The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1993
Robert W. Fogel, Douglass C. North
Transcript from an interview with Professor Robert W. Fogel at the 1st Meeting of Laureates in Economic Sciences in Lindau, Germany, September 1-4, 2004. Interviewer is freelance journalist Marika Griehsel.
Professor Robert Fogel, very welcome to this interview. It's a great honour to meet you.
Robert Fogel: It's a great pleasure to be here.
I wanted to start off, to ask you a little bit about your background. Your parents were immigrants to the United States in the early 1920s.
Robert Fogel: Right.
Has it in any way had any impact on your life, that they were immigrants?
Robert Fogel: That's a good question. It certainly made me very much aware of America as a home for immigrants and my father believed that America was the land of opportunity. I think that was a widespread feeling among the immigrants that families I knew in New York, they fled difficult circumstances and found opportunity in America, although it wasn't always easy.
Was it so for your family? They left Russia.
Robert Fogel: They left Russia. My father got sick in Constantinople and all the money that they took with them from Odessa was spent saving my father's life and they had to borrow money to pay for passage to the United States and they had to borrow money when they reached Ellis Island to send a telegram to an older cousin who was already in the United States and saying, please come and get us, so they literally started off penniless.
After about five years my father started his first business and so, he arrived in 1922, that was about 1927, I was born in 1926, and he had several businesses and he started a third one in 1933 during the Depression and that turned out to be very successful. He and his brother started the business and seven years later he had 100 employees. Many young people in high school were of a radical persuasion and I used to tell my father that capitalisation was a corrupting system and he would be astonished and he'd say America was the land of opportunity and he'd say look at me and I said, well he was the exception that proved the rule and then he'd go down the list of other people in the New York City meat business, who were also immigrants and who were much more successful than he had been, so he did live in a world in which a lot of people came in very poor and became well to do in 15 or 20 years.
I would like to come back to that, looking at it from today's point of view, but just staying a little bit with your background and your school years. Was it important for your parents and were they influencing you that you would achieve academically? I believe you started off with physics and chemistry and yet you ended up with eonomics and history.
Robert Fogel: Right. That was not my parent's influence, that was sort of the influence of the times because when I was in high school, I still thought of myself as becoming a physicist or a chemist and it was only when I went to college and there was so much discussion that we might have a new depression in the United States, there was a great deal of fear that the economy would not be able to employ, have full employment and so I became very curious about how the economy works and why it should be so problematic and I also discovered I loved history, it was a great story.
You said somewhere in your biography that it was a bit naive, you said you wanted to change the world.
Robert Fogel: Yes.
Do you still?
Robert Fogel: Well, like many young people I thought the reason we had so many problems was that there was an absence of goodwill and all you needed was for people to have goodwill and we were the generation that finally had goodwill. One of the most startling events in my life was when my older son was about 16 and he blamed me for all the troubles of the world. So I, I felt like telling him, oh no, I was just like you when I was your age, I wanted to change the world too. So if young people don't have these dreams when they're young, don't ever have them, so I think it's part of having you developing humanitarian perspective and learning that it isn't quite so easy, that goodwill is not enough. You have to have good fortune and you have to have people on the other side who have goodwill.
Yes. Staying there for a moment, you certainly went straight ahead into looking into history and economics and develop theories that eventually gave you the Prize. In which way have the work that you have done over the years and then the Prize, affected the way we can make people understand that we can foresee certain parts of development, for example?
Robert Fogel: Most of my work in recent years has been in the health area, the economics of health and the economics of aging and in that area we try to forecast the answer to questions like, what will happen to the health of people 20 or 30 years from now and what will happen to the cost of care, given that a much larger proportion of the population will be elderly? And if you're going to forecast 20 or 30 or 40 years into the future, you have to have some idea about how things have been changing. So it's impossible not to be historical, you have to go back and look at the record, at least 30 or 40 years, sometimes 100 years, in order to understand the process of change. So having a historical point of view I think has made me better able to identify the kinds of evidence that we need for forecasting.
Will people who have the power to take decision, for example politicians, always acknowledge the need to do this kind of research, or would they rather ignore the historical facts because it might be easier to just leave it?
Robert Fogel: Well, if you take the people in Congress, the people who are the experts within Congress, on let's say issues of aging and healthcare, they pay a lot of attention to the technicians, they don't make policy independent of what the technical people are discovering or telling them, so I think they are very carefully listened to and they usually have on their staffs, people who are well trained in these fields and who have good ties to academic specialists. In the United States I think there is a pretty good interchange and my impression of most other countries is that it works, at least most other countries that I've visited and had a chance, it works similarly. Politicians realise they need to know what the facts are and that requires experts and they look to the experts to give them the information they need, so that they can make policy.
If one looks back to your work and some of the books that you have published, they have been met with criticism because they haven't exactly fitted into the model of what was believed to be the truth, for example the history of slavery and its impact on the US economy. Why is that so difficult for people to accept, I mean the way you were met with this criticism, for example, what did it do to your research work and why was it so controversial?
Robert Fogel: First of all I did a lot of this work with Stanley Engerman, who was at the University of Rochester and when we first started looking at the evidence, we didn't believe it. We thought that we must be doing something wrong and what was different in our work was, that we went back to records that couldn't have been examined before because you needed high speed computers to digitise the information, so we were lucky to be around when high speed computers and their use was becoming cheap enough so that you could do very large projects. I once estimated what it would have cost to do that stuff if we had to do it in the old-fashioned way and it would have been about $100 million. So we were able to look at what had actually happened, looking at huge quantities of data and a much different picture than what all of us had believed up until then. So we were the first but that's what generated the controversy. If someone else had been first, I would have been criticising them but we were lucky enough to be in the right place at the right time.
You say here, I mean, during times of criticism, your children and your family has been very important, supporting you right through.
Robert Fogel: Yes.
How important is that when you do this very hard and strenuous academic work and also have to defend it?
Robert Fogel: Well it is very hard because the critics are very serious people also and it's easy to become disheartened by the criticism and so my family support was essential in encouraging me to keep working at it, not to get discouraged, that initially so many people thought we must have done something stupid. Yes, the older I get the more important my view of the family is. I think the most important thing I have done in my life is to raise two boys.
Yes. It's something ...
Robert Fogel: But also the hardest thing I've ever done, harder than my professional work.
Are they also in the academic world, your children?
Robert Fogel: No, no, they're both in business.
OK, and yet they were criticising you when they were younger, in their student years.
Robert Fogel: Yes, they were younger. Now they think I'm too liberal and I haven't changed my position very much.
I want to come to a question which has more to do with politics really. The way the United States today is acting in the Middle East. The way the US economy has been affected over the last couple of years, the huge budget deficit. Does it scare you, what's going on at the moment in terms of the US involvement?
Robert Fogel: Well, let me take the economy first. The President has very little effect on the economy. If you want to put blame or credit, the main person who influences the business cycle is the Head of the Federal Reserve Bank. The fiscal policy used to be thought to be an important instrument for managing the economy but that was several decades ago, it is no longer in the United States considered to be an important or even an effective instrument. In the case of the Bush tax cuts, normally when Congress passes tax cuts, in order to influence the business cycle, they spend so much time arguing about the legislation that by the time it's passed, the recession is over and it just adds to the inflationary danger as you're in a strong expansion. In this case the economy was somewhat more sluggish and so the tax cuts probably had a positive effect, but they're not decisive in the way in which the economy is unfolding.
The main factor influencing the American economy is the rate of technological change and that's the reason that because the output per worker has been very high and has been growing very rapidly and which means you can do more and more with less and less people at work, so that's what's made the growth in jobs in the United States sluggish. So it's really factors outside of politics. I would say in general, the main role of the government is to create circumstances in which the rate of change in technology can proceed as smoothly as possible and there is also a role that the government has to play in equity, that not all people benefit from technological change, some lose their jobs while others are lucky to be in the right place at the right time and their incomes increase very rapidly, so there are equity issues in which the government has to play a role.
That seems to be an issue that is very much relevant in the whole western world.
Robert Fogel: Right.
What you are describing at the moment, you know and there is a fear. I know that your topic here in Lindau will be talking about high performing Asian economies, you know the kind of competition we are already seeing obviously from that part of the world.
Robert Fogel: Right and it is creating problems. It's not so much an issue that's been popularised by the election campaign, that we're outsourcing a lot of jobs because, not only are we outsourcing jobs but Japan and Mexico and other countries are outsourcing jobs to the United States. It's called international trade and international trade, like everything else, has winners and losers. The consumers benefit from trade but not all the producers do, some producers benefits, other find that they can't compete and that creates problems of equity. So the government has to play a role in making it possible for people who are not in the favourite industries to be able to find better opportunities than they now have. It is an international question too, that is, the rich countries of the world have to make at least modest efforts. Modest efforts would be, let's say, 1% of their gross national product, should be contributed to assisting poor countries. You can't make a poor country rich with that kind of programme.
China is becoming prosperous at a rapid rate because of what China is doing, not because what countries and OECD are doing, but there are things like the HIV AIDS epidemic that we can sit by and say, isn't it too bad? A small amount of resources can be very effective. So those critical things, we can do a lot to save lives. We can also make our technological knowledge available, both by being open to educating the children of Third World countries and also, as has been done, not entirely unselfishly, in starting joint enterprises in poor countries which is a way of transferring our technology, that is the technology of the richer countries of the world, to the poorer countries. So those are the way to do it, but there have to be people in those countries that seize the opportunity. If they're involved in bitter tribal conflicts, nothing we do will permit them to get out of the difficulties that they have economically, health wise and in other respects.
Coming back to that, having lived in Africa for many years and having witnessed some of these conflicts, but also witnessed what global trade have done, for example subsidised farm products being dumped in African countries, which have then completely destroyed the local market. So it seems at times we are giving with one hand and destroying with the other.
Robert Fogel: ... and taking with the other, yes. That comes out of very complicated domestic pressures, that is the farmers in rich countries will say we're not doing well and we expect our government to make it possible for us to sell abroad. That's among the most difficult when you have a sector of the economy that's not doing so well, doesn't like being told it's immoral for us to follow policies that will dump our surplus agriculture on them and destroy their domestic economies. But nevertheless, I agree with what I think you were suggesting, that the politicians need to resist that kind of pressure and point out that in the long run, the failure to do so can backfire.
One last question, if you were to give advice to young students today, who are interested in these issues, what field should one look into if wanting to have the greatest impact?
Robert Fogel: Well I would and I do urge students to get into health economics. The United States currently spends 15% of it's gross domestic product on healthcare. China is spending about 4%. We will by 2020, probably be spending 21% and China will probably be spending 10 or 11%. So in all countries, even though people are getting healthier in all these countries, we're spending more money, not because we're sicker but because we have new technologies that permit us to overcome, in rich countries especially, the problems of aging.
We can give people a longer life free of chronic disabilities and when they do get those disabilities, we have very effective means to minimise their effect and the United States is so rich that the percentage of our GDP that we spend on food, clothing and shelter is only about ⅓. 100 years ago it's 90%, so as we get richer and richer, a smaller and smaller part is spent on what we used to call necessities, and more and more is spent on healthcare and education and not just education for a job but also education for spiritual improvement for understanding literature, poetry and other things. The quest for knowledge, I think is as basic a human drive as the need for food. So when we've satisfied the need for food, these other strong human urges gain precedence and that's what I think is happening in the rich countries.
Thank you, that's a great note to end this interview on. Thank you very much, Professor.
Robert Fogel: Well thank you for those questions.
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