00:00He says he still doesn't like seeing himself on camera.
00:02Philippe Aguillon, Nobel Economics Laureate, is with us in our studios.
00:06Thanks for joining us here on France 20.
00:07Very nice seeing you.
00:08I heard on the radio the other morning, you giving an interview,
00:12where you said that the Nobel Committee actually asked you for the phone numbers of the other winners?
00:17Absolutely.
00:18Tell us what happened.
00:19No, I mean, they were not sure because they tried.
00:22It was not working, so they wanted to double-check, probably.
00:25I think they had some numbers, but they wanted to double-check.
00:27So they asked me to look for.
00:29I had the phone number of Peter Howitt, although not at hand, and my assistant had the number of Joel Mokir,
00:38but I could not tell my assistant what it was for, that I needed that number.
00:42So I had to call my assistant, ask her for the phone number of Joel Mokir without telling her the reason why I needed that number.
00:51And she didn't guess why.
00:53Okay, so you don't like seeing yourself yet on TV, but you've got to brace yourself, right?
00:57Because imagine the next time you're in the faculty lounge at the Collège de France.
01:02Are people going to look at you and say, oh, it's Philippe, or are they going to say, oh, it's the Nobel Economics Laureate?
01:08Remember that the famous philosopher Jean-Paul Sartre refused the Nobel Literature Prize because he didn't want to be known as the Nobel winner for the rest of his life all the time.
01:17I think, you know, yeah, I think, yeah, I think you can, I'm very happy to be, to have received the Nobel because it rewards, it rewards the whole line of research.
01:29I think it's, it acknowledges, you know, you know, a whole new way of thinking about the growth process.
01:35There was a, there was a, what we used to call the neoclassical growth paradigm.
01:39It was the Solo model, the model of Robert Solo.
01:42It was a wonderful man, Robert Solo.
01:44But it's a model whereby growth is, you know, driven by capital accumulation primarily.
01:50So that was the paradigm.
01:52And capital accumulates, you produce more GDP, more output, you can save more.
01:58And the savings turn into investment, into new, increasing capital stock, and you keep growing this way.
02:05That was the Solo model, okay?
02:07Nothing to do with innovation.
02:08It was pure capital accumulation, output, savings, investment, capital accumulation.
02:14And in our paradigm, you know, the, really, the key role is played by enterprises.
02:22You see, I mean, the, the, the, the core of our, of our paradigm is, are the firms, the firms that innovate to find new products or to better products or more efficient way to produce.
02:34And that's what, you know, drives productivity growth is the innovation activities of firms.
02:40So firms that, that innovate, is it firms that take big risks?
02:45They take, of course, big risks.
02:46They, they, they, they need incentives.
02:47Because you can try and fail.
02:48Of course, and they may fail.
02:49So that's why you need to create a business, a favorable business climate for them to be, you know, to, to be willing to invest in innovation, which is very risky rather than, you know, invest in real estate or pension funds or, you know, when someone puts her own funds or her own money into a risky undertaking, it's not the same as if you put, you know, your private savings into, you know, a bank account or whatever.
03:15So it's, so it's a, so it's a world, our world is a world where all the time you have new talents, new talents become new startups and the new startups come to challenge existing firms.
03:26You see what I mean?
03:27And so it's a model where you want to encourage firms to innovate because they will get innovation once.
03:32But later on, they may be tempted to use their grants to prevent subsequent innovations because they don't want themselves to be subject to creative destruction.
03:41So you see that there is this contradiction at the heart of the growth process.
03:45On the one hand, you need innovation grants to induce firms to innovate.
03:49But on the other hand, they are tempted to use their grants to prevent subsequent entry and subsequent innovation because themselves don't want to be subject to creative destruction.
03:58So how do you deal with this contradiction, you see?
04:01And you must have had many years of, I guess I can only call it heartache because 1992 is when you co-author this paper.
04:11But in fact, we started to work on it in 87.
04:13Oh, 87.
04:14We met.
04:14Even earlier before.
04:15We worked on it.
04:16We did it in 87.
04:18Nobody in those days had a cell phone or.
04:21No.
04:21And so 1987 was the year of a big stock market correction.
04:29There was going to be financial crisis that followed.
04:32And yet, you co-author with Peter Howitt this paper in 1992.
04:37And for years, decades afterwards, the jobs that people go to are not the entrepreneurial innovation jobs.
04:44They're things like working in the city of London for a big trading firm or for a bank.
04:50It's true that whenever you have waves, you know, when you have new technological waves, people tend to go too much into the financial sector.
04:58So we need finance, of course.
05:00You need venture capital, institutional investors to finance innovation.
05:05But sometimes what happens is that there is too much, you know, you know, attraction for finance at the expense of the real economy.
05:15And so you now have this model.
05:19When you talk about innovation, do you understand how some of our viewers might be a little bit intimidated, dare we say scared?
05:27This notion of because, you know, people feel intimidated when they see new gizmos and.
05:34Because they are afraid of losing their jobs, for example.
05:36And that's why it's so important.
05:38And that's why I advocate a lot, kind of the niche system of flex security.
05:42When you lose your job, you get, you know, 90 percent of your salary for two years.
05:46You are retrained and the state helps you find a new job.
05:49I think it's very important, you know, to make creative destruction socially acceptable and to make sure that nobody is left out of the process.
05:59It's very important to have this kind of flex security system that they have in Denmark.
06:02And it's also very important to have a good education system because at school you learn to learn.
06:08At school you learn to be adaptable.
06:10If you don't go to good schools, you don't know how to adapt.
06:13So I think the combination of good schools, of a very good ecosystem for everybody, you know, like in Finland, like in Korea,
06:20if you have a good education system combined with a good flex security system,
06:24then there will be less reluctance to the creative destruction, you see, which is the driver of growth.
06:30Growth is really economies that are dynamic, are those economies where you all the time you have new talents,
06:35new firms that come in, grow and challenge existing firms.
06:39And existing firms, if they want to survive, they need to innovate again.
06:43Or if they don't, well, they have to, they are driven out of the market.
06:47You see what I mean?
06:48And that's the, that's what drives growth.
06:51But then you first, you need new talents.
06:52Where do new talents come from?
06:54From schooling.
06:54So if you don't have good schools, you have very few new talents.
06:57Excuse me, Philippe Aguillon, you're French, right?
07:00And in France, the schooling is very top down.
07:03You probably endured like I did, sitting on the benches of big amphitheaters where the professors who are then called mandarins sometimes.
07:13Yeah, that's right.
07:15That's not a recipe for innovation, is there?
07:16No, but there are two things.
07:17You talk about universities.
07:19I talk about, you know, primary, secondary schools.
07:21Right.
07:21We need primary, secondary schools that deliver good test scores.
07:25You see, good PISA tests.
07:27So I mean, very much at school in favor of going back to calculus, reading, dictations.
07:34It's very important that, you know, high school students really master the basic knowledge.
07:42You see, I think that's very important.
07:43And then on top of that, you can study history, geography.
07:46But calculus, reading, basic literature, they need manuals.
07:51They need, you know, books.
07:52Books, don't use books, read paper books.
07:56And I think that's very important.
07:58And we used to have a school like that in France, and we lost it.
08:03We've lost it.
08:04We lost, well, yeah, the school.
08:06We have very good teachers.
08:08We have really devoted, fully dedicated teachers in high schools in France, in primary and secondary schools.
08:15But the system is organized in such a way that the public school system in France no longer delivers the promise of opportunity.
08:23And why is that?
08:24Why is that?
08:25Is it because, well, the decision is that the private sector is good and we shouldn't be putting our money?
08:31No, no, no, no.
08:31I mean, it's good to have the private sector.
08:33But I think, you know, we had migrations.
08:35We had new ways of migration.
08:36We would need, we needed classes with, you know, 15 students at most.
08:42We had excessively numerous class, you know.
08:47So lack of funding for education.
08:49Then if there were students left behind, the teacher doesn't have time to care about them.
08:54So we need schools where there is nobody left behind.
08:57When anybody has left behind, she or he can have tutorship, can be helped, can the homework done at school.
09:04All this we didn't have, you see.
09:06We need to invest in schools so that we can really make sure that nobody is left out.
09:12The problem with the French schooling system, there are a lot of wastes, a lot of children who get out of it, barely knowing how to read and write.
09:20And that's not right.
09:21That's not good.
09:22That's not good.
09:22So there may be, it should be maybe cold comfort.
09:25But you compare the United States to Europe and you say the U.S. does poorly on inequality on the social safety net that you're describing there.
09:34And Europe does poorly on innovation.
09:37Exactly.
09:38You know, that's right.
09:39And so is this trend going to continue?
09:43Well, I hope not.
09:44There is a Draghi report.
09:45You know, Mario Draghi recommends that we wake up and we try to revert trend.
09:51I mean, the European per capita GDP is declining compared to the U.S. per capita GDP.
09:58We need to get our acts together and become a frontier innovator space.
10:04So we need a single market, a truly single market, you know, for goods and services, which we don't have.
10:10There are too many gold plating.
10:12Each country, each member state in Europe has its own regulation on top of the European regulation.
10:17We need a good financial ecosystem of innovation, venture capital, institutional investors.
10:22We don't have, like, in the U.S.
10:23And we don't have the equivalent of the DARPA, Defense Advanced Project Agency, this very pro-competition way of doing industrial policy.
10:30You have that in the U.S.
10:31You don't have that in Europe.
10:32So I think on all those dimensions, we can improve a lot in Europe to become more innovative.
10:38And on top of that, I would add the education and the flex security to make sure that, you know, the creative destruction that we generate is socially acceptable.
10:48But that's where Europe needs to wake up.
10:50All right.
10:51Creative destruction.
10:53That term sounds a little bit like when Mark Zuckerberg talked about move fast and break things to people.
10:59Yeah, but break things in a way which does not endanger social, you know, social safety.
11:06We need social safety nets.
11:08We want to make sure that people feel comfortable with it.
11:11Right now?
11:11Like in Denmark.
11:12In Denmark, there is no negative effect on health of losing your job.
11:16There's been studies on that by my friend, Alexandra Roulet.
11:18No negative effect on health in Denmark of losing your job.
11:22In the U.S., you have the death of despair phenomenon, which Anne Case and Angus Ditton have pinpointed so well.
11:28So that's the big difference is that we need, on top of the Draghi recommendation, we need to have good education system and good flex security system to really make sure we don't run into populism.
11:39You see, why do you have Trump or Pope or Mrs. Le Pen on the doorsteps of the Elysee and Matignon?
11:46Because there were many people in France or in our countries left out of the process.
11:51You see, abandoned, that felt abandoned.
11:53Nobody should be left abandoned.
11:56Should be left out of this, you know, quest for more innovation and more innovation-based growth.
12:04More innovation, one final question, Philippe Aguillon.
12:08We're talking about artificial intelligence now, and you've argued that it can be a factor for that innovation.
12:15Absolutely. It's a big driver.
12:17You know, this interview, if there's a transcript of it, AI will eat it, will digest it.
12:23And for some, that's not innovation.
12:26That's theft.
12:27And they're taking people's…
12:29Ah, I know.
12:30That's right.
12:30There is a good and bad use.
12:31But the good use of AI…
12:33Taking people's content, their copyright…
12:36Of course. That's why you need regulations.
12:38So you do need more regulations.
12:39But too many regulations can get in the way of competition.
12:41So you need the right regulation.
12:43But avoid over-regulating, because when you have too many regulations, incumbent firms know how to cope with them.
12:49New and trans don't.
12:50So you want to make sure you have the right regulations, but not too many regulations, because then it stifles competition.
12:58And we know that the big problem with IT is that IT boosted growth initially, but then you had a growth decline because you had the emergence of superstar firms that discouraged new entry, you see.
13:11And because competition policy was not adequate, we let those firms grow unboundedly through merger and acquisition.
13:18And now we have to be very careful.
13:20Competition policy has to be there to make sure that the AI revolution will not end up having two or three dominant firms that will deter any innovation by anybody else, you see.
13:31It's always this thing.
13:32I need to have always newcomers.
13:34I don't want some kings, a few superstars, to just discourage all potential new entrants.
13:41And that's where competition policy is so important.
13:44Competition, education, flex, security.
13:46Those are pillars of a successful growth through creative destruction.
13:51And we look forward to hearing your speech in Stockholm on December the 10th.
13:54Congratulations again to you on your Nobel Economics Prize.
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