>> From the Library of Congress in Washington, D.C. >> You're here to listen to Sylvia Nasar, prize winning writer, whose prodigious talents you know from her first book, A Beautiful Mind, which was a fascinating chronicle of the life of a mathematical genius, groundbreaking scholar of game theory and Nobel Prize Laureate in economics, John Nash. Nash as Nasar so sensitively and thoroughly portrayed in A Beautiful Mind, was tormented for much of his life by schizophrenia and her book makes for a rich, vivid story of that troubled yet brilliant journey. So rich, so vivid, in fact, that it was made into a compelling movie starring Russell Crowe. Sylvia Nasar is the Knight Professor at the Columbia Graduate School of Journalism, trained as an economist, excuse me. She has been a correspondent for the New York Times, a staff writer at Fortune magazine, and a columnist at US News and World Report. She has a rare gift for explaining complicated socioeconomic theory in ways ordinary humans can understand. She was born in Germany of a German mother and an Uzbek father and immigrated to this country when she was still a child. She studied economics at Antioch College, New York University and did research with a Nobel Laureate in economics Wassily Leontief. She has lectured frequently on topics ranging from the global economy to mental illness. Now a bit more than a decade after the publication of A Beautiful Mind Nasar is back not with a biography of another genius but with a biography of an economic idea. That idea groundbreaking in history was simply this that the participants in an economy can reach out and manipulate that economy that they live in to their benefit. For millennium the world believed that the human race was condemned to grime poverty. Somewhere along the way economic theorists began to [inaudible] that we actually can do something about that miserable state of affairs. That we have the capacity to organize our financial affairs to extraordinary social and institutional advantage. In her new book, Grand Pursuit, Nasar chronicles the development of that economic thinking from the days when economics was described as the dismal science to modern times when we have learned that there is a way to put money and the ways we make it and dispense it to the service of social and human justice. Charles Dickens, Thomas Carlyle, Karl Marx, Frederick Engels, Alfred Marshall, Joseph Schumpeter, John Maynard Keynes, Amaryta Sen, the protagonists are all here. As Steve Pearlstein of the Washington Post put it in quote, "In Grand Pursuit, Sylvia Nasar inserts the reader into a sweeping historical drama that extends from Victorian England to the modern day India. That she succeeds reflects the depth and breadth of her research but also the elegance of her prose." Ladies and gentlemen, please welcome a marvelous clarifier, Sylvia Nasar. [ Applause ] >> Sylvia Nasar: Thank you, Marie. Thank you. Thank you. I'm so delighted to be here. It was worth every hour that I spent on the New Jersey Turnpike this morning. [laughter] For the bottom nine-tenths of humanity, which presumably would include all of us, the world has changed more in the last century and a half than between the reigns of Julius Caesar and Queen Victoria. The idea that humanity did not have to be the slave of dire necessity is so new that Jane Austen never entertained it. The new way of thinking was born in Charles Dickens' London in the midst of the Victorian economic miracle. It was a leap of the imagination and that is why the first character in this three-act drama is the novelist himself. Over the next century and a half this idea that humanity could take charge and mold its material circumstances, the means for all human ends that idea was born and spread outward like ripples in a pond until it has transformed the lives of every person on this planet and it's still spreading and because we're here at this amazing festival to talk about ideas that have shaped history and matter to our lives today and the geniuses who dared to dream of overcoming scarcity I'm very pleased to share some of the story of the Grand Pursuit with you. Act I is called hope and it opens in London in the early 1840s. Twenty years later we are standing in front of the Bank of England in the financial district and witness a scene of chaos and panic. A rumor has been swirling around London that the Bank of Overland Gurney believed by the average British citizen and saver to be more solid than the mint had failed. A horde of struggling and frantic creditors of both sexes and seemingly all classes of society had invaded the financial district, constables were called out and typically the New York Times correspondent had this moralistic remark to make, "Englishmen have been running mad on speculation. The day of reckoning has arrived." Have you heard this before? When news of the panic reached north London where Karl Marx, the shaggy-haired German philosopher within his study, he was pondering a financial crisis a little bit closer to home. His income which thanks to his guardian angel, Fritz Engels, was enough to put the Marx's' in the top 2% of British households never could keep up with Karl's desire to keep up appearances and now the rent was months overdue and so was, not by months but by many, many years, Das Kapital, the weighty tome that Marx had claimed for years and years was virtually finished. I'm just making a few corrections on the proofs. Twenty-years earlier Marx had set out to prove with mathematical certainty that this modern society which was first born in Britain, a commercial society, was doomed to self-destruct. Under the weight of every decreasing wages and ever increasing burden of toil. These were supposed to be not just historical facts but historical necessities beyond the ability of individuals or political parties to change. Unfortunately for an author writing an apocalyptic text, the Victorian economic miracle intervened and instead of falling wages were rising. Instead of toil becoming more burdensome, brain work was increasing faster than manual labor. Instead of more hunger, more poverty, the average standard of living of the average working person was for the first time, for the first time in human history, rising. Rising. But now that Black Thursday and financial panic had created the prospect that finally economic Armageddon might be at hand, Marx got over his writer's block and he dashed off numerous sentences like the death knell of capitalists private property sounds. Meanwhile over the next few months a real dooms day scenario was unfolding in the center of the world market, the capital of the intellectual world, the heart of British industry, London. What the distress is no one knows. That was what Florence Nightingale had to say and that economic distress which had thousands and thousands of previously rather relatively well off dock workers, factory workers now unemployed and breaking rocks to earn a penny a day at a poor house so that they could get a quarter loaf of bread, that distress of 1867 what we now call recession had the effect of galvanizing the consciences of many young university people and awakening a desire to get involved in social reform. Alfred Marshall was a 23-year old Londoner, who had escaped a childhood and youth of genteel poverty to become a Cambridge don, Alfred Marshall felt compelled to tramp through the slums of a factory town in the north looking into the faces of the poor. The sight of so much want amidst so much wealth prompted him to ask whether the existence of a Proletariat that is an almost hereditary class designed evidently by nature or God to drudge its way through life was that really as everyone believed a necessity of nature? Why? Why should not every man become a gentleman? When he got back to Cambridge, he was told to read the Founders of Political Economy and he did so only to discover that these imminent thinkers had ruled out perhaps even more decisively than socialist radicals like Marx, ruled out any possibility of a mass escape from poverty. Individuals, of course, did and might escape like Pip in Great Expectations but the class, the mass, was going to be stuck no matter how rich the nation became. He was dazzled by the power of their logic, but he saw that they were assuming that many things were frozen, that, in fact, seemed fluid and in a state of flux to him. It also seemed to him and remember he was a mathematician who, of course, knew calculus. He also saw they failed to take into account the action of time and the huge cumulative effect of series of incremental improvements, which of course meant to him or evoked for him the evolutionary process that was the obsession of Victorian intellectuals even since before Darwin's great work. The author of Das Kapital, which was completed, was actually sent off to the publisher did appear although in German in 1867 had never sat foot inside a single factory, but Marshall, who of course lived and worked in one of the great ivory towers of the western world, did not share Marx's or for that matter the English political economists aristocratic contempt for business and made a mission of studying how the modern economy that was coming into being and particularly modern firms worked he spent every summer visiting factory towns, interviewing owners, union leaders, engineers and he tried to understand exactly how this worked. So Marx and [inaudible] saw the firm as an instrument of exploitation, of regimentation, of almost if you read Dickens prison like, but Marshall observed something that these others who hadn't really, you know, gone there and really didn't have this first-hand knowledge, what they had missed and that is that in this freely competitive economy that had come into being in England that managers and business owners were compelled year in and year out, week in and week out to seek ways of doing more with less. Making more of the given, with whatever resources they had. In other words, of increasing productivity and, and this is the real discovery, that these gains that as the whole economy was able to do more with the same resources that these gains were not just captured by the owners of these firms but were spread around in the form of higher wages and he showed that that had to be the case. It wasn't possible because competition forced this to happen. So, it turns out that because of Marshall we now know that the economic function of the corporation, the social function of the corporation is to raise the standard of living by raising productivity no matter what the shareholders think. So, this was an incredibly hopeful insight because it meant that instead of resigning one's self and one's children to the notion that history would always repeat itself and nothing would get better, there was a dynamic in society that made it possible to change the circumstances of ordinary people. So Marshall, who really is the founder of modern economics, created an economics that was about what you could change before him economics had been about what you couldn't change. Now it was about what you could. How am I doing on time? So now we're going to move into the 1880s and 1890s, the gilded age, the [inaudible]. You're young, pretty, rich, clever what more do you want? Beatrix Potter and that's not Be-a-tricks Potter, Beatrix Potter, his poor cousin asked her, why cannot you be satisfied? Like the heroine of Henry James' 1881 novel, Portrait of a Lady, Beatrix asked the question that had never been of any interest to novelists before and that is what shall I do? What shall I do with my life? She had been brought up with unusual freedom to travel, read, form friendships and satisfy her great desire for knowledge, she was brought up as a member of the governing class, the people in England who gave orders but never carried them out, and yet she was torn between the desire for, not just for work, not just for a career, but to have a major impact on the society in which she lived and another wish equally powerful which was to marry as all of her eight older sisters had done to marry a masterful man. She reflected bitterly at times the plight of the 19th Century woman resembled that of working men with "active brains doomed to the treadmill of manual labor" by which she was presumably referring to the half dozen at least children that each of her sisters had. Yet by the time this unhappy sometimes suicidal young woman had blossomed into a brilliant and gorgeous and richly endowed with shoes and fabulous clothes, middle-aged, she invented the think tank, the idea of the modern welfare state, and she had supplied a rising young political star a former [inaudible], who is now moving to the west with the country, Winston Churchill with his first political platform. She had been weaned from her original laissez-faire views by the upheavals, the labor conflict and political upheavals of the 1890s. Social questions are the vital questions of today. They take the place of religion. Beatrix by the way was a brilliant diarist and there is no history of 19th Century society or politics that does not draw on her remarkable portraits of the people, movers and shakers around her. At one point she took up, she was tired of social work, she took up investigative reporting, which was very glamorous thing to do at that time. She went undercover as a sweatshop worker. She despite weeks of trying to learn how to sew, she didn't do very well in that department but when Pages of a Work Girl's Diary were published in a liberal journal, its success and the newspaper coverage of her escape including coverage in the US was delicious. At last I am a socialist she told herself. Then she met Sidney Webb, the son of a London hair dresser, the best friend of the Irish playwright George Bernard Shaw, and the brains behind a coterie of young men who wanted to manipulate the mainstream political parties to "voice a growing desire for state action." The Fabians as they known called themselves socialists but the word socialist didn't mean what it later meant. They merely wished to tame the "Frankenstein" of free enterprise rather than to kill it. Sidney had a perfect pick-up line. Why don't we write a book on labor unions together? [laughter] After a year of telling him I do not love you and Sidney swearing that life together would consist of abstentious living, copious research, constant socializing with the movers and shakers presumably in lieu of sex and babies Beatrix reluctantly agreed. It seems an extraordinary end to the once brilliant Beatrix Potter she wrote in her diary upon returning from the registry office to marry an ugly little man with no social position and less means. With Beatrix's trust fund and her admittedly great executive talents and Sidney's astonishing capacity for work, the Webb's set themselves up as a think tank, as a political stellar, everybody comes here wrote H.G. Wells in his sort of [inaudible], The New Machiavelli, he called the Webb's, the Webb's house a center of reference for all kinds of legislative proposals and political expedience. Washington is full of such places but that's where they started. How am I doing on time? Okay. Well, I could tell you more stories. This is a, I guess what I want to say is this, look, a lot of people knew about John Nash's life back when he won the Nobel Prize and nobody, everybody thought what a depressing story, you know, mathematician, schizophrenia, what a depressing story. When I first heard it I thought what a glamorous, romantic drama. How many stories are there with a genuine third act? It took me a little bit longer to realize that the story of the Grand Pursuit of economic thinkers to overcome scarcity and to give us an apparatus, to develop an apparatus of the mind that we could use to understand and steer our material circumstances that let us raise living standards in the world tenfold since Jane Austen's day, five fold since the Great Depression, despite all of the crises, all of the setbacks that it took me a while to realize that this too was a romantic and dramatic and very human story. Thank you very much. [ Applause ] I guess being told that you're going to be filmed is a real incentive to ask questions. [laughter] >> So I have two questions. I haven't yet had the pleasure of reading your book but based on your exposition it reminds me a lot of the book The Worldly Philosophers by a man named Heilbroner, and I just wonder how you see your work complementing that wonderful sort of classic term? >> Sylvia Nasar: Okay, I'm so glad you brought up The Worldly Philosophers. If any of you are English majors as I was and you only ever read one book about economics, you read The Worldly Philosophers and this is a book that was written by a 25-year old Harvard graduate in 1953. It was published by Simon & Schuster. They wanted to call it The Economists. He being a brilliant writer said no, no, no, let's call it The Worldly Philosophers and it's a wonderful book and you should read it. It's still in print that's my point. It's still in print after 18 editions, you know, to have this book compared to The Worldly Philosophers is an amazing compliment and I would say that it was a book that was very much of its time and this is a book that is very much of my time and his was a series of portraits and what I tried to do because he had already done that which is why he never wanted to write a sequel himself, but what I tried to do was to tell a story. To make it a narrative. So I'm not pretending to write history of economics, I'm not giving you a birth to death portrait and little capsule of each person. These characters come on stage usually pulled to economics by these great historical events and dilemmas of their day. >> Yes, I'm delighted that you're bringing in these human factors to what is otherwise known as a dismal science and they were very, very interesting people. What I understood was that Engels had the biggest factory in the world and, therefore, Marx did not need to visit factories and you have not touched the modern thing that Keynes and Hayek were extraordinary but friends and that Keynes gave Hayek a very [inaudible] letter about how great his work is and he also nominated Hayek to the British Academy. >> Sylvia Nasar: Yes. Was there a question? [laughter] Because I think of one. >> Go ahead. You're [inaudible] than I am. [laughter] >> Sylvia Nasar: This gentleman here brought up something that I think is so relevant today and he brought up John Maynard Keynes, who along with the American Irving Fisher invented the economics of the whole which was a way of diagnosing the kinds of short term but very acute crises of the kind we're having right now and came up with a very good antidote for them. The thing about Keynes, who is really I think by common consent by conservatives and liberals was the greatest economic thinker of the last century. What is remarkable about him thinking of the current context is three things. One is that he as this gentleman pointed out, talked to everyone. So he was willing to engage with Friedrich Hayek, the opposite a brilliant Austrian philosopher, who had the opposite diagnosis and proposals for dealing with the Great Depression, okay. So Keynes was always in collegial exchange, sharp but collegial exchange with people who didn't agree with him. Secondly when the facts changed, Keynes changed his mind. Okay? Somebody once criticized him for that and he said, well, when the facts change, I change my conclusions. What do you do, sir? And the third thing is that he was a, and this is one reason that he is unique just like Lincoln and FDR and Reagan were unique presidents, he straddled the biggest economic crises, the two wars, the Great Depression, of the last century and so he was often involved in very practical positions and what is so striking especially if one listens to today's debate is that he was always looking for common ground. Again, with the people who didn't want to do what he wanted to do and as a result of that after he failed to influence events after World War I, after he failed to get either Churchill or FDR to adopt his proposals for ending the Great Depression, he did have this third act and that was to create the basis of post-war economic recovery after World War II. >> Given your background and your previous book I'm wondering how you came to be interested in this subject and how you came to write the book? >> Sylvia Nasar: How did I become interested in economics or why did I decide to write a book? >> More specifically how you came to write about these characters and this idea. >> Sylvia Nasar: Yeah. Well, I mean very narrowly Robert Heilbroner's publisher had been trying to get Bob, who is by then in his 80s, to write a sequel to The Worldly Philosophers, and whenever anybody came along who was remotely a candidate for writing such a book, he would propose that idea and he proposed it to me, but I think the deeper, you know, I mean that was sort of the spark but the fact is that I was an immigrant, I was also a literature major, I didn't have a great education and at a certain point I realized from reading the columns of Robert Samuelson that economics was not etiology but it was sort of an engine of analysis for getting your arms around what was happening in the world and that seemed very attractive to me. >> Hi. As a student of economics, when I went through the program myself, it seems to me that economics should have stopped becoming so ideological and philosophical and should have become a lot more data driven and that's what they drive into you. You can't walk out of a program now without knowing a lot of econometrics, a lot of statistics, even operational research stuff. So whenever you come up with a hypothesis, you should have some data that should be able to sort of underpin it so it becomes less and less ideological and becomes more and more empirically based. >> Sylvia Nasar: Yes. >> And yet despite that the recent recession what we're going through now has opened up gigantic rifts between, that seems to me would be answered if not answerable, we all know about Keynes multipliers. >> Sylvia Nasar: Right. >> There's hundreds of papers out there. A, if you had to write a book about current economics, what kind of theme given what I just talked about, what kind of themes would you touch on? And who are the current players that you kind of find interesting out there? >> Sylvia Nasar: Well, I think that the, the question was if you didn't hear it, so who are the economic geniuses today and are there any that rise above the current sort of shouting back and forth. Yes, there are and the action has really shifted to sort of microeconomics to things like sustainable development, game theory, decision making that departs from the purely rational and there's a tremendous amount of, you know, really leading edge exciting stuff and more smart young people than ever are attracted to the field and Google and Microsoft both have chief economists. That said most of the debate that we're hearing on the radio and TV now is not about anything new. It's a rehash of old things and I don't think it's very, I don't think it really reflects the, you know, views of people who actually know that much about the subject because if you read, I happen to love the Wall Street Journal, if you read the serious conservatives and the serious liberal economists on their pages, they have much more in common than they do, you know, have differences and there's certainly plenty of common ground. It's just that's not what you're hearing. You already asked a question so I feel like I have to. >> Well, you indicated that Marshall proved that greater productivity would lead to more things -- >> Sylvia Nasar: -- no, to higher standards of living, yeah -- >> -- higher standards of living, higher wages, et cetera. >> Sylvia Nasar: Yes, right. >> To be shared by everybody. >> Sylvia Nasar: Right. >> Which seems common sense in the way you would hope it would happen. Do you think that's still true today? I mean it looks like maybe higher productivity actually has contributed to unemployment, that it contributes to lower wages because they don't need as many workers. What do you think about that aspect? >> Sylvia Nasar: Well, it is this ingenious mechanism at the heart of our competitive economy still working. In other words, our productivity gain is still driving, you know, average incomes and the answer is yes. Look right now we're in the aftermath of a recession, okay? And income falls in recessions, but if you look at the trajectory, okay, the productivity trend is above 2%, what does that mean? It means that incomes are, it continues that is barring a war or a major environmental catastrophe that incomes will be double what they are now in 35 years and this has held true, okay, for 150 years for the United States and it has become true for more and more countries, okay? So, you make a distinction between the wiggles around the trend. Every, you know, in every recession now speaking as a reporter, in every recession we read story after story about the American Dream is dead, wages are no longer attracting productivity, the middle class is disappearing, living standards are declining and the only thing I would say is that in the middle of, in 1931 when the Depression became the Great Depression, you know, when things fell off the cliff, Keynes who has been excoriated for saying in the long run we're all dead and that we need to pay attention to these acute short-term problems and do something about them, said look, this is, you know, a mechanical breakdown. We're stuck at the side of the road and we actually do know how to fix this but it doesn't mean we're going back to the horse and buggy. If you look at the data, that's exactly what happened. He said by the time our grandchildren are grown up, their incomes will be four to eight times higher, okay, and he said that let's be bold, and he also by the way loaded up on American bank stocks in 1936 held on to them during the second, beginning of the second leg of the Great Depression in the US, and became rich for good and never had to sell a single one of the impressionist paintings that he had collected. All right. I think we're, look, thank you. I can't believe there's so much interest in economics. [laughter] [ Applause ] >> This has been a presentation of the Library of Congress. Visit us at loc.gov.