Martin Vander Weyer, business editor at the Spectator was keynote speaker, and the prizes presented by Philip Mould OBE. Applicants were asked to reflect on: the successes and failures of traditional economic models in explaining growth and prosperity; the role of the state in encouraging social and individual flourishing; and the relationship between prosperity and morality. The judges were Victoria Bateman, University of Cambridge, Tim Besley, London School of Economics and Emma Duncan, The Economist.

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Session 1—The Economics of Prosperity

In Three Dead Ends and a New Direction, Daniel Susskind, lecturer in Economics at Balliol College, Oxford, remarked that the world is as economically prosperous as it has ever been. He looked at the three main schools of thought that have thus far tried and failed to adequately explain economic growth; grand theories about the fundamental dynamic of history, such as Marxism, the reductive formalism of Ramsey and Solow, and the regression models of Barro. Instead, he argued, we should attempt to isolate causation rather than correlation of factors of growth, and ‘hunt for exogeneity’.

Tim Besley explained that economists are now embracing political and social factors when attempting to account for economic growth. The hunt for exogeneity looks for these factors, rather than mere correlations between statistics. The general assumption has always seen economics as a science, but in fact it can be more like analytical philosophy, evaluating our intuitions about the world.

Nuno Palma, PhD candidate at the London School of Economics, presented his paper Liquidity Provision Under Commitment in Monetary Policy. He showed how the authority of the state and its fiscal credibility is crucial in allowing for fiat or paper money to circulate. China had paper money from the tenth to fifteenth century, the use of which ended due to war, high transaction costs and a stagnation of political growth. In contrast, in Britain with the West, there was a boom in paper money in response to the French Revolution, yet the use of fiat money continued. Palma argued that for fiat money to be viable the public needs to be convinced that the value of fiat will be stable in a predictable future.

Belsey highlighted the importance of looking at the bigger question of what drives economic prosperity; we have never seen successful economic development (in the West) without successful institutions. The group explored virtual currencies such as Bitcoin, to assess whether a credible fiat necessarily has to be tied to a state.

In a presentation arguing in favour of Nudge Theory, James Stillit, Research Associate for Trade Policy Research Centre, showed how ‘nudging people’ into rational action can have a greater impact on people’s lives than traditional public policy methods. Nudge Theory is a branch of behavioural economics which, in simple ways, drives people’s behaviour towards the perceived best outcome. Promoting healthy behaviour through rephrasing public health campaigns in the case of smoking, for example, was widely discussed as a way Nudge Theory can positively influence society.

Stillit emphasised that freedom of choice was not removed, and people, through Nudge Theory, would still have the chance to opt for the behaviour contrary to what was being promoted. Besley pointed out that the main critique of Nudge Theory comes from a libertarian approach to public policy and economics. On the other hand, his main critique was that Nudge Theory has yet to produce the grand results most defenders of Nudge Theory seem to believe possible.


Session 2—Greed and Fear; Propellants of Prosperity?

George Ligon, MSc International Relations student at the University of Edinburgh, in Individual Fear and Collective Prosperity in Democracies, argued that fear is a motivating factor for citizens in liberal societies. Self-rule and a parallel belief in freedom result, he believes, in many in society being fearful. With few rules to compel people to work they are motivated not by the desire to reach the top of the economic pile, but instead by a fear of falling to the bottom. Personal prosperity, Ligon argued, becomes an obligation in a liberal democracy.

Victoria Bateman spoke about cases of self-defeating competition in the animal kingdom applying to the ‘rat race’ in liberal democracies and attitudes to cooperation in different cultures. She believes this one-upmanship is particularly prevalent in cases of those with limited incomes. The discussion looked at whether equality of opportunity was sufficient for liberty, as well as debating the right balance between the welfare state whilst still encouraging people to succeed and become upwardly mobile.

In Greed Is Good, writer James Brenton examined the societal change in attitudes towards the self-interested actions of bankers. The Gordon Gecko quotation epitomised the majority conception about prosperity prior to the 2008 Financial Crisis. The broader notion was that personal gain, or ‘greed’ was seen as an acceptable motive, if it then contributed to the general good, ‘most were prepared to accept unequal distribution providing the cake was large’. Now it is not enough simply to say a country is prosperous; it is becoming increasingly important to say how prosperity is distributed. Brenton called for the recalibration of greed and prosperity, in order to achieve more economic growth which can be beneficial to all.

Bateman questioned the notion that people indeed behave as economists assume, i.e. that they act in a rational, self-interested way that will have the best outcome for themselves. Another problem is that this Pareto efficient equilibrium could only be achieved through perfect information, which decision-makers in finance lack. She proposed that people have become less worse at restraining themselves from pursuing short term benefits over long term welfare, and this perhaps is where the role of the state comes in.


Session 3—The Philosophical and Moral Underpinnings of Prosperity

When answering the question ‘Why do societies prosper?’, Bernardo Teles Fazendeiro, Research Associate at the Centre for Critical Thought at the University of Kent and Lecturer in Post-Soviet Politics at the Central European University, argued in More on the What and Less on the Why that we should first establish what exactly is ‘prosperity’. In order to tackle the idea of cause we first need to understand the terms in the question. Bernardo argued that in our increasingly technocratic society the issue of cause has come to dominate.

David Ruffley, MP for Bury St Edmunds, pointed out that the question of what constitutes a prosperous nation has changed in recent years: “It was Cameron who said we shouldn’t talk about GDP anymore, we should talk about GWB, or general wellbeing”. He praised Bernardo for picking up on the notion that a good life cannot be explained simply by wealth or GDP. The group then debated what might be a metric for ‘the good’ in today’s society. The importance of considering a number of different metrics when judging which societies are prospering was supported by all.

Mats Ekman, Doctoral Student of Economics at the Helsinki Swedish School of Economics, presented his paper on The Ethics of Disutility. He argued that prosperity, if defined as ‘all things which yield utility’, cannot be defended as a moral end in itself. Prosperity is not all that matters, it is more important that people should be able to choose freely. Focusing on the right, rather than the good or ‘utility maximising’, will help us avoid the trap of saying that a choice between actions A or B, when the action will have no impact on anyone else’s utility, has a moral significance. The pursuit of prosperity, in many cases, Ekman argued, should be optional.

Ruffley pointed out that policy decisions, such as budget calculating, are generally done on this basis i.e. the greatest good for the greatest number of people. He asked whether it might be possible that the pursuit of prosperity could make us more moral.

In the final presentation of the symposium, Carissa Mulder, special assistant to Commissioner Peter Kirsanow of the US Commission on Civil Rights, looked at how social norms might help foster individual liberty. In Social Norms, Illegitimacy, and Liberty, she argued that in the absence of societal norms the government has to intervene, thereby reducing the freedom of individuals or communities. She focused on the American ‘illegitimacy crisis’, and the implications this might have on a child’s future prospects. Mulder argued in favour of reviving the norm of marriage in order to reduce the need for government regulation. She also looked at difficulties in creating a positive social norm as opposed to merely criticising others for their actions.

The discussion highlighted the unique emphasis placed on marriage in the US in comparison to other Western countries and the differences between the US and UK welfare system. The position of the LGBT community in the debate proved problematic for the thesis and the discussants looked at the implications of Carissa’s argument from a feminist perspective. The point was made that there may be other reasons why many children are born out of wedlock, not simply poor decision-making by mothers, but a lack of suitable partners, lack of education around sex and birth control and a lack of support for underprivileged women.


The Winners and Prizes

The Legatum Institute was pleased to present Nuno Palma with 1st prize, James Brenton with 2nd prize, and Daniel Susskind with 3rd prize. The awards were presented by Philip Mould of Philip Mould and Company, who generously donated a portrait miniature as part of the 1st prize winnings.

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For more information about the competition, please click here

In previous years, the Charles Street Symposium has hosted acclaimed economists and intellectual thinkers, including Tyler Cowen, Randall Kroszner, Peter Lewin, Pascal Salin and Esca Hayek.