My brothers- and sisters-in-arm of Ondata have been exploring ways to use LLMs to facilitate their interactions with online sources of open and statistical data. In so doing, they have hit on a working style that I find very promising.

The obligatory disclaimer: I do not endorse “artificial intelligence”, a highly controversial socio-technological construct. As an economist, I am irked by the economic aspects of the tech: the insane concentration indices in this industry, the information asymmetries, the gigantic losses associated with the expansion of its customer base, its “dogshit unit economics”, to quote Ed Zitron, its massive environmental and social costs, its dark politics that makes it gravitate towards disinformation and deepfakes. I could go on, but you get the idea. This is probably preaching to the choir anyway, given that most people I hang out with are very skeptical of anything that smacks of “AI”.

And yet, Andrea Borruso and Matteo Fortini (among, undoubtedly, many others) have proposed an approach that I quite like. It goes like this: if you ask a data-related question to a LLM, such as “is the unemployment rate in Guatemala growing faster or slower than that in Ethiopia?”, you get better than even odds that the LLM will just make something up. A more reliable approach is to download the pertinent data from an authoritative source, and see for yourself. Andrea and Matteo, as honoured elders in the Italian open data community, are no strangers to tracking down data warehouses, poring over API documentation, building structured queries and feeding the result of those queries to scripts that will tease answers out of the data. And their substantial experience tells them, inequivocally, that having to do this work every time you want a question asked sucks big time.

But they found an alternative: codifying their deep knowledge of structured data and structured metadata in ways that are legible to an LLM. Then, instead of asking the LLM the direct question, they can instruct it to look up the data at the source – say, the World Bank’s data warehouse. This is possible because, after 20 years of open data movement, authoritative data to address many of those questions exist, and are structured. For example, there exists an ISO standard for machine-to-machine exchange on statistical data, called SDMX and followed by many statistics agencies. So, Andrea built OpenSDMX, a command-line interface that interacts with SDMX-compliant data sources. Give it a search term (unemployment rate Guatemala), and it will search the catalog, find the relevant datasets based on the metadata, and return a menu of options of what to download. For example, do you only want to know the most recent estimate of the unemployment rate, or would you like a time series? If sub-national data are available, do you want them too? Perhaps a disaggregation by sex, or age group? And so on.

OpenSDMX works well on its own, but it was set up so that you can interact with it via any LLM. This is done via something called a skill, which is a human-readable file containing the instructions necessary to use the command line interface well. To a human it reads like good documentation: to a LLM it is a long, detailed, well structured prompt. Thanks to it, LLMs can turn the instructions of their human operator into a structured flow of interactions with SDMX-compliant data sources by means of well-formed SDMX queries – there is no need to guess, because the skill contains correct, unambiguous structures written and validated by someone like Andrea and Matteo, who knows the standard well. Further specifications of the skill (more text files) address the quirks not disciplined by the SDMX standard itself. For example, while EUROSTAT (the European Union’s statistics agency) and ISTAT (Italy’s) both comply with SDMX, the former labels its variables in lowercase, and the latter in uppercase. This is the type of quirk known for causing lots of mild irritation to data scientists: having it encoded in the skill means your LLM benefits from the experience of veteran data scientists, even if you do not bother to read the skill.

The approach works not only for statistical data, but for any kind of data and metadata as long as they are exposed according to a standard. Another conceptually similar project built by Andrea is a Model Control Protocol (MCP) server to interact with open data portals and their content. This is possible, again, because the information therein is structured according to well-documented standards. Most open data portals are built on CKAN, and the datasets hosted therein follow another standard, DCAT. The logic is the same: open data portals are somewhat standard, and over the years the community has produced lore about how to whisper to them so that they will return the data we want. Encode that lore into text files that an LLM can interpret as a prompt. Then use the LLM as a natural-language interface to the data.

In social and economic research, it happens quite often that you have a hunch that can, in principle, be validated, or disproven, by looking at data. Andrea’s and Matteo’s approach greatly reduces the distance between formulating a question and getting an initial answer. It is even more useful when you have not a question, but a hunch, and you want to get an initial look at the raw data to see if you are even remotely right.

I decided to test OpenDMX as a way to validate or invalidate a conjecture. My conjecture was:

Within the European Union, Eastern European member states are undergoing more economic upheaval than average.

I wanted to test this conjecture by comparing the rates of business creation and business destruction (as captured by the creation of new companies and the cessation of existing ones). Furthermore, I want to do it by looking at sub-national-level data, if they exist. The idea is that upheaval is in the extremes, not in the averages: I am looking at the location of regions where business creation and destruction are unusually fast. To be clear, this is a completely unfounded conjecture, but it is a conjecture of the kind that economists make all the time, so it is valid as a test.

I launched an LLM and called up the skill, then wrote a prompt:

> /sdmx-explorer
> Business creation and business cessation rates in European Union            
   countries, geographically disaggregated   

 I have found the primary datasets on Eurostat that cover business creation
  (births) and cessation (deaths) with regional disaggregation.

  The most relevant dataset is BD_SIZE_R, which provides comprehensive business
  demography data down to the NUTS 3 region level (the most granular regional
  level in the EU, roughly equivalent to provinces or counties).

  Candidate Datasets

   1. BD_SIZE_R — Business demography by size class and NUTS 3 region ⭐
      Recommended
       * Coverage: All enterprises (including those with no employees).
       * Key Indicators: Number of births, number of deaths, birth rate (%),
         death rate (%), and net growth rate.
       * Dimensions: Region (NUTS 3), economic activity (NACE Rev. 2), and size
         class.
       * Timeframe: Typically annual data.

   [...]

  How would you like to proceed?
   - Would you like to explore BD_SIZE_R (all enterprises) or focus on
     employer-only data?
   - Do you want to see the specific regions or economic sectors (NACE)
     available?
   - Are you interested in a specific year or a recent comparison?

 > Use BD_SIZE_R at NUTS 3 disaggregation. For each NUTS3 region, get birth and 
   death rate. Write to console the URL to the original query for verification  
   purposes. Next, create a scatterplot where each NUTS3 region is a point. Put 
   birth rates on the Y-axis and death rates on the X-axis. Do not label        
   datapoints for legibility. Color-code them according to macro-region:        
   Western, Northern, Eastern and Southern Europe. In the legend, provide a     
   list of the countries included in each region.

I have completed the analysis of business birth and death rates across
  European NUTS 3 regions.

  Verification URL
  You can verify the original query and data structure directly on the Eurostat
  portal:
  https://ec.europa.eu/eurostat/databrowser/view/BD_SIZE_R/default/table?lang=en
  (https://ec.europa.eu/eurostat/databrowser/view/BD_SIZE_R/default/table?lang=e
  n)

  European Macro-Regions (Legend)
  The scatterplot color-codes regions based on the following grouping:

   * Western Europe: Austria (AT), Belgium (BE), France (FR), Germany (DE),
     Ireland (IE), Luxembourg (LU), Netherlands (NL), Switzerland (CH)
   * Northern Europe: Denmark (DK), Estonia (EE), Finland (FI), Iceland (IS),
     Latvia (LV), Lithuania (LT), Norway (NO), Sweden (SE)
   * Eastern Europe: Bulgaria (BG), Czechia (CZ), Hungary (HU), Poland (PL),
     Romania (RO), Slovakia (SK)
   * Southern Europe: Croatia (HR), Cyprus (CY), Greece (EL), Italy (IT), Malta
     (MT), Portugal (PT), Slovenia (SI), Spain (ES)

  Results Summary
   * Data Source: Eurostat BD_SIZE_R (Business demography by size class and NUTS
     3 region).
   * Indicator: Birth rate (ENT_BRTHR_PC) and Death rate (ENT_DTHR_PC).
   * Geographic Detail: NUTS 3 disaggregation (counties/provinces).
   * Latest Data: Most regions reflect data from 2021 or 2022.

  The generated scatterplot scatter_demografia_final.png shows the correlation
  between business creation (Y-axis) and cessation (X-axis). Regions along the
  diagonal have a stable business population, while those above the diagonal are
  growing and those below are experiencing a net contraction in the number of
  active enterprises.

But when it is done, it can be incredibly empowering. Ukrainian open data activist Nadiia Babynska Virna reports using Andrea’s CKAN MCP server in combination with a locally-run LLM to check the openness of public sector information with no code and only basic data science skills, “in the middle of a war”. Centaur. Conclusion: while my hunch about the geography of economic upheaval was unfounded, Doctorow’s own centaur/reverse centaur model holds. In his words, it’s not what the technology does, it’s who the technology – and, I would add, the data – is for, and who it is done to.

Here is a short post to test my posting script. I am trying to automate the posting to Mastodon from my blog, inspired by Cory Doctorow’s POSSE (Post on Own Site, Share Everywhere) concept. The concept is described here.

I do this via a Python script, and am using this post to test that script. Please ignore the post itself and the corresponding Mastodon thread. I will be deleting both soon.

I have just returned from walking St James’s Way. It is perhaps the most famous of the medieval pilgrimage routes: for twelve centuries pilgrims have walked it to reach the cathedral of Santiago de Compostela, in northwestern Spain, and they still do. According to tradition, the apostle James is buried there; since the early Middle Ages, the church has granted an indulgence to pilgrims that make it to Santiago. The flow of pilgrims towards Santiago is believed to never have stopped since the Middle Ages. In modern times, it shrank to a trickle, but has been growing at double-digit since the 1990s. It is estimated that over 500,000 pilgrims walked 100 kilometers or more in 2024.

To walk the Way is to participate in a subculture in which it makes complete sense to set aside a month of your life so that you can walk six-seven hours a day, sleep in crummy hostels, deal with foot blisters and minor (and sometimes not so minor) injuries. It may sound counterintuitive, but people take to this kind of stuff so easily that I suspect it may be hardwired. Maybe we are evolved for the collective nomadism we practiced before agriculture? I have no idea. Certainly the same ease of adoption applies to endurance sports like long-distance running and its even more extreme cousins, triathlon and iron man competitions: they seem weird from the outside, but their popularity speaks for itself. You will be hard pressed to find extrinsic rewards that justifies these huge investments of time and effort. The simplest explanation for why so many people walk St James’s Way or run marathons is that they enjoy doing so. And that takes me to Keynes.

In 1930, John Maynard Keynes wrote a landmark essay, Economic Possibilities for our Grandchildren (full text). The Great Depression was raging on, but he refused to despair. Yes, the rate of technological change had temporarily outpaced the rate with which “we can find new uses for labour”. But the Depression was just a sideshow. Based on a conservative estimate of a 2% yearly increase in the stock of capital, and a 1% yearly increase in efficiency due to technical progress, Keynes concluded that “mankind is solving its economic problem”.

I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not—if we look into the future—the permanent problem of the human race.

John Maynard Keynes, “Economic Possibilities for our Grandchildren”

It was coming time for the Round-the-Worlder, which began every other perihelion. Starting from Sheffield the contestants could run east or west around the world, without wristpad or any other navigational aid, shorn of everything but the information of their senses, and small bags of food and drink and gear. They were allowed to choose any route that stayed within twenty degrees of the equator (they were tracked by satellite, and disqualified if they left the equatorial zone), and all bridges were allowed, including the Ganges Strait Bridge, which made routes both north and south of Marineris competitive, and created almost as many viable routes as contestants.

– Kim Stanley Robinson, Blue Mars

However, many reports are rarely read. A famous 2014 World Bank study found that about a third of their reports received zero downloads. This does not mean no one reads them, but it does highlight how difficult it is for non-intended readers—like researchers or practitioners in related fields—to find them. The current system is low in serendipity. Additionally, as websites change, old URLs break, resulting in 404 errors and lost access to content. This phenomenon is known as “link rot”.

We can do better. Academia has faced the challenge of serendipitous knowledge reuse for centuries. Over the past thirty years, it has built a robust ecosystem by leveraging the digital revolution and the power of open standards and open licenses. If your work includes producing reports and publications for public consumption, you too can adopt these practices to make them more discoverable and reusable, increasing their impact.

Unique identifiers enable a digital ecosystem of services

At the heart of this ecosystem are Digital Object Identifiers (DOIs). A DOI uniquely identifies any file—article, report, dataset, or executable application. DOIs are an ISO standard, issued by Registration Agencies that maintain metadata (authors, year, organisation, keywords, etc.) in interoperable databases. The largest is Crossref, a consortium of 23,000 publishers, currently handling two billion API requests per month. In a similar way, authors are uniquely identified by ORCID – Open Researcher and Contributor ID. ORCID provides an open, API-accessible database of researchers, automatically updated as new papers are uploaded. DOIs and ORCIDs create a web of linked data: papers link to their authors, and authors link back to their works.

These open, machine-readable datasets of uniquely identified knowledge products and authors have enabled a rich ecosystem of services. Repositories like arXiv, Mendeley and Zenodo allow researchers to upload papers and assign DOIs. Applications like Altmetric index documents in these repositories to measure their impact by tracking citations and aggregating them into bibliometric indicators. These, in turn, influence inclusion in major academic databases, such as Web of Science, Scopus, Lens and Google Scholar.

Academic repositories accept papers before they get peer reviewed (“preprints”), acknowledging that some knowledge is at most useful when its fresh, and academic review processes typically takes months. So, knowledge products from non-academic organizations (like NGOs) and academic research papers have become interoperable, part of the same digital space. The research community has come to read and cite reports more often, and this adds to their serendipity and impact. UNDP and other organizations could even take advantage of this to curate their own series and even journals, displaying content from repositories via API and experimenting with forms of review and curation. The European Commission’s Open Research Europe is an example of this model. These innovations, and others that will come, are enabled by community-created software libraries to access Crossref’s APIs, for example for Python and R.

The ecosystem includes bibliography management applications like Zotero. Instead of manually creating a bibliography for every publication, researchers maintain libraries of works they cite, from which these applications create bibliography on the fly. Such applications download metadata from Crossref and transform them into citations and bibliographies in any format, via plugins for LaTeX, Word, Google Docs, Obsidian and other editing applications.

Legal interoperability unlocks the power of open

The digital revolution enables remixing and cross-referencing from a technical perspective, but legal barriers remain. Knowledge products are governed by intellectual property rights (IPRs), which by default restrict many uses. Licenses specify what can and cannot be done. For example, Google Maps data is not open. This means that you can use Google Maps as a service, but you are not allowed to do anything else with the data. Say you use Google Maps to obtain the coordinates of UNDP’s offices around the world and put the coordinates in a CSV file. Although you knew the locations of the offices and have produced the file, the fact of having used Google Maps to find out the coordinates entangles your file with Google’s IPRs. You cannot publish it without calling in the lawyers.

To be truly frictionless, knowledge products must be both technically and legally open: irrevocably cleared by their copyright holder for use, redistribution, modification, and remixing by all, as per the open definition. This is crucial for datasets, as researchers avoid data with legal hurdles. Failing to use open licenses limits the spread, and therefore the impact, of your work. If you have a say in crafting your organization’s policies on licensing its own content, I would recommend you push for an explicit and blanket authorization to publish using open licenses, like those provided by Creative Commons. 

Publish for frictionlessness

To wrap up, here’s some recommendations for publishing reports and publications. 

• Use Zenodo as a long-term repository. It provides free DOIs, supports versioning, and is run by CERN, ensuring reliability.
• Obtain a (free) ORCID for each author or contributor and include them in the metadata. Zenodo supports multiple contributor roles, such as “team leader” and “data curator”.
• If your report is based on data you collected, publish the dataset separately with its own DOI and cite it in the report. Publishing open data is nontrivial; see a detailed guide to do that.
• Use open licences, such as Creative Commons Attribution 4.0 International (versions 4 and above protects your readers from copyleft trolling), which is widely used and protects both creators and users.
• Link your website’s report page to Zenodo for downloads to centralise page views and download statistics.
• Consider using bibliometric services such as Altmetric to track your impact over time.

Image made by Notebook LLM, based on the text of the post and a prompt written by myself.

Spring has arrived for economic alternatives

As I stood on the stage of the Istanbul Innovation Days 2025, I experienced a feeling like the beginning of spring, when you throw the windows wide open and let warm air fill the room. The economics winter was over, for good. It was March 26 – the beginning of spring indeed – and I had the honour of facilitating the plenary session on “Alternative Economic and Financial Models”. Our panel had come together to claim that bold, comprehensive economic transformation was both urgent and possible – in fact, it was already under way in many parts of the world.  

For economists such as myself, this is an extraordinary claim. Since the 1980s, the economics profession has been all but dominated by a paradigm known as neoclassical economics, vigorously promoted by many prestigious scholars associated with the University of Chicago. The Chicago school’s success was not limited to academia: it persuaded political leaders the world over that its brand of economics was the only sound, reasonable one, not only in existence, but possible. British Prime Minister Margaret Thatcher summarized it brilliantly in 1980: “there is no alternative”, no point looking for other ways. Two full generations of economists and policy makers complied, defining a half-a-century long winter of economics.  

Progress everywhere

And yet, there we were, in Istanbul, and spring had come. We were seeing robust policy innovation to equip economic decisions makers with new tools – job guarantees, universal basic income and services, carbon coins, community land trusts, local energy communities, tailor-made financial instruments, twenty minute cities, missions and moonshots, and more. We were seeing ambitious redesign of economic institutions to deploy these new tools effectively. And we were seeing rapid progress in devising indicators of economic performance to guide those deployments, indicators that move beyond GDP – with UNDP and the UN as a whole taking a leading role.  

The best part? None of this is only theoretical, and none of this is limited to a narrow club of best-in-class from affluent countries. Our panel was itself composed of doers, practitioners, with solid experience, hailing from all over the world. In Costa Rica, Eduard Müller and Costa Rica Regenerativa turned a previously extractive economic system into one that rewards the regeneration of soil and nature. In Indonesia, Natalia Arjomand and Second Muse Capital devised a highly successful financial instrument to deliver interest-free loans to small enterprises in the waste management and recycling sector. In South Africa, Miles Kubheka and Wakanda Food Accelerator build economic inclusivity around food, an economic good which also encodes conviviality and care. And in Sicily, Giacomo Pinaffo and the Messina Community Foundation have built a rich and diverse local economy in solidarity, with hundreds of businesses coordinating under a single strategic umbrella in sectors like landscaping services, bioplastics, energy production, social housing, beverages, and the arts. The anti-colonial movement played a large role in opening our eyes, letting us see these contributions (which started well ahead of, and independent from, progress in academia) not as “lagging economies”, but as viable alternatives in their own right. 

The power of local (and of science fiction) 

There is much to be learned from their stories, and the stories of practitioners like them. I, for one, am determined to continue learning for years to come. But three learnings in particular stood out for me.  

The first one is that economic transformation works, not always, obviously, but more often and better than conventional economic wisdom gives it credit for. And it stands to reason: thanks to the progress I mentioned above, reformers in this generation simply have more tools in their armory than the conservative thinkers that oppose them. Exaggerating a bit for the sake of clarity, the latter have spent half a century developing one single option, that of free markets that, once correctly liberalized, will automatically deliver the best possible outcome. If that option fails, they have nothing else to offer.  

The second one is that economic transformation tends to happen fastest and deepest at the local level. Economists invariably point out that this is non-optimal, because critical levers for economic policies are only available to states, not to regions or districts or cities. They are right: and yet this oddity tells us that collective institutions closest to the people feel the demand for economic transformation strongest. I predict that regions and cities will continue to lead in institutional and policy innovation when it comes to the economy – and also that small states might have large impacts if they get on board with the economic transformation agenda. 

The third one is that we can only build economies we can imagine. Fifty years of “there is no alternative” have weakened our ability to imagine economies more humane and egalitarian than the ones we inhabit now. We need to re-develop our economic imagination muscle if we are to design successful economic transformation. Economists are not of much help there, so Kate Beecroft and Özgür Can Özüdoğru – with remote support from complexity economist Joffa Applegate – demonstrated how science fiction (especially in its more economically inclined variants, like cli-fi, solarpunk and afrofuturism) can help us travel with our minds to alien economic systems, and try them on for size. They made this point by delivering a brilliant workshop they designed with the Science Fiction Economics Lab, that took us to a fictional future Istanbul that had seriously tackled some of the very real economic problems it is facing now, such as housing and water scarcity.  

Stories are, as ever, a potent catalyst of human transformation. People don’t abandon broken systems because they have seen graphs on inequality graphs or read critiques of GDP. They change when they see new models come to life. When Costa Rican farmers heal their lands, and see the butterflies return. When Indonesian small businesspeople are entrusted with the capital to build their vision of a circular economy. When South African “foodpreneurs” gain access to platforms where food becomes power, pride, and possibility. When Sicilian researchers, businesses and workers find ways to build a social economy from the ground up, for themselves and others.  

As we traded war stories with one another and the audience of the Istanbul Innovation Days, I believe it became clear to everyone that Margaret Thatcher was wrong. She was wrong in 1980; she is even more wrong now, in the face of all this progress and creativity. Let’s leave “there is no alternative” behind, and embrace, instead, the message of UNDP’s Human Development Report 2025: “it’s a matter of choice”. The report refers to Artificial Intelligence, but I believe it applies to economic institutions as well. Those we have, we chose. And we could, and should, choose others, if they serve us better.  

I look forward to a future where we do so, with everybody’s contribution. In fact, I am working on a draft concept note to develop a portfolio on economic transformation. Please reach out if you want to contribute, or simply know more.  

Heartfelt thanks to all panel- and workshop- participants for their suggestions in writing this blog post. 

The Scholomance is a school for wizard children, set in the eponymous world created by fantasy author Naomi Novik. In this world, magical predators called maleficaria feed on mana, a substance that allows wizards to do magic. Both children and adult wizards have it, but the adults are more dangerous than most of the maleficaria themselves, so the latter need to feed on children. This is a major threat to wizardkind: in the wild, nineteen out of twenty wizard children are eaten before maturity. The solution to this is the Scholomance: a semi-sentient, heavily warded magical building where children are better protected while they learn to defend themselves against the maleficaria. However, this solution is far from perfect: some predators still get in, and kill three out of four students before graduation.

Novik’s Scholomance Trilogy is a hugely enjoyable read. Cory Doctorow wrote a raving review of it; he’s not wrong, and I am glad he put me onto it. Even more so because, as I went through the three novels, I discovered the literary equivalent of a secret door to… a political economy based on a particular value theory called the labour theory of value (LVT). And look, maybe I am seeing ghosts here (no pun intended). I am like into analyses of science fiction novels, so maybe I am a guy with a hammer and all I see is nails. But still… humour me here, and see if it makes sense

Let’s start with mana. Wizards can do magic, but only if they have mana to spend. A powerful wizard is like a powerful car; its power is only theoretical until you put fuel into the equation. How do you get mana? A wizard can produce mana directly by engaging in a tiring or tedious activity, like doing pushups or crochet. He or she can also receive it from another wizard who gives it willingly: in fact, this how wizards purchase from each other things that they value. Finally, a wizard can get mana from his or her own storage: besides their own bodies, wizards have access to magical artifacts that hold mana and can be drawn from as needed.

To an economist this means that mana is currency in the Scholomance world. It serves as mean of exchange, numeraire, storage of value; it is fungible. It also means that magic is derived from human labour: every act of magic requires mana, hence somebody’s effort or drudgery. In LVT terms, the socially necessary labour or absolute value (not to be confused with the exchange value) of an act of magic is equal to the amount of labour gone into producing the necessary mana. The analogy is quite strict, to the point that, as a wizard gets fitter and doing pushups becomes easier, he or she needs to do more of them to produce the same quantity of mana. (Novik: “The physical labor isn’t what counts. What turns it into mana is how much effort it costs me.”).

So far, so good. Here’s the curveball: it turns out there is another way to do magic after all. It’s called malia, and consists in pulling mana from your surroundings. Novik:

Everyone—almost everyone—uses a bit of malia here and there, stuff they don’t even think of as wicked. Magic a slice of bread into cake without gathering the mana for it first, that sort of thing, which everyone thinks is just harmless cheating. Well, the power’s got to come from somewhere, and if you haven’t gathered it yourself, then it’s probably coming from something living, because it’s easier to get power out of something that’s already alive and moving around. So you get your cake and meanwhile a colony of ants in your back garden stiffen and die and disintegrate.

So, in the Scholomance world there are two paths to doing magic: mana and malia. If you use the LVT analogy to translate this sentence in terms of our world, it reads like this: there are two paths to value production: labour and extraction. “The power’s got to come from somewhere” is Novik’s equivalent of “there is no free lunch”. If you have power and have not created it with the sweat of your brow, you have appropriated it from something or someone else.

This is a rather elegant formulation, because it puts under the same analytical umbrella two phenomena that most economists would consider distinct: negative externalities and exploitation. Negative externalities appear when an economic actor manages to shift some of the costs associated to their production onto the environment, for example through pollution. A company might be doing well, like, say, Dupont at the end of the 1990s, its profit tidy and its markets bullish – meanwhile, though, they are discharging poisonous chemicals into rivers, and people are dying of kidney and testicular cancer. Malia. Or take the example of high-octane fashion brand Armani, who was caught by Italian police subcontracting its 1,800 EUR bags, by way of a contractor, to sweatshops were workers were paid 2-3 EUR an hour to works 10 hours a day so that the sweatshops in question could sell the bags to Armani’s contractors for 93 EUR. Malia.

Some wizards go all in, only finance their magic with malia, and end up being responsible for a lot of suffering and death. Some do not want any part of this malia business, and go “strict mana”. Most are somewhere in between; they produce mana of their own, but also “cheat a little”. In the Scholomance world there are two problems with cheating a little. The first is that cheating adds up to create a negative balance on the other side of the ledger, compensating the positive balance of the additional magic that the cheater can do. Novik:

Whenever somebody needs a little more mana than they’ve got, they steal it from somewhere, seems like no big deal – but you end up with a negative flow [sic] of mana. When that negative flow gets big enough, a maleficaria will generate around it. It’s not a secret, but people do it anyway […] All the psychopatic wizards in the world put together aren’t the real problem. The problem is that everyone cheats. And the we get more maleficaria, and our kids die, and still everyone cheats, because the two things are too far apart. You can live your whole life without cheating once […] and still your kid’s just as likely to get eaten, and meanwhile someone else cheats every day and their kid sails through.

That, ladies and gents, is a textbook prisoner’s dilemma, with maleficaria in the role of negative externalities. And now to the second problem with cheating a little: by being so obviously beneficial, it makes it easier to cheat a lot more. In the Scholomance world, the highest-reputed wizards have figured out way to create magical fortresses called enclaves, that will keep maleficaria out, making their lives a lot safer and more comfortable, and give them the opportunity to acquire a lot of cheap labour by less fortunate wizards, dangling in front of them the possibility of a place in the safety of the enclave.

In the Scholomance world, safety is the main scarce resource around which the wizarding economy turns – the quantity on the left side of its production function, as it were. From an economic perspective, therefore, book three of the trilogy comes with the main plot twist: the scarcity of safety is, at least in part, manufactured.

Here’s how this happens. The protagonist, a powerful witch, discovers that making one of these fortresses requires hideous human sacrifices, and releases deadly maleficaria into the world. So, enclaves as a magical technology make the world safer for the privileged few, but less safe for everyone else. She then digs up a set of spells (a magical technology) to build enclaves without human sacrifices. “The power has to come from somewhere”, so the resources that do not come from those sacrifices must come from honestly earned mana; and the process cannot build shiny, gigantic fortresses, but only smaller ones, that would reduce the space available for each wizard.

Still, no human sacrifices and no extra terrifying wizard-eating monsters released into the wild sounds like a great value proposition. And yet, the witch has no takers at all: no wizarding community would replace their grisly foundations with something cleaner and more durable, though more modest. The idea of renouncing to their advantages is, for enclaves-dwelling wizards, simply unthinkable. As Novik is not shy to point out, the system works poorly for wizardkind as a whole, but it works brilliantly for the more privileged wizards in the enclaves, who have safety and substantial leverage on everybody else. Producing monsters is perversely useful for enclavers, because it makes wizards on the outside even more desperate to sacrifice their lives and abilities to serving the enclaves in the hope of being allowed in: in other words, it enables exploitation. Enclavers are basically in the protection business: they create a threat for other wizards, then extract services from them for partially protecting them against those threats. Creating externalities and exploiting independent wizards is how enclavers procure the mana that powers their dominance.

Something similar happens in our own real-world economy. Countries that got wealthy on the back of colonial extraction and fossil-fuels burning are not only refusing to provide proper loss and damage compensation to the countries that suffered for the very real “maleficaria” brought into existence by those behaviors. They are taking advantage of the dire conditions created by climate change in vulnerable countries to extract even more resources, like critical raw materials, in return for desperately needed capital. Like in the Scholomance world, our safety needs are, at least in part, manufactured: recent research suggests that we could meet everyone’s energy needs while remaining within planetary boundaries. But we don’t, because, like those wizards in the enclaves, we do not want to share.

I don’t know if Novik is familiar with the economic notions of sufficiency and degrowth. I suspect she does. If not, she has reinvented them, alongside the social and moral dilemmas that stand in the way of their widespread adoption. That is at the same time depressing and great: depressing, as she mercilessly rubs in our face the cruelty and injustice of the economic systems both we and the wizards live in, and great because the Scholomance trilogy makes for a great metaphor to explain capitalism to young adults. And, yes, to economists such as myself.

Photo: Public domain, from https://www.needpix.com/photo/download/1017235/witch-sorcerer-woman-female-young-medieval-magic-gothic-dark

I am part of a group which is building a cohousing in Brussels. It’s a risky endeavor but I could just not resist it: I dislike how the real estate market has financialized the right of humans to decent housing, and I dislike how the manner of building homes have made us lonely, alienated, surrounded by strangers. As an economist, I also find modern housing incredibly inefficient, because it does not produce public goods – like common spaces and communities – that are, by definition, the most efficient goods there are. And so, after many years of longing and reflections, in late 2021 I found myself in a small group willing to try it out, and took the plunge. Our cohousing is called The Reef in tribute to the diverse webs of cooperation and competition that exists in real coral reefs, and also as an act of remembrance should all coral reefs in the world die, which is not unlikely at all.

It is an incredibly rich, life-changing experience. It is also the second most difficult thing I have ever done (the first was founding a reasonably successful punk-folk band), and the one with the first-highest stakes (for most of us it is all of our lives’ savings). Yet, I never posted about it before, with one exception at the beginning of the journey. Frankly, I was not sure of what lessons one could draw from it: we were certainly working hard, but were we getting anywhere? Were we on our way to success, or just deluding ourselves? I could not tell. In the legal framework and economic landscape of Belgium in the 2020s, building a cohousing is a highly uncertain affair. At every turn, you face another obstacle that has the potential to stop the entire project dead in its track. Will we find a site to build the cohousing in? Will we be able to work together in reasonable harmony, or will the group collapse under the weight of interpersonal conflict? Is there even enough demand for cohousings to complete a group? Will the war in the East make construction materials unaffordable, and our project with it?

Still, people around me are interested in learning about cohousing. Many have encouraged me to start sharing my reflections about it. And it is the right time: the project has reached a degree of maturity where, I think, we can start drawing some lessons from it – though it could still fail, of course. There is a lot to share, but I am going to start with only few of the clearest learnings so far.

1. Self-managed projects are surprisingly efficient

Over the years, I have spoken to many people that dream of living in a cohousing. Despite this, it is almost impossible to just go out and buy a house or an apartment that is part of one. There appears to be what economists call a market failure: there is a market demand for a more social way of living, but no supply. So, if you want to live in a cohousing you will most likely need to start a group, or join one, and have your cohousing built to specifications. Groups must make a choice as to how to organize themselves. One possibility is for the group to directly take charge of the project management: find a site to buy, negotiate with the owner, purchase it, hire an architect and a construction company, organize the financial flows and so on. The other is to hire a company that will take care of the project management for you. In Belgium we are fortunate that there exist two such companies.

The Reef chose to be a self-managed group. In practice, this means that a bunch of random people, none of whom is a real estate or construction professional, is now running a 9 million Euro real estate project. Counterintuitively, this is working better than we had any right to expect: processes are transparent and relatively fast. We learned to work as a team quite quickly, and there is a high level of accountability. The Reef is a healthier, more efficient working environment than many professional spaces I have worked in. We have to work harder, but that work will pay for itself in terms of added trasparency and fuller ownership of the project. There is pride and joy in working together as a group to build our future home, and we believe that doing it this way will make our little community even more cohesive – and we save money.

2. Building community comes natural

Most people in our group did not know each other before joining. Most of us joined not based on previous friendships or family ties, but because we are drawn to the idea of cohousing itself. Some of us thought this might pose a challenge: in this kind of project people are making large investments in an endeavor the outcome of which depends on their cohousing mates playing nice. A lot of trust is needed. Among the many challenges of cohousing, this one turned out to be fairly easy. Common involvement in this kind of project builds mutual trust, even friendships, relatively quickly. This is because the project itself gets you into repeated interactions with each other. Reputation is obviously valuable, so people do not like to drop the ball on one another. In a short time, you realize you can trust these people after all, and start to relax and enoy their company. I have no doubt that The Reef will be an imperfect but functional, and even beautiful, community.

3. Process and information tidiness are critical

In 2021, as a prequel to the formal start of the process of building The Reef, the founding group spent a few months researching cohousing. We read up on everything we could find, and engaged with extant cohousing groups to learn from their experiences. We also arranged to visit several already-built cohousings. All sources pointed to how critical good process is.

The reasoning is straightforward. Building a cohousing takes 4-7 years. During this period, you will be doing weekly meetings plus individual- or small-group work. All of this effort is unpaid, and you will still have all of your personal and professional responsibilities. You might even be asked to step up a little to cover for your cohousing mates: for example, in our group parents of small children are given a pass, and just asked to respect the deadlines and otherwise do what they can, no questions asked.

In a situation like this, it is super important to be methodical and efficient, or you will become overwhelmed. The Reef is very methodical, on two fronts. First, we are organized according to a variant of a model called sociocracy. This means plenaries + teams that report to the plenary and do the heavy lifting of preparing the decisions for the plenary to take. All meetings are facilitated (by a Team Facilitation, whose members took trainings in sociocratic methods). The entire group took trainings in non-violent communication as a measure to prevent the escalation of conflicts. This method is very efficient, and it saves time on decision making that we sorely need for operations. For example, while searching for a site we scouted the entire city on bicycles and on foot for six months, mapping and evaluating 170 potential sites. Even with a fairly large group of a dozen active adults, you see why efficiency is so important.

Second, we take information management seriously, and adopted ways inspired by the open source and open knowledge movement. All information is public by default, and protected only if there is a need for confidentiality. A very successful move was to ban emails completely, and instead move our communication onto an online forum. This reduces Inbox stress and allows people full access to every communication, letting them choose what they want to engage with. It also makes past communications very searchable (we even use tags consistently, something that I have not experienced in any other working environment). Do not underestimate the impact of using good forum software over email – let alone stuff like Facebook or Whatsapp or Slack groups, which is not, repeat not, optimized for economical and accountable communication! Our forum as of now hosts over 10,000 messages, and has over 300,000 pageviews, and the fact that it allows access while not flooding us with notifications is valuable. Transparency is also important

From open source culture we also learned the importance of good documentation: for example, we have a guide to The Reef’s digital assets, one to using tags and groups in the forum, one to making changes to the website, a manual to onboard new members, a governance document. Each one of these shares knowledge and empowers everyone in the group, removing organizational bottlenecks, at the cost of having to write things down in a clear and accessible format.

4. A cohousing ecosystem is coalescing in Brussels

Self-managed groups like ours need not be navigating uncharted waters all the time. To our surprise and delight, cohousing is something like a movement. People support each other, mostly with information that can save us enormous amount of time. The advice we received from our sister cohousings at the beginning of the journey was invaluable. Also, there are now a few professionals in Brussels that understand cohousing and have experience of building them: the architects’ studio Stekke and Fraas has already built three cohousings in Brussels; Mark Van den Dries, a retired entrepreneur that has led several successful cohousing projects (he lives in one) and now offers himself as a coach; the Namur notary Pierre-Yves Erneux. A Dutch-Belgian bank, Triodos, offers mortgages adapted to the reality of cohousing.

All this means that we have it much easier than first-generation cohousings. Like all economic movements, cohousing is cumulative: if you were to start a project now, you would face fewer uncertainties than we did, because you could build on our experience. And if you or someone you know did start a cohousing, I would be interested to learn about it, be it through a link you share or by sharing war stories over coffee.

Photo: The Reef’s group explore a candidate site for the cohousing project in summer 2024. CC-BY The Reef Cohousing

A friend – I will call her Caroline – got in touch after a silence of several years. We used to work together back in the day, and had become friends. We had stayed in touch, very irregularly, through a common friend, who, like me, lives in Brussels. Caroline herself, who lived in the US when we worked together, was now back to France.

She had another former colleague, a man I will call Malik. Malik is Palestinian, and lives in Gaza with his wife and two children, 4 and 3 years old. You can see where this is going. His house was bombed, twice. His immediate family was unharmed, though some of his nephews, that used to play with his children, are gone.

Malik managed to get his family into Egypt via Rafah. Thanks to Caroline’s invitation, he obtained a tourist visa for the family to travel to the USA. With her help, he tried to obtain political asylum in the USA and Canada. But nothing worked. At the end of the customary three months, the visa was about to expire. So, Caroline’s message told us “Malik has decided to apply for refugee status in Belgium. Can you help?”

It turned out we could, a little bit. Mostly with information, and by giving him someone that he could call, a friendly voice in the New Place.

So in they flew, Malik and his wife and their two children, with a stopover in Brussels and a connecting flight to Cairo. They had a plan, supported by information we could find on the Belgian end: intentionally miss the flight to Cairo, then report to the airport authorities and ask for asylum.

It turns out that Belgium has an “airport track” for asylum seekers, and that it becomes very fast when minor children are involved. Malik and his family were first made to wait, and yes, after a long flight from the US and with two small children that’s not a joke.

But at the end of that wait, the system kicked into gear. The family was put into a car and driven to a building in the airport’s region. They were given the keys to an apartment, some money to buy food and information on where to buy it, and told to get some rest.

As the weekend came around, my girlfriend, who had taken point on the whole Malik initiative, went to meet the family and accompany it on a trip to Antwerp.

The trip was, she reports, very touching. They had a story to tell, and they wanted to tell it. They had photos on their phones: a house shot to pieces. Toys retrieved from the rubble. The missing cousins of the children, who they will never see again (though they have not been told that yet).

But check this out: they had an appointment with the Federal agency which processes asylum requests for the intake interview on the following Monday, less than one week after arrival!

The interview went something like this: the whole family had their photos and biometrics taken and was issued ID cards. After which, the official in charge basically told them: look, the situation is clear. You are from Gaza and cannot go back. Your status as refugee is straightforward and we might not even bother with a second interview. Welcome to Belgium. Here is information about your rights and the support that come with refugee status. See you in five years when you apply for citizenship.

The language was no doubt more formal (I was not there), but that was the gist of it.

It’s going to be difficult for them. Malik is a highly qualified professional, but the truth is many Belgian landlords do not like to rent to refugees. He and the family will have to learn French or Dutch to function in society. But this, by the Gods, is the asylum system working as intended. Belgium is a member state of the United Nations, which voted to adopt the Universal Declaration of Human Rights in 1948 (Belgium voted in favour). So, it is now beholden to it, and that implies offering safe haven to Malik and his family. No ifs, no buts. This is honorable.

And meanwhile my cohousing group is trying to make this a softer landing for the family. Since the group organizes some social event, it is easy to act as a sort-of-peer group for the adults while they find their feet.

Also, someone is organizing a Sinterklaas visit for their children, and maneuvers are in place to involve Malik’s little monsters.

(Because Belgium, we do not care for Santa Claus, and have our own version)

https://en.wikipedia.org/wiki/Sinterklaas

And look, the gods know that Belgium can be gleefully dysfunctional and infuriating at times. Look up “Belgian solution” and you’ll see what I mean. And the Belgian government is so blasé about dysfunctionality that it makes it own jokes about the Belgian government. But underneath it all, there are (some) functioning bureaucracies, and some simple just doing the bloody job, ESPECIALLY if your job is standing up for the underdog and the people in need.

And here, I have to say, I am having a bit of a patriotic moment, and am proud of the country where I chose to make my own stand, and of my fellow Belgians. I was never happier and prouder to have become one of you. Let’s keep doing this. Laten we dit blijven doen. Continuons comme ça. <3

The 2024 von der Leyen Commission aspires to deliver economic reform, and prepares to invoke the Draghi report as the rationale for its reform agenda. This comes at an interesting time for economic policy, because in recent years – after decades of incremental tinkering around the neoclassical model – economists have come up with several new, bold theories, models, and policy implications thereof. This body of work is new enough that people are still discussing what it should be called: in what follows I call it New Economic Thinking (NET), mirroring this 2022 report by Demos Helsinki.

NET is not a single new paradigm; rather, it is a collection of approaches (Demos calls it  “a landscape”). They differ, but share the conviction that neoclassical economics is unfit for purpose, and that, once you let go of the old orthodoxy, new instruments for economic policies become available. Methodologically, many of the authors associated with NET are skeptical about measuring human wellbeing in monetary terms, and prefer to fall back on physical quantities like calories intakes or square meters of housing (more on this). In fact, many of them have intellectual roots in disciplines other than economics, such as physics ( Julia Steinberger, Ole Peters) or anthropology (Jason Hickel). NET approaches have names like degrowth; post-growth; modern monetary theory; doughnut economics; wellbeing economics; and more. Both NET scholars and the group behind the Draghi report call for reform. In this article, I want to look at the report through the prism of NET, and reflect on the similarities and differences between the two.

1. Report narrative

The Draghi report starts with three statements.

1. The European Union needs economic growth to realize its ambitions on social cohesion, decarbonization and strategic autonomy.
2. Its economy suffers from a large and growing competitiveness gap with respect to the rival economies of the USA and China. This gap must be closed to achieve the EU’s strategic objectives.
3. To increase competitiveness, Europe must invest massively, way more than at any point in its history, and pursue coherent policies across multiple areas. This is true for economics policies writ large, and beyond: trade, competition, industrial, monetary, defence development cooperation. All these policies must be tightly integrated and put in service of the overarching strategic goal of being competitive.

Given these premises, the report identifies intervention areas: ten sectoral policies (energy, critical raw materials, digitalisation and advanced technologies – in turn broken down into high speed and broadband networks, computing and AI and semiconductors – clean tech, automotive, defence, space, pharma and transport) and five horizontal ones (accelerating innovation, closing the skills gap, revamping competition and strengthening governance). The bulk of the report then proposes, for each of these policies, some concrete objectives and the interventions to achieve them.

Similarly, many NET scholars refute the idea of a positive linkage between economic growth and social cohesion. We have known for a long time that reported satisfaction is uncorrelated to GDP per capita: this is called the happiness-income paradox and was discovered by James Easterlin in 1974. More recently, Ole Peters has shown that systems that grow on average while practically all its participants are reduced into poverty are perfectly possible : indeed, such systems arise naturally when the income of individuals grows randomly and multiplicatively over time, like most financial markets most of the time.

As for social cohesion, it has now become  clear that, from a NET standpoint, there is no automatic path from economic growth to poverty reduction. This is a key concern for academic thinkers like Jason Hickel (who argues rich countries are better off with degrowth instead), Giorgos Kallis, Tim Jackson and others. Judging from the recent report of the United Nations Special Rapporteur on Extreme Poverty and Human Rights – bearing the NET-friendly title Eradicating poverty beyond growth – these ideas are getting buy-in in the global policy space.

Social cohesion is also linked to decarbonization. The debate on just transitions shows that decarbonization is much harder for the financially more vulnerable, and therefore harder to do in more unequal societies. Joel Millward-Hopkins calculated that highly unequal systems require far more energy to provide everyone with decent living standards. The implication is that  inequality is a drain on productivity when you measure input in physical terms and output in human well-being.

The second statement – that the European economy is less competitive than the economies of the US and China, and that this is a bad thing – looks a priori reasonable. Seen through a NET prism, however, it raises empirical and normative questions. How do we measure competitiveness? By dividing the input into the economy by it output. How does the Draghi report measure output? I have not found a methodology section in the published report, but Figure 1 uses GDP to compute productivity. That’s a fatally flawed measure of productivity, because it misses what economies are actually supposed to be producing. That would be human well-being, and GDP is simply not fit to measure it, not even approximately.  This has been known since Simon Kuznets operationalized it in 1934, so I will not embark on a critique here. Suffice it to say that, when you log primary forest, you increase GDP. When you sell a public park to a real estate developer to build luxury housing on, you increase GDP. It is a wildly inadequate measure of economic performance. It is disappointing to see it used in a document of the importance of the Draghi report. NET scholars would have tried to estimate physical productivity: for example, by comparing worked hours and material input with some measure of human welfare like the United Nations’ Human Development Index.

The Draghi report’s reliance on GDP as a proxy of welfare means that its authors accept the neoclassical theory of value based on utility theory, and believe that the fundamental theorems of welfare economics apply to the European economy, at least approximately. NET thinkers reject these beliefs, as do most people who are not professional economists. This leads the report to pursuing an economy that, at times, can feel dystopian – like when the report laments that most pension systems in Europe are public and mutualized, instead of private and finance-based like in the US. This is a bad thing, if you are an investment banker, because it leaves much less hot money sloshing around on financial markets for you to profit from. But if you are a human believing in human solidarity, unwilling to trust financial markets with providing for you in your old age, you are likely to find it rather good.

From the point of view of non-investment bankers, the Draghi report suffers from a “garbage in, garbage out” problem: the best analysis will still be useless, or worse, if it aims at optimizing the wrong indicator.

3. Policy innovation – but to do what?

The third statement – that the European Union is not investing nearly enough in its future, and suffers and a gap in policy coherence with respect to the USA and China – seems intuitively correct. Europe is polycentric in nature, so everything is a hard-achieved compromise, including investment. “Frugal” member states are notoriously suspicious of public investment, seen as a machine to produce Southern European public debt and shift it to Northern Europeans. Even when there are no ideological disagreements, polycentricity means that a certain amount of horse trading is baked into any major policy decision in Brussels. On average, this reduces policy coherence: it is hard, for example, to imagine a European version of the American Inflation Reduction Act.

I can imagine several NET authors agreeing with Draghi here. Already in the foreword, the report calls for unprecedented levels of investment.

To digitalise and decarbonise the economy and increase our defence capacity, the investment share in Europe will have to rise by around 5 percentage points of GDP to levels last seen in the 1960s and 70s. This is unprecedented: for comparison, the additional investments provided by the Marshall Plan between 1948-51 amounted to around 1-2% of GDP annually.

This can-do attitude resonates with the insistence of NET scholars that we can and should do things differently, if “differently” brings better results. Scholars like Stephanie Kelton, Mariana Mazzucato, Thomas Piketty, Kate Raworth, Randall Wray have produced substantial economic policy innovations, and are advocating, sometimes successfully, for their implementation. These and other NET thinkers believe Margaret Thatcher’s quip, “there is no alternative”, to be wrong. Apparently, so does Draghi. How to organize the economy is a political choice, not an inevitability. Policy makers are more free than the study of neoclassical economics has led us to believe.

Mario Draghi began his career as an academic economist. But he is best known as a banker and a policy maker; a practitioner, more than a theorist. So, it is no surprise that the most interesting content of the report that bears his name is its discussion of various specific policies. There is some solid advice here, built on insightful analysis. For example, Chapter 3 (“A joint decarbonisation and competitiveness plan”) starts with a discussion on the root cause of energy prices. The report argues that the price of energy – gas in particular – is made “unnecessarily high” by institutional factors. Even long-term contracts are indexed to spot energy prices, and spot energy markets are vulnerable to speculation because (1) the supply is highly concentrated, and (2) the European regulation on commodities derivatives grants exemptions to companies whose primary purpose is not trading. Energy prices can be reduced and stabilized by de-financializing the energy markets; abolishing exemptions from regulation on commodities derivatives trading is a good place to start, and indeed is part of the American playbook. In a similar vein, the report offers good advice in Chapter 6, dedicated to governance: consolidate coordination mechanism; consolidate budgetary resources; extend decision making by qualified majority voting in the European Council, and so on. These are not new ideas, but the Commission may hope that Draghi’s prestige lends them extra weight.

But not all the report’s policy advice is unambiguously good. Viewed through the lens of NET, some policy proposals suffer from the fundamental misalignment, noted above, on what a “good” economy looks like. If you – like me – are sympathetic to NET approaches, it sometimes makes for disturbing reading. Several times I found things that I believe are (good) features of the European economy described as bugs. For example, regulating the tech sector (the use of the precautionary principle, data protection laws, compliance on AI) may be “a barrier to scaling up” (Chapter 2), but it has protected European citizens, at least a little bit, from the worst data protection and privacy abuse of the tech giants. Same story in Chapter 5, where the report deplores the weakness of private equity funds on the European markets. This certainly raised my eyebrows: private equity is known for asset stripping companies and impoverishing workers to the benefit of the wealthy (“buy, strip and flip”). Cory Doctorow describes its effects in a colourful, but factually correct, way:

When PE buys up all the treatment centers for kids with behavioral problems, they hack away at staffing and oversight, turning them into nightmares where kids are routinely abused, raped and murdered (NBC News). When PE buys up nursing homes, the same thing happens, with elderly residents left to sit in their own excrement and then die (Politico).

Here is a Guardian article with many links to the documented effects on private equity on the economy. It is safe to say they are not productive at all. They only appear so if you insist measuring economic output wrong. Adopting a NET perspective would have avoided the dystopian moments in the report.

4. A deeper European integration

The report builds on technical arguments to advocate for deeper European integration. We need to increase productivity; to increase productivity, we need bold, tightly coordinated policies across the board; to have those, we need deeper integration. European institutions must work in a more coherent way with one another; member states must work in a more coherent way with the EU (in Chapter 1). Specifically:

1. If tighter integration means a two-tier EU (a tightly integrated core, plus a more loosely integrate outer layer), so be it.
2. The EU should move towards “the issuance of a common safe asset” (in Chapter 5), by which Draghi means “emitting European sovereign debt”.

Deep integration of economic policy and sovereign debt issuance would bring the European Union closer to something like a federal state. This is a large step, but it appears much more realistic after the COVID crisis, when European institutions were deployed to protect the population from another massive financial crisis on top of the epidemic. Debt was issued, overcoming the resistance of the “frugal” member states, and the worst was avoided. Achieving social cohesion while decarbonizing the economy, Draghi argues, is also a crisis, in the sense that it cannot wait. He is not wrong in that. Why not, then, use the same instruments that have served us well before?

I expect that most of the public debate on the Draghi report will focus on these two proposals. Considerations more pertinent to NET, such as those on value theory and indicators of economic performance, are likely to be the province of economics geeks like myself. Still, GDP as a reliable measure of well-being? In 2024? it seems like a missed opportunity. Draghi could have made his two main proposals for European integration equally well from a NET standpoint. That would likely elicit more public support: most Europeans are facing insecurity and are more likely to support policy mixes that zero in on their well-being rather than on self-referential constructs like “the economy”.

UPDATE: Hans Stegeman has published a post in a similar vein. What I liked most about it is that he spent some time quantifying where the difference in GDP growth between Europe and the USA ended up making an impact: population increase, increase in the per capita income of the top 10% earners,  increase in the per capita income of the bottom 90% earners. The results are surprising: the bottom 90% earners have, on average, seen their income grow more in Europe than in the USA. If you take the bottom 50%, the effect is even stronger: their average income has grown 20% more in Europe than in the USA over the period 1990-2023. This reinforces the point, made in my own post, that the Draghi report is optimizing for the wrong variables.

Photo: The Eurotower in Frankfurt am Main by Marco Verch under Creative Commons 2.0

Now, some of you might have seen newer economics papers refer to something called “mode of provisioning”. The concept is not very intuitive, but – I believe – the story of school lunch payments is great to explain it.

Some of these papers come up with dramatic – and often very encouraging – results. As a recent example, consider How much growth is required to achieve good lives for all? Insights from needs-based analysis by Jason Hickel and Dylan Sullivan

https://doi.org/10.1016/j.wdp.2024.100612

This paper comes up with a terrific punchline: you could provide everyone on the planet with “decent living standard” (I will define that in a minute) with as little as 30% of the energy and materials that we consume now. This is surprising, especially given that now we are nowhere near those levels of global welfare: Hickel and Sullivan cite an upcoming paper by Hoffman et al. that find over 95% of residents of low- and middle-income countries are deprived over at least one dimension of the decent living standard! So how is it that we could technically vastly improve our welfare with one third of the resources we are spending now? There must be a gigantic source of inefficiency lying around, but what is it?