May 27, 2024

Economix: Author’s Plea for More Trial and Error

Book Chat

Tim Harford is a columnist for The Financial Times and the author of “The Undercover Economist.” He’s part of the growing cadre of journalists who try to write about economics in plain English. His new book, “Adapt: Why Success Always Starts With Failure,” will be published this week. Our conversation follows.

Tim Harford, author of Fran MonksTim Harford, author of “Adapt.”

Q. You briefly tell a story about the chef Jamie Oliver. He persuaded schools in one part of London to change their lunch menus to reduce fat, sugar and salt and to increase the number of fruits and vegetables. When two economists studied the children later, they found less illness and somewhat better school performance. That’s incredible. How much confidence should we have that the change in the menus caused the health and academic changes?

Mr. Harford: What really grabbed my attention about this incident was not, “Healthy meals help kids concentrate in school” – it was, “Wow, it takes a campaign by a TV chef to find out something like this.”

The research was carefully done by serious economists, but we could have more confidence in their findings if the project to improve school meals had been designed as an experiment. It wasn’t; it was designed for a TV show. After it started, Tony Blair, the British prime minister at the time, was falling over himself to endorse it. Yet it was a simple idea that Blair’s government could have tested out years before.

One of the main ideas of the book is that the world is full of interesting ideas that might help solve some of our big problems, but nobody really knows which of these ideas will work and which will fail. So policy makers, corporate leaders and social campaigners need to be much more open to all sorts of formal and informal experiments. Jamie Oliver created an accidental experiment. It would be nice if we spent a bit more energy doing this deliberately.

Q. You’re saying, in essence, that society doesn’t do enough trial and error. What are some of the areas that could benefit most obviously and immediately from trial and error?

Farrar, Straus Giroux

Mr. Harford: I look at lots of different examples — military strategy; climate change policy; development aid; education and social policy at home; and support for innovation .

I think our system for promoting innovation, which is funded by a combination of government grants and private enterprise, struggles with large and adventurous projects, such as clean energy. The private sector is terrific at producing lots of experiments (just think of Silicon Valley) but not at funding expensive, long-term projects. Government grants can do that but are often rather risk-averse. One promising approach to get the best of both is innovation prizes. Another is to use a far more risk-loving system of grants.

In Iraq, we had a failing strategy and leaders who refused to listen to feedback from the men on the front line. It took a near rebellion from some brave colonels in Iraq to change the strategy. The U.S. military now seems to recognize that a successful post-Cold-War campaign is going to require the soldiers on the ground to improvise a lot more.

Of course we can’t simply say, “Let’s experiment more,” because there are areas of the economy where experiments can go off the rails — credit derivatives, anyone?

Q. Innovation is an especially important subject, because it has such a big effect on economic growth and living standards. And there is reason to worry that the pace of innovation has slowed in recent years.

How would you recommend that the United States change its policies intended to promote innovation? You’re based in London, so I realize you may want to talk about what some other countries are doing well — if, in fact, there are any shining examples.

Mr. Harford: Here’s the challenge: by its very nature, innovation requires a lot of exploration and a lot of blind alleys. Government agencies don’t tend to be comfortable with that, so the private sector often makes the running. Even when an idea was initially government funded — the Internet is a classic example — it’s taken the private sector to explore its potential.

But I’m not happy to leave this to the private sector alone, because modern innovations tend to require ever more money, larger teams and more specialists. The age of the lone inventor is long gone, and in important cases — for instance, a smart energy grid, or nuclear fusion — the private sector just doesn’t have the money or the patience to pay for progress.

So this is fundamentally an organizational problem: how to harness the diversity of the private sector with the long-term funding of the public sector?

I see two promising approaches. One is to earmark more government research grants for high-risk projects. A fascinating research paper compares conservative medical research grants from the National Institutes of Health with more speculative grants from the Howard Hughes Medical Institute. The Hughes approach produces more failures but many more “big hits.” Clearly, there’s a balance to be struck.

A second approach is the use of innovation prizes. These have received increasing attention but there’s potential to put up far larger prizes — multibillion-dollar affairs.

Q. Who is a hero of adaption — someone who managed to change an organization that had been terrified of failure?

Mr. Harford: There are several inspiring characters in the book, but I’d pick out Gen. H.R. McMaster, who in the spring of 2005 was a colonel in charge of operations near the Iraqi city of Tal Afar. He developed a new approach to fighting insurgents. It was successfully copied by other colonels and became an important inspiration for the “surge” of 2007.

What makes General McMaster’s initiative amazing is that he had to shrug off every link in the chain of command above him. Remember that in 2005 Donald Rumsfeld didn’t even want to hear the word “insurgent,” so this was a career-threatening move, Many observers commented on the fact that he was repeatedly passed over for promotion.

I wanted to explore why he did it. Partly it was his academic background: McMaster was a historian who wrote a blistering account of the failures of leadership during the Vietnam War. And it was also his personal experience. McMaster captained a troop of tanks during the first Gulf war and won a celebrated victory — the Battle of 73 Easting — against Saddam Hussein’s Republican Guard. Rather than resting on his laurels, McMaster argued that this battle — a total surprise, in a sandstorm, with no air cover — showed that the traditional satellite-guided air war had serious limitations. He argued that junior commanders on the ground would often be the ones called upon to adapt to local circumstances, and the military command structure had to acknowledge that.

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