeds of social discord and social distrust and he said and then with inequality and how inequality will be exacerbated by climate change yeah mankind will have its greatest test and it will all ultimately focus on social sustainability because without social coherence we cannot govern and i remember just sitting with him at dinner feeling that scenario that perception wash over me and i recalled it today as you were talking about ecological macroeconomics in in the post-cangean realm because it seems as if like you talked about with the physical constraints and so forth that our macroeconomics presumes all those other sustainabilities are not in play and particularly environmental resource sustainability but i guess uh you're in dublin yeah and as i uh as i listened to you today i was reminded of a song that i've been very fond of by you too which was called 40 comes from psalm 40 from the bible yeah and the second verse the lyric is he set my feet upon a rock and made my footsteps firm many will see many will see and hear i will sing sing a new song i will sing sing a new song how long to sing this song well gail i think you from dublin are singing a new song in economics and it's one that we must hear and you're helping our global commission firm up our footsteps and to build a vision that we hope and believe that many will see and hear thank you for being my guest today i look forward to working with you and i look forward to having perhaps another chapter together any final thoughts thank you for for quoting the psalm 40 you know this song was written by by jews when they were in captivity in babelan in exile actually and so they were crying and saying we are in a very complicated situation our country has been destroyed the kingdom of david is destroyed the temple is destroyed everything has been destroyed but nevertheless we have faith that a future is possible so it seems to me yeah we are getting close to the situation and we need to keep faith yes well the song by you two started with i waited patiently for the lord he inclined and heard my cry exactly he brought me up out of the pit out of the myral and clay i will sing a new song i will sing sing a new song gil we'll have to get together again for another chapter of economics and beyond sure but this has been delightful today and i thank you again thank you see you again bye bye wait and check out more from the institute for new economic thinking at inet economics dot org