Michael Spence (centre) talking about his new book, next to his co-author Mohamed El-Erian, and Professor Dame Diane CoyleJeremy Peters for The El-Erian Institute with permission for Varsity

Michael Spence’s name is one that every second and third year economist has heard. His work on asymmetric information and signalling – developed during his PhD in Harvard under the supervision of Richard Zeckhauser and two late Nobel laureates, Kenneth Arrow and Tom Schelling – won him the 2001 Nobel Prize, and never fails to come up in every game theory exam. Yet his career extends far beyond this contribution, and over the years he has become deeply involved in development and public policy work. Today, I find him in the Queens’ College President’s Lodge, preparing for a talk on his new book, Permacrisis: A Plan to Fix a Fractured World, co-authored by Gordon Brown, Reid Lidow and Queens’ President Mohamed El-Erian. Michael is worried about whether he should wear a tie to the event. Mohamed’s response: “They’re academics. We would be the only ones wearing ties.”

Michael’s career is almost impossible to summarise. The model that won him the Nobel Prize investigated how individuals behave and send “signals” to each other in contexts of incomplete information. It was ground-breaking at the time. He has been Dean of Stanford’s Graduate School of Business, head of a Commission on Growth and Development set up by the World Bank, and has also collaborated with myriad other universities and councils. His range of interests within economics is remarkably broad, overcoming boundaries which typically demarcate academics from policymakers and the private sector – as reflected in his new book, which tackles everything from rising inequality and declining global co-operation to the climate crisis.

“I still regarded it as an experiment, and I almost quit”

All of this began with an unconventional path at university. As a Princeton undergraduate, Michael initially majored in philosophy, before shifting to maths at Oxford and finally economics at Harvard. I ask him why he initially chose philosophy. “I started out taking maths courses. They weren’t too advanced for me,” he says, completely deadpan, “’cause, you know, I came from Canada.” His advisors then recommended that he major in philosophy instead, and he “ended up liking it a lot.”

“By the time I left Princeton I knew I probably wanted to try to be an academic – as an experiment, I didn’t know for sure. I’m not one of those people who knew at age five that he wanted to be a doctor.” He adds: “But I was going to try and be an academic and I had pretty much settled on economics.” In preparation, he completed his master’s in maths at Oxford.

Why did he choose economics? “I didn’t want to sit in an office the whole time and I knew enough about economics to know its enormous breadth.” I am surprised to hear he wasn’t always sure of his decision, though: “I still regarded it as an experiment, and I almost quit.” He tells me that near the start of his third PhD year, he even met with his advisor to announce that he was quitting to work for McKinsey. (Needless to say, he was eventually convinced otherwise.)

I ask how he came to meet Mohamed El-Erian and Gordon Brown, the co-authors of his new book. “Mohamed and I met probably now 15 years ago. I was the Chairman of a Commission on Growth and Development and he had come from the IMF. I knew he knew a great deal about development issues – all the more than I did.” The two met up for lunch in Boston, where Mohamed was working for the Harvard Management Company, and afterwards they kept in touch. It was Mohamed who eventually introduced Michael to Gordon Brown, and organised the pandemic Zoom calls that led to the creation of the book.

“This doesn’t mean that we shouldn’t take people’s fears seriously…AI could go wrong in lots of different ways”

One of the problems that dominated these calls, and stands out in the book, is the climate crisis. Much of the book is dedicated to detailing a plan for reducing emissions and fostering global cooperation. Michael warns that “we’re not yet, even in terms of stated ambitions, going fast enough – especially in the short run […] between now and the early 2030s.” Having worked in development for much of his career, he is especially concerned about the effects of climate change on developing countries. “It’s hard enough to get started [with economic development] in a normal world with a relatively open global economy.” Once you add “shocks like the pandemic, which were not just a health hit but a fiscal shock” and “then climate shocks,” the difficulty becomes magnified.

He is also concerned about the pressure that climate mitigation will place on developing countries. Greening the world economy will require them to “green out their economy way before anybody else has done it in the growth [cycle]” – which “may be just too far to ask countries and their leaders to go”. A source of hope is the rapidly declining cost of clean energy, but Michael insists that this is not enough: developing countries must also have good access to financing, as many clean technologies, like solar, are highly capital-intensive and require big initial investments.


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Finally, we discuss AI automation, a topic that Michael has shown interest in recently. His answers strike a careful balance between optimism and caution. He talks of “people at Stanford who decided to use the image recognition software to do skin cancer detection”, creating a tool that could potentially be accessed with just a smartphone and thus increasing “on a global basis, the potential for extending primary care to a huge number of people.”

Yet he also stresses the technology’s limits. “These AIs are not at the point where you’re going to say, ‘Oh you’re going to get it right every time.’” He thinks that, for the most part, AI will not automate “whole jobs”, but rather “tasks or sub-parts of jobs” – for instance by helping write reports faster. Yet “this doesn’t mean that we shouldn’t take people’s fears seriously […] AI could go wrong in lots of different ways.”

There is plenty more we could discuss, but Michael’s talk is about to begin and we must make our way out. Michael finally leaves our interview – tie-less, but tireless in his determination to “Fix a Fractured World”.