Global Development

Peter Klein: Entrepreneurship, Economics and Education

Editor’s Note: Peter Klein, is Executive Director and Carl Menger Research Fellow of the Mises Institute and Associate Professor in the Division of Applied Social Sciences at the University of Missouri. At Missouri he also directs the McQuinn Center for Entrepreneurial Leadership, and he holds adjunct faculty positions with the Truman School of Public Affairs and the Norwegian School of Economics. His research focuses on the economics of organization, entrepreneurship, and corporate strategy, with applications to diversification, innovation, food and agriculture, economic growth, and vertical coordination. Klein has authored or edited five books and has published over 70 academic articles, chapters, and reviews.

He taught previously at the University of California, Berkeley, the University of Georgia, and the Copenhagen Business School, and served as a Senior Economist with the Council of Economic Advisers. He is also a former Associate Editor of The Collected Works of F. A. Hayek. He lectures regularly at the Mises University and other Mises Institute events.

Klein received his Ph.D. in economics from the University of California, Berkeley and his B.A. from the University of North Carolina, Chapel Hill. He co-founded the popular management blog Organizations and Markets.

To learn more about him, check out this this this this and this.

eTalk’s Niaz Uddin has interviewed Peter Klein recently to gain insights about entrepreneurship, economics and education which is given below.

Niaz: Dear Peter, thank you so much for joining us in the midst of your busy schedule. We are very thrilled and honored to have you at eTalks.

Peter: It’s my pleasure to participate!

Niaz: You are the prominent researcher, speaker, author, analyst and think tank in the field of entrepreneurship, innovation, economics, and education. At the very beginning of our interview can you please tell us about Entrepreneurship? What is entrepreneurship to you? What are the different contexts of entrepreneurship?

Peter: The terms “entrepreneur,” “entrepreneurship,” and “entrepreneurial” are used in many ways, not always consistently! On the one hand, entrepreneurship is often used to mean self-employment: an entrepreneur is a person who starts or operates a small business. On the other hand, we also use the term “entrepreneurial” to refer to something broader, a mindset or way of thinking that emphasizes novelty, creativity, and initiative. Obviously one can be entrepreneurial in this sense without being a small-business owner.

In the academic literature, things get even more confusing. Originally the word entrepreneur was identified with decision-making, risk-bearing, and responsibility: entrepreneurs were the business people who organized production, transforming resources into valuable products and services for consumers. That usage goes back to the 18th century. More recently, scholars have identified entrepreneurship with narrower activities or functions such as alertness to profit opportunities or the introduction of new goods and services or new ways to make existing products. In my academic writing I adopt the concept developed by the American economist Frank Knight and the Austrian economist Ludwig von Mises which emphasizes judgmental decision-making under uncertainty.

This variety of concepts and definitions causes problems, both in academic and in popular discussions. I sometimes think it would be better if we avoided the language of entrepreneurship altogether! As an exercise, I require my PhD students writing about entrepreneurship to describe their dissertation topics without using the word entrepreneurship or any of its cognates. If a student is writing about venture capital and IPOs, then call it “new-venture funding,” not entrepreneurship. If she is studying how people evaluate and compare new business models, then call it “business-model evaluation,” not entrepreneurship. I typically find that if people struggle to explain a particular phenomenon or research question without using the language or entrepreneurship, they probably don’t really understand what they’re doing!

Niaz: Can you please define what an entrepreneur is?

Peter: As discussed above, there are many definitions floating around in the academic and practitioner literature. I prefer to define entrepreneurship as judgment, the act of combining and recombining heterogeneous resources under conditions of uncertainty. But arguing about definitions is often counterproductive. I prefer to think in terms of the research question to be answered, or the practical problem to be solved. Defining entrepreneurship as self-employment or technological innovation or opportunity recognition may be useful in some contexts, but not others. Let’s focus on the phenomena and relationships of interest, even if we disagree about the labels!

Niaz: Why do you think entrepreneurship is the fundamental stand of understanding economics? And how?

Peter: Unfortunately, most people see economics as a dry, technical subject that involves poring over charts and graphs and writing equations to describe the “equilibrium” behavior of hypothetical actors. But economics is a logical, deductive, human science about real people acting in the real world, with all the dynamism, unpredictability, and creativity that entails. Markets aren’t static, lifeless mathematical constructs but lively, vigorous spaces where people interact and coordinate. Firms, markets, and industries don’t just come into existence by themselves, they have to be created and operated by real people with real responsibility. These people are entrepreneurs, what Mises called the “driving force” of the market economy. That’s one reason I’m attracted to the “Austrian” approach to economics, which has always placed the entrepreneur at the front and center of production and exchange—not an incidental actor who steps in to introduce novelty then fades into the background as the “normal” market process resumes. Entrepreneurship, as decisive action under uncertain conditions, is at the very heart of a market economy.

Niaz: At eTalks, we believe entrepreneurship is a great tool that helps building sustainable economy. We also believe entrepreneurs are the rock starts those who work to keep economy growing. Both entrepreneurship and entrepreneurs are the driving forces and instrumentals to build strong economy. Now, how do you connect these three dots: entrepreneurship, economic growth, and development of a country?

Peter: If we think of entrepreneurship is the broad sense of judgment under uncertainty, then economic development and growth can not exist without entrepreneurship! It is the entrepreneurs who invest the capital necessary for productivity growth, who organize production into firms and industries, who compete and cooperate to create and distribute goods and services to consumers in the most efficient and profitable manner. If we think of entrepreneurship more narrowly, as small business or startups or venture funding, then the story is more complex. To be sure, smaller and newer firms are often disproportionately responsible for employment growth and, in some contexts, the introduction of new products and new technologies. At the same time, large enterprises can also be innovative, and capital accumulation is often critical to achieving economies of scale and scope, even in today’s “knowledge economy.” And not every individual wants to be responsible for owning and operating a small business. Unfortunately, large firms are typically more adept at securing for themselves special political privileges and protection against competitors, though small firms play this game as well. Ultimately, I am agnostic about what mix of small and large, new and mature, and high-tech and low-tech firms is best for economic growth; I prefer to let competition in free markets sort it out.

Niaz: As you know, America is a great country having being built all big and great corporations. In the last two decades we have seen the structural and revolutionary contribution of the most exciting companies like Apple, Microsoft, Google, Facebook, and Amazon in American economy. But things are not happening in the same ways throughout the world. In some points, things are happening more devastatingly. Some countries are taking optimum advantages of cutting age technologies, disruptive innovation, and digital economy. On the other hand, most countries are lacking behind and economic condition is becoming worse. According to you what drives entrepreneurs to build great organizations? And what are the role of culture and entrepreneurial environments in that endeavors?

Peter: Clearly culture and environment are critical for the success of entrepreneurs, however defined. Unfortunately, there is little consensus in the research literature about the precise mechanisms by which culture, including social norms and beliefs, affects economic behavior. We have a general sense that cultures in which experimentation and creativity are rewarded, and failure is tolerated, are more conducive to the kind of risk-taking that entrepreneurship requires. At the same time, there are plenty of counterexamples—the Nordic countries, for example, are relatively egalitarian and homogeneous, while still being highly entrepreneurial.

When it comes to the legal and political environment, the evidence is clearer. Countries with strong property-rights protection, a well-functioning monetary system, and minimal government intervention in the economy provide the best environment for entrepreneurship and economic growth. There is a strong temptation among many government planners to try to micro-manage entrepreneurial activity through targeted subsidies, infrastructure spending, tax and regulatory codes that favor one type of firm or location over another, and other attempts to create geographic or industrial clusters of innovation. Everyone wants the next Silicon Valley in his country or region. But entrepreneurial clusters like Silicon Valley emerge, endogenously, from the bottom up; they cannot be established from the top down. To be sure, strong “anchor” entities like research universities and established companies are important for kick-starting local entrepreneurial activity. But most attempts by government planners to target particular areas or activities for an entrepreneurial boost have fallen flat. The policy environment should also allow the “freedom to fail”—no bailouts and subsidies for unsuccessful ventures! Monetary and fiscal policies designed to “stimulate” the economy are also harmful, as they tend to generate asset bubbles and other forms of price inflation that make it more difficult for entrepreneurs to plan and invest.

Niaz: Why don’t we see big organizations getting formed in other countries? What are their core challenges?

Peter: Well, we do see large-scale enterprise around the world, but it often takes different forms such as diversified business groups, keiretsu, chaebols, and the like. Often these large groups are nominally private, but closely connected to the state, which tends to extend them special privileges that make it more difficult for them to innovate and compete internationally. Size is great when it results from superior performance on the market, but not so good when it comes from subsidies and political connections.

Niaz: How can they overcome those challenges?

Peter: Newer and smaller organizations looking for sustained growth have to find a balance between doing the things that made them successful in the first place—acting with boldness and imagination, being willing to experiment, finding the right niche—and developing routines and capabilities that keep it going. Often there is a change in mindset; in the early stages, founders feel like outsiders, Young Turks shaking up the establishment with little to lose.  Over time, the competitive landscape changes, and the outsider becomes the incumbent. This creates two problems: the team may still be in startup mode, still fighting the old battles, or it may become complacent, unaware of the potential competitor around the corner.

Complacency is a common problem for any successful organization. Clay Christensen has shown how large companies—and, I’d add, other large organizations like universities—struggle to adapt the newest and latest technologies. They are often too successful at what they already do, too effective at serving their existing customers using existing methods, too reluctant to disrupt their existing revenue streams. Of course, large and successful companies can also be innovative, typically by delegating decision authority to subunits, providing strong incentives for performance-enhancing innovations, setting up “skunk works” and internal corporate ventures, and other strategies. But it is not easy, and many large firms fail to adapt to changing circumstances.

Niaz: What other countries can learn from Silicon Valley and from its culture, environment, attitude, and innovativeness?

Peter: As noted above, Silicon Valley is a unique case and difficult to duplicate. What we see there, as in other successful innovative clusters, is strong anchor entities (e.g., Stanford University, Fairchild Semiconductor in the 1950s and 1960s, Hewlett-Packard in the 1970s and 1980s), a concentration of highly skilled and highly mobile workers, local venture funding, and a dose of serendipity. Economists have been studying agglomeration—the benefits of locating similar or complementary activities in geographic proximity—since Alfred Marshall’s work in the 1890s. Paul Krugman’s academic reputation rests partly on his elaboration of Marshall’s insights (not, incidentally, for anything Krugman wrote on macroeconomics!). Once a cluster emerges, it can exploit economies of scale: skilled workers, attractive firms, and aggressive funders want to be located close to each other. The trick is to get the cluster started in the first place. Nobody knows exactly how—otherwise we’d have Silicon Valleys all over the place.

However, it’s also important to recognize another force, what we might call economies of diversity. The late Jane Jacobs masterfully demonstrated that the growth and vitality of cities stems not from the way they cluster similar or complementary people and activities, but how they bring together a wide variety of dissimilar, and seemingly unrelated ones. Exposure to new ideas and new ways of thinking is more likely in a diverse, heterogeneous environment. So maybe we should care less about same-industry clusters, and think more about how to encourage interactions among firms and industries doing radically different things.

Niaz: In this information age, now we seriously need to redefine, rebuild, and redesign our Higher Education to help us in pursuing entrepreneurial, actionable, and effective knowledge to learn, grow, and work to contribute in global economy. What are your suggestions to change and build an effective education system?

Peter: That’s a huge question. I can’t speak authoritatively on primary and secondary education but I have strong opinions on the structure of the higher-education industry in the US and Europe. Basically, the established universities are the privileged incumbents who tend to be swept away by the disruptive innovation Christensen talks about. Most are highly inefficient, slow to embrace new technology, and highly dependent on public subsidy. Technology has encouraged many new entrants, mostly at the low-quality end of the market. The incumbent universities have responded by discouraging people from consuming these entry-level products—“Those online, for-profit universities are fly-by-night organizations, they don’t offer real degrees like we do!”—but I do not think this strategy can succeed in the long run. At present the established universities are coasting on their reputation for quality. Reputation lags are long, so it may take time for consumers to begin voting with their dollars and feet for more innovative, lower-cost competitors.

In short, the higher-education industry is poised for a new generation of entrepreneurs, in both the for-profit and non-profit spaces, to experiment with new forms of educational content, new production and delivery methods, new ways to package information, and a range of further innovations we cannot yet foresee. MOOCs are but one highly visible manifestation of this. I find it ironic that the established universities are struggling to embrace the MOOC, seeing it as a way for them to leverage their brands and extend their market shares. They assume that, in the future, students in the developing world will be taking online courses from Yale or Illinois. I think it’s more likely that students in New Haven or Urbana-Champaign will take courses from some brilliant and articulate lecturer in Bangalore.

Niaz: To me a great entrepreneur is someone who understands economics, can see the big picture, and analyzes the things globally. He is also an economist, a research scientist, and a remarkable doer. What are the core things of economics and globalization should entrepreneurs be master at?

Peter: I think everyone should understand basic economics—say, by reading Henry Hazlitt’s classic Economics in One Lesson. Most of economic principles are common sense: there’s no such thing as a free lunch, benefits and costs should be compared at the margin, voluntary exchange is mutually beneficial, actions often have unintended consequences, and so on. Basic knowledge about globalization—the radical drop in communication and transportation costs, the often-surprising differences in legal, political, and social rules and customs around the world—is important too. But I don’t think a deep theoretical knowledge of economics or international trade is a prerequisite to successful entrepreneurship. Intuition and experience are typically more here valuable than “book learning.” (And I say that as a university professor!)

Niaz: What are your advices and suggestions to entrepreneurs to find big and complex problems, to build actionable business model to work to solve those problems, and to make this world a better place to live in?

Peter: The most important advice is not to listen to people like me. Seriously, one can fill a large library with books about entrepreneurship, innovation, competition, and business success, most written by scholars or journalists or policymakers without any experience or expertise with actual entrepreneurship. Thinking conceptually about entrepreneurship, and studying the great entrepreneurs of the past, can be useful and informative. Knowing basic accounting, finance, and marketing is important. But these things are neither necessary nor sufficient for entrepreneurial success. Entrepreneurial judgment, as Mises put it, “defies any rules and systematization. It can be neither taught nor learned.”

From a social or policy point of view, I think we need an environment in which those who wish to experiment with entrepreneurship can do so. Many people are attracted to “wicked problems,” for the intrinsic satisfaction of solving them as well as for financial gain, and we should allow people young and old, novice and experienced, to try their hands, knowing that they can reap the rewards if they succeed, but will have to bear the costs if they fail.

Niaz: Last but not least, if you could send a message about the benefits of entrepreneurship, what would it be?

Peter: As educators, I think it’s critical to remind people who are not entrepreneurs—I’m looking at you, politicians and journalists—that entrepreneurship is the driving force of a market economy, and that entrepreneurs need property rights, the rule of law, sound money, and free and open competition to be successful.

Niaz: Dear Peter, thank you so much for your valuable time and sharing us your invaluable idea, experience, and knowledge which will help us to pursue entrepreneurial excellence.  We are wishing you very good luck for your good health and for all of your upcoming endeavors.

Peter: Thanks for the great questions, and I look forward to reading future entries in your series!

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Further Reading:

1. Diego Comin on Entrepreneurship, Technology and Global Economic Development

2. Derek Sivers on  Entrepreneurship, CD Baby and Wood Egg

3. F. M. Scherer on Industrial Economy, Digital Economy and Innovation

4. Stephen Walt on Global Development

5. Robert Stavins on Environmental Economics

6. Ely Kahn on Big Data, Startup and Entrepreneurship

F. M. Scherer: Industrial Economy, Digital Economy and Innovation

Editor’s Note: F. M. Scherer is Aetna Professor Emeritus in the John F. Kennedy School of Government, Harvard University. Born in 1932, he received an A.B. degree with honors and distinction from the University of Michigan in 1954; an M.B.A. with high distinction from Harvard University in 1958; and a Ph.D. in business economics from Harvard University in 1963.

From 1974 to 1976, he was chief economist at the Federal Trade Commission. His research specialties are industrial economics and the economics of technological change, leading inter alia to books on Patents: Economics, Policy and Measurement; Industrial Market Structure and Economic Performance (third edition with David Ross); New Perspectives on Economic Growth and Technological Innovation; The Economics of Multi-Plant Operation: An International Comparisons Study(with three coauthors); International High-Technology Competition; Competition Policies for an Integrated World Economy; Mergers, Sell-offs, and Economic Efficiency (with David J. Ravenscraft) and Innovation and Growth: Schumpeterian Perspectives.

You can read his full bio from here, here and here.

eTalk’s Niaz Uddin has interviewed F. M. Scherer recently to gain insights about Industrial Economy, Digital Economy and Innovation which is given below.

Niaz: You are an expert in Industrial Economics.  At the beginning of our interview, can you please tell us about Industrial Economics?

Scherer: “Industrial economics,” the name commonly applied in Europe, is also called “industrial organization” in the United States.   It is primarily concerned with studying the functioning and malfunctioning of real-world markets, using an array of methods – theory, econometrics, and history.  It also has substantial policy implications, for example, encompassing all varieties of regulatory policy and antitrust policy (called in Europe competition policy).

 Niaz: How is industrial economics different from our traditional economics?

Scherer: The main differences are a strong real-world orientation and a focus on individual industries or markets rather than generalized markets or the overall macro economy.

Niaz: As you know, the economy is transforming to a digital economy.  What revolutionary changes have occurred in this era of digital economy?

Scherer: Virtually every era experiences changes that might at the time be viewed as revolutionary.  The digital economy is not really different.  I suspect most readers know the main elements: the enormously increased capacity and reduced cost of digital devices following Moore’s Law; the evolution of much more capacious means of transmitting information from one place to another – notably, optical fiber cables; and the application of information theory to compress more information into a given transmission medium, either cable or over-the-air.  Building upon these fundamental changes are a host of specific applications, ranging from smaller and more powerful computers to smart phones to the use of computers and robots in automation.

Niaz: What are the impacts of industrial economics in our digital economy?

Scherer: The field of industrial economics has evolved to track and understand the economic implications of the changes mentioned earlier.   We’ve done a lot, for example, to measure the economics of learning curves, which are one facet of Moore’s Law.  Perhaps our most important contribution has been a rethinking of the proper framework for, and means of, regulating specific industries, including telecommunications.  Regulatory reform in telecoms helped open the way for optical fiber cable networks and reassignment of the ether’s frequency space to new modes of information transfer.

Niaz: Can you please tell us about the future of the digital economy?

Scherer: Economists don’t have a particularly good reputation for predicting the future, try as we may.  It’s quite clear, e.g. from studies by economists such as Erik Brynjolfsson of MIT, that more powerful computer systems are helping to raise industrial productivity, as non-digital innovations have been doing for at least two centuries.  Among other things, computerized systems have improved inventory control and logistics in industries such as retailing.  Wal-Mart has been a prominent example here.  But the phenomenon is not really new.  In the 1960s, for example, Anheuser-Busch applied computer-based operations research to optimize its plant structure and shipping patterns, becoming in the process the nation’s largest and most efficient brewer.  And my own experience as a scholar using computers for quantitative data analysis suggests that the changes have been less than revolutionary.  I was able to analyze some rather large data sets successfully in the 1960s using computers that were by today’s standards primitive, but the analysis went through nevertheless.  Long processing queues meant foregoing instant gratification, but the gratification was all the greater for the waiting.  True, today one can access richer data bases – e.g., data on millions of health care interventions, complete retail product transaction tape records, and the whole historical set of U.S. patent grants – that would have been impossible in 1965.

The digital revolution affects not only industrial productivity, but also diverse consumer activities, including communication patterns and entertainment methods.  Here I’m much less confident about the consequences.  Surveys show prodigious numbers of hours spent in the average week, especially by younger people, on computer games and social networks such as Facebook and Twitter. Many individuals’ use appears from my observation to border on addiction.  (Disclosure: I seek an e-mail fix several times daily.) I suppose people get a lot of pleasure, some narcissistic, from social networking, but I’m much less sure that we are becoming better or more productive human beings as a result.

Education is likely to be affected with special force through the growth of massive open online courses (MOOC).  I’m personally thankful that I’m exiting from teaching just in time, for I know nothing more alienating than talking to an anonymous video camera.

Niaz: There is a tremendous problem of digital divide in under developed, developing, and poor countries.  What are the core challenges for those countries to embrace the blessings of digital economy?

Scherer: Yes, there is such a digital divide, just as there is a less immense digital divide between the United States and nations such as South Korea, Japan and Belgium with faster and more extensive internet connections.  The good news is that cell phone technology is diffusing rapidly into many relatively poor nations, permitting richer intercommunication generally and better information, e.g., on future weather events and market prices, which farmers can use in their planting, harvesting and crop shipping decisions.  From the base that has been established, there will be growth into more advanced generations of digital phone capabilities.  Important to this future progress is the construction of additional cells and high-capacity optical fiber cables to interlink them.  Cheap computers are also becoming available to students in less-developed nations, giving them richer access to the world’s information resources and enhancing their educational progress and, among other things, introducing them to writing software.  These things take time and money.  Both are in short supply, but progress will occur, perhaps faster than I suppose.

Niaz: So what are the new perspectives on economic growth and technological innovation?

Scherer: I suspect the wording of your question implies the identical wording of a short book I published in 1999.  My answer incorporates some of the pessimism I expressed in that book.  The world’s most advanced nations have experienced truly extraordinary technological progress and productivity growth during the past two centuries.  Some nations once viewed as less developed, such as China, are joining in, taking advantage of what has been learned elsewhere to advance at even more rapid rates.  But in the most advanced nations, growth rates have been ebbing, and nations like China and other later developers will experience diminished growth rates once they have extensively installed imitative  capital goods and must then innovate to advance further – a phenomenon called convergence.   The key question is, what can we sustain?  My own view is that environmental constraints, even if not raw resource constraints, will make future growth more difficult than it has been in the past.  But I confess I could be wrong, as other skeptics have been in the past, and indeed, I hope I am wrong.  I also worry about the increasingly unequal distribution of income and wealth that has occurred over the past four decades as skill requirements, patterns of international trade, and modes of competition have changed.

Niaz: Can you please tell us about your book, ‘Innovation and Growth: Schumpeterian Perspectives’?

Scherer: That was a collection of articles, mostly previously published, issued by the MIT Press in 1984.  It pretty well reflected what I had accomplished during the first two decades of my professional career, at least in the field of technological innovation.  Its main emphases were identifying salient characteristics of how innovation occurs and works its magic on the economy, how market structures affect incentives for investing in innovation, and  how innovation shortfalls contributed to the productivity growth rate slump experienced by the United States beginning in the early 1970s and continuing up to the time the book was published.  (Growth did pick up, at least temporarily, in the 1990s.)  These were, I believe, some of my best contributions.

Niaz: What are the new scopes and opportunities of innovation and growth?

Scherer: As I said before, predicting what will happen is difficult.  In the 1984 Innovation and Growth book, I included one 1978 article with my characterization of technologies that were still evolving rapidly.  My list of potential breakthrough areas included molecularly engineered pharmaceuticals, hormonal insecticides, asexual plant reproduction, optical fiber message transmission, and energy from thermonuclear fusion.  Making allowance for developments that emerged in somewhat different forms than I visualized, I was pretty much right on the first four.  I missed badly on the nuclear fusion score, which people had been cultivating intensively beginning in the 1960s and are still pushing without evident success.   Earlier in the list, I also erred seriously in classifying digital computers as “approaching maturity.”  I completely missed the PC revolution!  The big continuing breakthrough areas, as I look to the future, are further developments in human and plant gene sequencing and splicing, among other things revolutionizing some aspects of health care, and of course, continuation of the information revolution.

Niaz: Do you think we have already solved all of our interesting problems with technology and innovation?  If not, what are your suggestions to come up with big ideas and solve big problems?

Scherer: Clearly, we have not solved all the interesting problems.  The previous answer listed two of my breakthrough candidates.  The biggest yet-unsolved problem in my view is learning how to use energy in ways that will allow the world’s huge and increasing population to prosper without precipitating disastrous climate change.   Seeding the atmosphere with sunlight-deflecting substances is one possible solution, but it is unproven and poses significant risks of getting the balance wrong.  How do we come up with the big ideas?   The essential facet in my view is continuing support of first-rate basic scientific research across a wide diversity of fields.  Chairman Mao was right in urging that we allow 100 flowers to bloom, because we can’t accurately pre-select which ones will thrive best.

Niaz: What is the economics of technological change?

Scherer: It’s a sub-specialty in several fields of economics concerned with the issues I have alluded to earlier.  I’ve been working in the area for more than five decades.  In the 1950s and 1960s, there were only a handful of us.  We were the “happy few … the band of brothers” in Henry V’s soliloquy.   Now there are hundreds of us working in the vineyards.

Niaz: My readers will love to know about your new book, ‘Quarter Notes and Bank Notes: The Economics of Music Composition in the 18th and 19th Centuries’.  Can you briefly tell us about it?

Scherer: It unites two dominant interests in my life: classical music and the study of innovation.  It uses among other things a statistical sample to reveal how 646 composers kept body and soul together in pursuing their chosen profession or avocation.  Among other things, it investigates composers’ education, their motives, their employment modes and entrepreneurship, their remarkable geographic mobility, and how they were affected by the spread of music publication and the emergence of copyright law.

Niaz: Last but not least, can you please leave us some points, ideas and advice to build a strong economy in this era of digitalization?

Scherer: You left the hardest question until last.  Education is of course critical.  We’ve come a long way, but there is very much more to be done, especially in the less affluent nations.  And even in the United States, our results leave lots of room for improvement. Among things, we need to provide higher status and pay for primary and secondary school teachers.  For economic strength, we also must reverse the increasing inequality of income distribution.  If the majority of our citizens don’t share the gains from our economic growth, it will be difficult to sustain continuing advances in broad-based consumption technologies.  And discontent is likely to manifest itself politically in ways that could destabilize the economy.   And finally, we need to avert disasters such as rising sea levels and adverse crop-growing conditions likely to be associated with global warming and to keep the nuclear genie in the bottle.  I grew up under the ominous shadow of nuclear disaster.  We had some frightfully close calls.  We’ve been fortunate thus far to avoid that fate, but the danger continues, and we need to keep it in check.

Niaz: Dear Scherer, I am thanking so much for finding time, sharing invaluable ideas and educating us with impressive thoughts in the midst of your busy schedule. I am wishing you very good luck for your good health as well as for all of your upcoming endeavors.

Scherer: I am happy to contribute.

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Further Reading:

1. Peter Klein on Entrepreneurship, Economics and Education

2. Derek Sivers on  Entrepreneurship, CD Baby and Wood Egg

3. Robert Stavins on Environmental Economics

4. Diego Comin on Entrepreneurship, Technology and Global Economic Development

5. Stephen Walt on Global Development

6. Juliana Rotich on Social Entrepreneurial Innovation

7. Naeem Zafar on Entrepreneurship for the Better World

Stephen Walt: Global Development

Editor’s Note: Stephen Walt is the Robert and Renee Belfer Professor of International Affairs at Harvard Kennedy School. He has been a Resident Associate of the Carnegie Endowment for Peace and a Guest Scholar at the Brookings Institution, and he has also served as a consultant for the Institute of Defense Analyses, the Center for Naval Analyses, and the National Defense University.

Professor Walt is the author of The Origins of Alliances (1987), which received the 1988 Edgar S. Furniss National Security Book Award. He is also the author of Revolution and War (1996), Taming American Power: The Global Response to U.S. Primacy (2005), and, with co-author J.J. Mearsheimer, The Israel Lobby (2007).

You can read his full bio from herehere and here. For reading his blog on international relation, foreign policy and global affairs please click here.

eTalk’s Niaz Uddin has interviewed Stephen Walt recently to gain insights about his ideas, research and works in the field of Global Development which is given below.

Niaz: Dear Stephen, thank you so much for joining us. We are honored and thrilled to have you at eTalks.

Stephen: My pleasure.

Niaz: You are a realist in an ideological age. You have been a leader in the field of International Affairs. You have done a significant amount of research and added gigantic amount of knowledge in this field.

As you know, by this time, we have developed superb technologies, published millions of great books and developed a lot as human beings. At the beginning of our interview, can you please tell us, how far have we progressed?

Stephen: From one perspective, human progress is remarkable. In the past 500 years, we have identified many of the basic laws of the physical universe, discovered the principles of evolution and genetic inheritance, eliminated many diseases, and lifted millions of people out of poverty.  And along the way humans have created a vast and diverse array of music, literature, and art. Yet these same creative impulses have also been used to create powerful technologies of destruction and various harmful ideologies. Human progress remains a decidedly uneven phenomenon.

Niaz: What are the lacking, scope and opportunity to progress?

Stephen: By developing language, humans became able to record and communicate their discoveries and to work together to create new realities and possibilities. That capacity remains the greatest source of human potential: our collective ability to work together to achieve common ends.

Niaz: Despite all of the progresses we have, why countries keep fighting each other?

Stephen: At the most basic level, conflict between nations arises from a combination of fear, greed, and stupidity. Humans are social beings, and we are hard-wired to establish group identities and loyalties. Once formed, social groups tend to worry about what other groups may do to them, and this basic insecurity drives competition that sometimes leads to war. That’s fear.  States also fight because individual leaders have dreams of glory, or because they seek wealth through conquest and plunder. That’s greed. And finally, wars occur because leaders are fallible; they often misperceive or miscalculate. In particular, they convince themselves that victory will be swift and easy and then discover too late they were mistaken. That’s stupidity. Unfortunately, humankind remains all too prone to all three tendencies.

Niaz: Why do countries fail to build and sustain international relations? Can you please explain us the reasons? 

Stephen: In fact, countries form all sorts of valuable international connections. Global trade and investment has grown steadily, allowing millions to live more comfortably. Previously war-torn regions such as Europe have now known decades of peace. Information now flows all around the world at very low cost. Global institutions like the World Trade Organization or the United Nations have not eliminated global conflict, but they have helped keep international rivalries within bounds.

Yet there are still limits to what global institutions can accomplish. In particular, they cannot keep the most powerful countries from acting as they wish and from competing with each other for advantage. Nor can prevent some individuals and groups from using violence to advance their own political agendas.

Niaz: What do you think about the core problems of building sustainable international relations?

Stephen: I believe the core problem for the next century will be managing the development and rising power of Asia, and grappling with the political and social effects of environmental change. These two challenges will make many of our current concerns seem trivial by comparison.

Niaz: How can countries overcome those challenges?

Stephen: I believe the key to more effective global cooperation lies primarily in encouraging more honest and open global discourse. When countries are guided by myths, self-serving national narratives, and inaccurate information about political and natural phenomena, then clashes and errors are inevitable. By contrast, when humans are able to confront shared problems honestly and openly, they can identify where they disagree and are more likely to develop solutions that work. But it is still a fragile process.

Niaz: Is there any net gain from wars?

Stephen: In some cases, yes. States are sometimes able to improve their position via warfare, or at least can prevent others from gaining an advantage. But “rolling the iron dice of war” is always risky, because no one can be 100 percent sure how things will turn out. For example, it was clear in 2002 that the United States would not have much trouble defeating Saddam Hussein’s army, but the occupation of Iraq quickly turned into a costly quagmire and the final result is far from what the Bush administration intended. Because warfare is always an uncertain enterprise, wise leaders will go to war only when forced to fight.

Niaz: Can you imagine a world without any war? If yes! How can we build that world?

Stephen: I can. For one thing, as my Harvard colleague Steven Pinker has recently shown, the overall level of human violence has been declining fairly steadily for quite some time. Furthermore, I believe nuclear weapons are a powerful deterrent to great power wars, and it is these sorts of wars that cause the greatest human suffering. Lastly, I believe that our species has the capacity to learn, and this capacity can help us avoid some of the circumstances that have fueled war in the past. But none of these measures makes war impossible, which is why we need to remain vigilant against its occurrence.

Niaz: What are the responsibilities of developed countries to restrain them from war?  

Stephen: Because developed countries have the most military capability, they have the responsibility of not using it to oppress others. Sometimes developed countries can use force to deter or halt aggression, which is a good thing. But other times they use their superior power to coerce others, or they wage low-level conflicts that kill innocent people to no good purpose.

Niaz: As a global citizen what are our responsibilities for stop killing each others?

Stephen: I think the first step is for global citizens to try to inform themselves about events, and not to trust just what their own governments and media are telling them. A second step is to develop empathy, by trying to imagine how international problems look to others. We don’t have to agree with those whose interests may be different, but we should try to figure out how they see things, and why.  

Niaz: As you know, there are millions of NGOs and social organizations who work for removing poverty, protecting our environment and so on. But what happens in reality? Business Organizations do the harm. Chinese version of capitalism doesn’t work. Governments are corrupted. And NGOs form for doing good. NGOs keep taking donations from business organizations to survive. Overall, this is a strong circle which continues for hundreds of years. Where do our core problems reside actually?

Stephen: I think we need to be very careful here. There are many NGOs and business organizations who do wonderful work in a number of areas. At the same time, there are other organizations whose activities are actively harmful. What we need most is greater transparency: the more we know about what different organizations are actually doing, and the more we know about who is paying for these activities, the easier it is to judge whether they are a positive or negative force.

Niaz: Do you think we can remover poverty by these poverty removal activities?  Why or Why not?

Stephen: Yes, but the record here is mixed. On the plus side, economic development in countries like China and India have lifted hundreds of millions of people out of poverty, and similar miracles have occurred in a few other places. But on the negative side, the gap between the richest countries and the poorest has actually grown over the past 100 years. When you combine this level of inequality with global communications you have a recipe for trouble, because people in the poorest countries or the poorest sectors can see how the wealthy people are living.

Niaz: What are your ideas to remove poverty and to make life better to contribute in this mother earth for making it a better place?

Stephen: I’m not an expert on economic development, but I think there are several obvious answers here. First, the only way to eliminate poverty is to increase productivity. Second, increasing productivity requires increasing educational levels, and bringing women into the work force in large numbers. It also rests on eliminating barriers to investment and trade, while at the same time creating a legal and regulatory environment that discourages corruption and prevents excessive concentrations of political power in the hands of the wealthy. But none of this is easy or automatic, and when you add it all up, you can see why sustained economic growth is so difficult to achieve.

Niaz: Any last comment?

Stephen: Only this: it is tempting to look for radical solutions, in the belief that some bold stroke will suddenly solve all our problems.   But I think history shows that grand schemes that are supposed to produce some magical solution rarely work, and often cause great misery. Human progress is due to more to patient, steady, trial-and-error efforts, and not from idealistic visions.

Niaz: Dear Stephen thanks again for your invaluable time. We are really enlightened with your ideas, knowledge and experience. We wish you good luck for all of our endeavors. Take very good care of yourself.

Stephen: You are welcome Niaz.

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Further Reading:

1. Peter Klein on Entrepreneurship, Economics and Education

2. Derek Sivers on  Entrepreneurship, CD Baby and Wood Egg

3. F. M. Scherer on Industrial Economy, Digital Economy and Innovation

4. Diego Comin on Entrepreneurship, Technology and Global Economic Development

5. Joseph Nye on Global Politics

6. Juliana Rotich on Social Entrepreneurial Innovation