TiB 94: How to fix the UK's productivity problem; the cash value of citizenship; the political consequences of encryption; and more...

Forwarded this email? Subscribe here. If you like it, please forward it to a friend.

We talked a couple of weeks ago about the slowdown of productivity growth. The huge cost of stagnation means this is perhaps the biggest public policy question today. But in the UK’s current election campaign no major party is talking about it. So it’s intriguing to see Dominic Cummings, Boris Johnson’s top adviser (see previous coverage), link to this superb report on fixing the UK’s productivity woes in his latest (unofficial) blog post. There’s a summary here, but it’s worth the hour it takes to read the whole thing.

The author, Richard Jones, a physics professor (and no ally of Cummings) says the UK has two big structural failings that have stymied productivity growth (see charts on p6 and p7). First, there are huge regional disparities between London and everywhere else. The regional inequality chart on p3 is the clearest illustration of the worrying breakdown of the economic compact between London and the rest of the UK (previous coverage). Second, there’s been chronic underinvestment in R&D and translational research.

What’s to be done? Jones argues that the UK Treasury’s aversion to demand-side interventions has left many parts of the UK in a low skill/low investment equilibrium. He recommends a more active industrial strategy that focuses on place and creating demand for innovation that fits the UK’s comparative advantages, like low carbon tech. Would a re-elected PM Johnson implement something like this? It’s much more interesting than anything in his (or anyone else’s) actual manifesto. 

What’s the impact of granting immigrants citizenship? There are two schools of thought. One sees citizenship as the completion of an integration journey - so actually becoming a citizen shouldn’t influence an immigrant’s trajectory much. Another view sees citizenship as a catalyst for deeper integration - so we might expect that the career prospects of new citizens accelerate. Integration is a hot political topic, but it’s been a tough question to answer.

A fascinating new study uses Switzerland’s unusual predilection for holding referenda on everything to reach a compelling conclusion: citizenship matters a lot. Remarkably, some Swiss municipalities held referenda on individual applications for citizenship during the 1990s. It’s therefore possible to compare candidates whose applications narrowly succeeded with those whose narrowly failed. The study finds that immigrants granted citizenship earn much more over the next ten years than similar people who miss out.

The difference is large: around $4,500 of average annual earnings difference for a decade! The effect is greatest for those in the lowest earning quartile. This suggests that many rich countries may be undervaluing citizenship as a policy lever, both economically and politically. I suspect it’s not just good policy, but good politics. It would be good to see pro-immigration political parties incorporate the language of citizenship into their rhetoric.  

Last week we talked about whether some technologies are naturally pro-authoritarian. This week I came across this short podcast from October (transcript here) by one of my favourite internet thinkers, Venkatesh Rao, on an idea he calls “charisma neutrality”, which argues that end-to-end encryption is naturally anti-authoritarian. 

The core claim is that the default response of thoughtful people to charismatic political leaders is cynicism. However, people have historically lacked safe channels to express that, so opponents of charismatic authoritarians have had a co-ordination problem. End-to-end encryption changes that. It’s now much easier to share dissent and harder for authoritarians to control the response to their messages.

Rao makes the point that, even in a democracy, end-to-end encryption means that the only way to dominate information flow is to control a lot of end points - i.e. people - who will amplify your message. The good news, as Rao sees it, is that the only “bot-like idiots” will amplify a stupid message - which over time reduces the signal in such messages and allows “non-charismatic thoughtful messaging” to triumph. I’m worried this is far too optimistic. What if it just means that over time the public sphere is dominated by ever stupider messages? I hesitate to comment on whether we’re already there…

First, I apologise that one link last week, on how much due diligence VCs do, was broken. The correct link is here.

Next week will be the end of year round-up, which will look at the most popular TiB links and topics of 2019 and then there’ll be a two week break over the holidays. Forwarding TiB to a friend who might enjoy it is the ideal Christmas gift: thoughtful and free!

As ever, feel free to hit reply to tell me what you think, say hello or follow me on Twitter.

Until next week,

Matt