Philip Morrison and Lester Thurow—Symposium on Forecasting the Future Across Industries

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PRESENTER: It's, I think, exceedingly fitting that as we move into the home stretch of our program, rather than looking backwards, we look forward. The basic notion as we look at the group of senior executives that's gathered here today, is that most of us will hopefully be at the very pinnacle of our responsibility and authority at roughly the turn of the century. Since we very much believe that education is not a process that ends with graduation, but one that really should and must continue through one's career, the question that we're really going to be addressing today and for the next several days is where's the world going between now and say the year 2000? Where is management going between now and the year 2000? And what do we as managers need to do to make ourselves as effective as possible in what's bound to be a changing context?

I think it might be useful to think of a simple model perhaps of where we are. If we argue that right now we're here. This is the year 2000. And out here there's some sort of environment. And if we can understand what that environment looks like, what the world's going to be like, we can begin to deal with the question of what is it going to take to be as effective as we could be out in that environment?

Our plan for this process, as you know, extends over several days. Step one, which is really this morning, is to look at that world out there. To really ask where is that they were going, what is that we're going to look like? And then based on that picture, for us, using what we've learned in these eight weeks plus what we've learned in our entire careers, to really focus on the question of what our manager's going to have to do to make that work?

We're very fortunate, this morning, to have with us two of the most distinguished people possible to help us with that task, our Dean, Lester Thurow, and they extraordinarily renowned physicist Phillip Morrison. Phillip is going to be the first to speak. I know you've all had a chance to look at his biography, as have I, so I'm not going to go back over it. It's obviously a very distinguished one. I guess, there's really one thing I'd like to emphasize, however, one thing I'd like to add to it.

As I went through the biography, which is obviously replete with important publications, major appearances, and extraordinary awards, and honorary degrees, I think, the thing that struck me most is the fact that Phillip is an institute professor at MIT. And, I think, it's important to know that within MIT, there's really no honor that is greater than that. The other thing about Phillip Morrison is, I think, in addition to being an important scholar, he's a very, very effective communicator. As a symbol of this, and Phillip doesn't know I'm going to do this, but Phillip, in fact, has made a very major contribution to marketing. There's a company out there that manufactures this particular device, and I'm not sure you gonna all be able to see it, but it really has a pretty remarkable--



--characteristics and--


--I think, one more maybe.


For reasons that Phillip will explain to you, not I, this has been, in fact, a very major part of his recent work. Phillip.


MORRISON: By the way, where is that made?


PRESENTER: Hong Kong, I suspect.


MORRISON: I understand that May Day is deferred till tomorrow. Perhaps the Red Hats will not reappear until then.


MORRISON: My task is really an onerous one. I have always to begin by quoting the hero of all physicists, Niels Bohr, who was a man that was no hand at the epigram, but everything he said was so full of meaning that it-- most prosaic statements become epigrams. He said, "Prediction is very difficult, especially of the future."


MORRISON: And it's in that vein that I'm supposed to talk for a while. And I thought I would-- what I'm about to do is just give some feeling for what I think and, really, why I think it. Concerning the technical and scientific, particularly the scientific a lesser degree than the technological environment, that will surround the industrial world in the next decade or so. That's not the most impossible thing to do because I've, with many other bold profits talked about it a century in the future, and that's very safe. You'll never be contradicted, confronted with the test of that, so it's all right.

But even 10 or 15 years is very difficult. I will mention one or two times earlier forecast of the same kind, so to be discussed. But I thought that just to come boldly out and do this affair, enumerating a number of changes, which most you will think are plausible, I thought it'd be fairer to try to put the whole thing into context, the context of how it is if this is done.

Of course, it is done, whatever one does is done essentially by continuity. Allowing for the existence of discontinuity as well, which one has to jumps conceivable, but are not that easy to predict. But we know nowadays, nonlinear systems, which history is the most extraordinary one, allows itself all sorts of creative leaps, as well as, study continuous evolution. Nothing is clearer in the lessons of physics or biology than that. Now being mathematicized to great public acclaim, but, in fact, not so new as it's cracked up to be.

So what I want to talk a little bit about is, what is the basis for what I think is coming. And of course, the accident and whether it comes the next 10 or 15 years or not is a little harder to be sure. But what I think I can say very reliably is what kind of stance, what kind of machine is running here. And then how its wheels turn is something a little bit harder to guess. We don't know the full design of this device.

What I'm prepared to say is-- and to defend, rather firmly, is that we have come more or less to an end, worthwhile looking at it, of a century of extremely powerful, unprecedentedly powerful, natural science, particularly those sciences that are around and derived from physics. Modern physics began, physicists are never very good dates, and so it can be said to have begun in 1896, not the 20th century. 20th century physics began in 1896, four years earlier.

And that's at the discovery a the x-ray, Roentgen's famous discovery of the x-ray, which is a prodigious discovery, not so much for its content, which in a way could have been and should have been predicted, but for its impact. It turned out that within a month of Roentgen's original publication, absolutely unexpected result, it had been duplicated, multiplicated, replicated, all over the world-- in Colorado College, Colorado Springs, Colorado, in Dartmouth, in Japan, in Siberia, you name it. Wherever there was some kind enterprising department of physics in a college, those people had the equipment which would demonstrate what Roentgen found that wonderful evening in his lab when he was preparing to look into these things.

And that's remarkable. It was latent everywhere. And a latent discovery is one of the hardest kinds to predict because you say, if something really new is going to be found out of all this stuff, why hasn't it happened yet? And, of course, the answer is, it will happen soon. But you never know that and running the movie backwards is much easier.

Exactly the same thing happened the second time with even more fateful consequences, not for physics but for the world as a whole, in 19-- December 1938 Hahn and Strassmann published the remarkable fact that when you bombarded uranium with neutrons, you produced barium. And they, among the most skilled of radio chemists in the world, certified that it was barium that it produced and not the neighboring element, a transuranic or something like radium which simulates barium quite a lot, but is not the same thing.

That very discrimination had escaped Fermi five years earlier. The result that they published in an obscure way, which is not the way a physicist would do it, was picked up by Frisch and Meitner two weeks, three weeks later. And in January 1939, the world on the brink of war, that discovery, too, the discovery of fission, was repeated all over the world. The apparatus was present. The materials were present. The ideas are present. All you had to do was add this-- you had failed to notice, it goes, you had failed to notice this latent result.

And those, of course, are the hardest things to predict. And they are naturally becoming relatively less frequent. That's important because there are more conscious people trying hard to do those things with everything that they have. But that does not mean it will not happen. They will happen. Therefore, that's the sort of thing we can not really disclose. What is latent in what we're doing today that we don't know in the whole of the domain of science?

But I want to talk about, now, the side of continuity. And I think I can fairly say that-- I'm going to have three or four points of this general kind. I'll try to do it rather quickly. The first is, we had 100 years, maybe 110, to people like Boltzmann and Gibbs and the later Maxwell, who understood, for the first clear time in physics though it was well known in gambling and actuarial insurance and so on, that probability, like causality, played an essential role in the prediction and understanding of complicated, interesting, physical systems.

I don't want to oppose them. I think that the philosophers, by now, are almost talked out of the view that between causality and chance there is a great gulf. And that passing from one to the other is a complete change in the view the world. I don't think that's true. I think they interpenetrate. We can't understand the world without both of them. And this realization was what came to the physicists slowly, slowly from 1880, maybe, until 1900 or so, and then sealed in blood by quantum mechanics in 1925. And I think we'll never go back on that.

The present concern, which has the rubric chaos, is only a replay of this same game in a little unexpected quarter where, indeed, [INAUDIBLE] had pointed to it 50 or 75 years ago, but it was too hard to do without computers. With computers you can explore the whole thing.

So I claim that for-- well, yes. And I right? Let me illuminate the analytical changes that occur. First, that we understand that probability and causality are related. There are causal chains and they have probabilistic interference and consequences as well. There are atoms. And atoms make up all the matter of the world. Indeed, if I extend the idea of atoms a little bit, also radiation. We call them quanta or photons, but it's atoms of radiation from the point of view of general thinking.

And the most striking development, which only goes back to the eve of the Second World War, acquired its strength only after the Second World War, is that language, description, all of the superstructure of knowledge is also to be analyzed in the atomic sense and turned into a category which I may call, broadly, information. And the understanding of information, and noise, and signal, and all those things with it, you see that the metaphors come already from electrical engineering, which is where it arose.

But now, of course, it dominates understanding in biology. The whole world of the computer is based on it. The entire feedback system we inherit from the eve of World War II has come from electrical engineering to be a very wide concept throughout all thoughts. And I think that's the third analytic change that we have to have.

And on the basis of this analytic change, I feel that we have moved through testing and elaborating these methods very far. Until now we are prepared, not quite ready, but prepared for the systematic synthesis of all this analytic understanding, in a variety of ways. And I will talk about them quickly.

First of all I think, based on this, we have now, and will gain steadily, but only incrementally, a control of material. Control of the material world is very great, the best examples of which are now shown by the powerful actions of polymer chemistry, manufacturing substance more or less the design. Rather limited range of substances, but still very, very important ones.

But the other side of my coin is the recent extraordinary discovery of the high temperature superconductor, which I suspect will be for a long time, the last really chance-y discovery of a fundamental physical change in materials, which we really did not anticipate.

I think over the last few weeks, we've been given very good arguments to show that we do even to understand the high temperature, so that we have a working theory of it. And the working theory suggests very strongly that we will go to room temperature and beyond, and the superconductivity will really be a much more common phenomenon. I hasten to say-- and I hope I'm right, I don't know that I'm right in this-- but I do not believe that it will lead to a revolutionary change in engineering practice as many prints.

Now, I'll tell you, I think this is self-serving, and to some degree, naive. I think it will be important, but it'll be important incrementally. It is a powerful discovery for the power systems, for electric motor design, for computer and instrumentation, miniaturization and reliability.

But if you look everywhere, it deals, so to speak, with losses in frictions, and losses in frictions are well known in engineering and technology. They're always present. Getting rid of them makes a difference, yes, it's economically desirable. But of course, it won't take care of all of it. And what you're talking about, 20%. That's-- I mean otherwise, you wouldn't do processes that are more loss-y than 20% in general.

And this is the general idea. So I don't believe it's a revolutionary thing. That doesn't mean to say, will here and there make a great change? It will. But broadly, it is not like introduction of electric power, which transformed the entire world. It's an improvement in electric power. Which will not transform, though it will certainly modified and affect the world everywhere

However, I think that we can see that the quantum control of materials will spread widely. And step by step we'll more objects like this, we'll have super fluids on a high temperature scale. We'll have other quantum phenomena that happen in controlled materials, of which of course the earliest one is the transistor, in a way. And that will be extended. But again, this is not something that will spread to everyday life. It'll be embodied in the technology of the future in 10 or 20 years, but in a way which will be recognizably as incremental improvement of what we have. Just as chemical synthesis is.

In connection with this also, the rational analysis of material has already led to the development of structure among the most important sides of material science, by understanding the nature of failure. The analysis of the nature or failure, giving rise to the behavior of composite materials. This, I think, is quite important now, because it touches not so much the engineering world-- which it will touch, technology-- but it touches the environmental supply of raw materials. Because it is clear to me-- I'm not saying-- it'd be premature to say it is over-- the age of iron is not over, but its end in sight.

Silicon, the glasses in general, diamond in the future, are going to be structural materials. Composites complexly designed, intricately built and designed to meet each purpose are going gradually to replace the minerals which we supply. In spite of the strange concomitant truth is, that the same analysis, which has a second-- [INAUDIBLE] I'll come to it-- comes to my second point, that physics and chemistry, electrical engineering, the related, these fundamental sciences have given rise to a second change.

Not only do we have an analysis, which gives rise as what we've-- I said we now understand the world pretty well in these domains. But a second thing has happened which takes us to the edge of the problem of natural resources, and indeed to sciences far beyond resources. And that is what I like to call the beginning-- we don't have it yet. But we have a sophisticated view which will gradually lead to something like mastery, what I'd like to call perception.

Perception, not only human perception, but also perception of the scientists and the technology. The instrumentation and the detection of what's going on out there, whether out there be another planet, or a tested bar of glass that you're trying to see how cracks propagate in it.

In every case it's the instrumentation, and the sophisticated way of collecting and handling data, because we have mastered the way of doing interfaces with all sorts of physical parameters. We have a very powerful instrumentation world. It is on this basis that the field sciences, meteorology, geology, oceanography, astronomy, ecology I suppose, to name a few, are now in phases of active understanding, exploitation.

Mainly because physics, which was not particularly valuable in understanding these matters. Its analysis is somewhat remote. But physics and the concomitants of physics have given rise to instrumentation, enables you to measure everything very well, very quickly, in all kinds of domains of parameter space that you've never investigated before. And as you know, you can buy these wonderful sensors for most things.

This perceptual improvement science was, I think, the prerequisite for the success of the field sciences. Up till now, it was all pioneering work. We still can't proceed very well the depths of the Earth. We can do the first few thousand feet pretty well. I think this as a barrier to us. We're probably not easy to cross. And of course it's also rather remote from us. Because to gain it is very difficult. That diamonds come up 100 miles down in the pipes is a remarkable and dramatic event. We haven't seen one yet.

Some one will happen one day. They occur every million years or two. They scatter over the whole world. They are independent geological time. There are huge coal volcanoes coming up, and they make the diamonds in the world, until we learned how to make diamonds. And now, of course, not the same problem.

And as I said, I think it's fair to say that diamond and diamond-like materials will gradually take their rather interesting place in the commodity, in the commodity market, in the engineering materials in which we make our world. It's going to happen quite soon. The beginning of it is now. So I can say what happened in ten years' time. Some of it.

Now the most important of all the perceptual gains is the-- oh, I meant to say that this-- because we have a powerful [INAUDIBLE], because you understand, for example, the teleconnections of meteorology, we get an understanding of them. We know that the monsoon and its success or failure which waters the entire South Asian subcontinent, and is the staff of life for a billion persons at least, is intimately connected to events on the coast of Peru and Chile.

There's no question about this any longer. The correlation was dimly seen 50 years ago by perceptive meteorologists, and is now beginning to be the domain of analysis. And pretty soon we'll be able to make forecasts of those things, I think. It's very likely we can.

And that's the beginning of teleconnections. And I strongly suspect that we'll gradually have a more mature climatology than the present one, which is confronted with nothing but skepticism and uncertainty. That's got to improve. We don't know how to do that yet, but I think that's one of the big things that we'll have, on the basis of this. Now of course, one is an optimist, maybe it'll take more than 10 years. But it's coming.

The other important side-- of course what comes, there's the ability to predict the occurrence of minerals, already being happen. Already happening. However, it happens at a time when the minerals that you would so wonderfully predict, like diamonds and copper, are going to be less and less economic value, in my view. And so while you will be able to predict the presence of copper mines, and find that South Africa's not the only place endowed with huge numbers of diamond pipes.

You won't care so much because anyhow, the glass, the fiberglass cables, and the synthesized diamond layers will probably be more useful than the natural commodity. Though they won't drive it off, out of existence, as nothing ever goes away. So that's a curious anomaly that is there.

Now I tried to say it, I come to it, that the most important perceptual consequence, I think, of a contemporary understanding of atoms, which is based on chemistry and physics, and of the-- what I said, probability, causality, atoms, and information-- taking these together and applying them since the double helix to these substances and processes of living forms has made a huge development in scientific thought, and in everyday life, which will grow the biology of information.

Primarily based on microbiology, which I hasten to say, and has given an enormous change, I think, in view of the world-- which I want to put forward to it-- I think you probably would recognize but probably, as I did, underestimate. And that is what we recognize now, I think it's quite clear, is that the wonders of life really cut into. There is the development from a cell to a multicellular organism, which we ourselves are, which is responsible for the entire complexity associated with life as we think of it.

The museums show us the earliest fossils. And between earliest fossils and the rainforest of today, and the ecologist tramping across it, there's a big judgment, a big gain, a big improvement in complexity. We talk about that all the time, and the museums are full of it, which we call evolution. But that's only the last 15%. The 85% was buried in biochemistry. But all the biochemical tricks are held by the microbiology. The cells do everything. Except this wonderful trick of finding out to cooperate and make multicellular creatures, which is still beyond us. We will not solve the problem of development in the next 10 or 20 years.

But we will really, and we have made, great progress in the biochemistry of life, and some reconnaissance into how that biochemistry effects the developed organism, which gives rise to the success and failure of medical pharmacology and so on, where we have all kinds of drugs, and all kinds of effects, and all kinds of substances, good and bad, and all sorts of new information carrying, and metabolic systems, subsystems, which constantly fill the news and win the Nobel prizes, but still come primarily as surprises out of the domain of, you find some substance you can isolate that does something else in another test cell, and that's the way it goes. There's no-- we don't have a true picture of development in all its stages.

I think it's very important because it makes clear to us that the evolutionary process is not related to size, necessarily. It's not related to this thing, that the history of Earth, history of life begins about three or four billion years ago with very modest organisms indeed, which transcended the geological world. Introducing the chemical modifications made in life, and the self reproducing system, in ways not yet understood, which still dominate. As I say, what we understand about the developing the human body or all higher forms, but we'll not always do so. But that break will not come next 10 or 20 years. That's the serious battle for the future.

Of course in practical events, the molecular model of human behavior does-- of human physiology-- does give rise to many novelties. Practical surgery gives rise to many novelties. We see much control being taken on all sides. But it is still-- as I recognize, it just looks at what happens in the papers year after year-- is very much a matter of chance and exaggeration. We don't really have a systematic growth, as I think we have, say, in solid state physics or something like that. We're on the edge of it.

And I should mention particularly, because it is so much on everyone's mind, the return of infectious disease, of epidemiology, as a major public concern, which I think will continue because we don't yet have the skills to beat back the ingenious genetic apparatus of viruses, of which course, HIV is the one-- the human immunovirus is the one that takes all the news today.

But I recommend to you that you consider the still urgent fact that we do not know why 1% of all influenza virus cases in 1918 and '19 led to a fatal primary viral pneumonia, that we cannot cure the primary viral pneumonia. We cannot yet immunize against the effects of influenza, new strains. We don't know where they come from. We are puzzled before this disease, which has been reasonably benign for 60 years, but may not always be.

We have the arsenal of molecular biology to attack it, and a lot of information, but short of solutions. This of course goes as well to the other important biological-- the other, besides health, the most important biological concern of science and of technology, and that is, of course, the crops. Someday indeed we will not do crops as we do today. Someday indeed we will have a much better understanding of biological processes which we gain our food. Someday indeed that will be an industrialized structure.

But that day is not here. And I don't think you will even live to see it. Oh yes, occasionally here and there. But we're going to take energy from the sun in green leaves to make proteins and cellulose, as we've done for a long-- and starches-- that we've done for a very long, long time. For a long time to come, 100 years or 200 years. But I don't think it will always be true. We have not come to the end of the agricultural revolution, which begin not with 1948 or 1955, but began at 6000 BC. That still has a little while to work.

Influences improvements, yes indeed, but not the whole thing. The other perceptual change, which I think I have to talk about is, the gloomy subject, but very important in the world economically, and in the thinking, very reasonable person, is the problem of warfare. And I have to say that two things of course, the understanding of the atom, which gave rise to the inordinate outpouring of energy which we associate with nuclear weapons is now augmented by the development of perception, which I think is come because it's most extreme and most costly, the battlefield has now become a place where perception is all, and where self guiding devices are gradually penetrating more and more, so that which can be seen can, with high probability, be destroyed. And this is going I think, for the first time in a long while, to favor the defense. That is, to oppose the distant interdiction which is the projection of power, which is so characteristic of the great powers, especially the United States.

It's getting harder. And if you don't think it is, consider the situation in the Persian Gulf. Consider the situation in Afghanistan, just to be evenhanded, and you'll see what's happening to the great powers, limited both by the social perception of their citizens who don't want to fight so much, but also by the fact that the opposition, with a few tens of thousands of dollars, could do in some mighty million dollar equipment that we're very proud of, that you've manufactured to great success in oversea [INAUDIBLE], in El Segundo, and it's not going to last too long out there.

That's another story of perception, this generalized improvement of the sensory, which has made physics what it is today. And physics is given, now, to every other scientific activity, and now the technical ones.

And the third element I want to talk about, which is a novel quality of the new sciences, which is going to continue it in large, is more important probably for the truly important matter science, our understanding of the world, our views and metaphors tell us what we are, our place in the scheme of things, than it is for direct improvement of economics, or-- but still quite important. And that is the understanding, the physicists, the astronomers, the geologists especially-- natural science has grown-- of the great importance of history. How contingent are the things we see around us? Rather than how fixed and immutable and just the way things are.

The best example I can give, I think, to make a long story, which has many ramifications, a short one, is to consider the solar system. Because I grew up through this. I can tell you as a thoughtful physicist, I believe I grew up with this, and I found my views completely erroneous, and completely transformed in the course of a single career. And I'm not the only one. When I was a graduate student I studied, almost risibly, the careful dynamics of the 19th century heroes of dynamics, who showed us elegant ways of making little calculations, not very exciting, in classical physics, Newtonian mechanics.

And their real purpose was to, essentially, to improve the almanac. To make possible predictions of the motions of the planets of the solar system 100 years in the future, accurate to ten seconds, which was more or less what we could do. The eclipse, you don't expect it, doesn't overwhelm you anymore. And of course that was the-- even the 19th century that was the great metaphor for scientific causal prediction, the mechanical right of science. You could predict the eclipse, predict the unseen planet Neptune could be found from Newton. And the Enlightenment seemed fully fulfilled in this mechanistic way.

And it was a great try, not denying that. And we studied very hard. The Poisson Brackets, and the full paraphernalia that enabled that improvement. It depends, in principle, upon Newton's laws. Nothing new about that. That's why it comes to the enlightenment. But it much improved their practical applicability, by developing mathematical techniques for handling many body systems of the kind of the solar system.

That means, what is the solar system? Well you all know what it is. It's an awfully regular thing. All the plants go the same way. If there's one exception among the 60 satellites, it's written down, everybody memorizes it school, which it is. All the planets lie in a disk. Well if one is tilted by five degrees you're quite worried. And this is the way it goes. They all spin, with one exception, again, more or less perpendicular to that disk.

And everything is so regular. And it's this great architecture of the world, right? And so as a student, I thought it was a very dull subject. I did not want to spend my time learning how to improve the ninth decimal place, by really quite elaborate calculation. Especially, I must admit, because [INAUDIBLE] the calculation. I did that for a whole summer. It was a really tedious activity with a millionaire made in Zurich in 1912, a wonderful machine which [INAUDIBLE] the streetcar controllers handle. It really did, and a hand crank. I could have a motor, but that was the-- my boss use the motorized millionaire.

It didn't make much difference. You still have clank, clank, clank, clank. It just saved your arm, but it didn't improve your patience. Well we learned that that's not intrinsic the laws of gravity, the nature of Newtonian mechanics at all. That's a consequence of history. The planets have worn each other smooth. They've won the orbits smooth. That's why we're all in a disk. That's why we all go the same way.

Once upon a time was a highly chaotic mess. And what evolved is what is stationary. And all the rest was thrown away or lumped together to make the planets. There's no doubt about that now. The signs of it are clear. We have a few exceptions like the comets, which still don't share that. But that's not the topic of astronomy, it's a very interesting subject, because a metaphor for all our change in the philosophical point of view.

We know now that what we see around us in the world is not only the result of the irrefutable laws of physics, but also the contingent result of boundary conditions. And we gradually understand, we can understand those boundary conditions as being connected to the conditions of the world. And so we gradually have a historical element in physics, it's especially strong in cosmology today. And the best discovery at MIT, in physics anyhow, was that of inflation, the universe, which is essentially a way of saying that long, long ago, when matter was quite different, from the way it is now, there was a thing called repulsive gravity.

Gravity, you know, is attractive. But in those days it was the other kind dominated. And it blew world apart, the universe apart, and gave rise to the expansion and the uniformities in which we now see, and we begin to understand how this happened and why it was inevitable, and one of the great issues that connect that with every day particle physics, we haven't quite done that yet, and it will not happen in the next 10 years either, but it is on the agenda. And more and more interest will come from that. And the philosophical, lagging philosophical view that we all have to have will rise out of that.

And I think for me, that was quite clear that Newtonian mechanics, like the motion of continents, like the bombardment of the earth with asteroids, which is the pre-- which was the sterilization act that fixed the time of the origin of life, because you couldn't have life when nothing on the surface was not churned up every million years, turned up and flung into the air, if not vaporized. That's what was happening in early times on the Earth. And we see the signs on the moon which froze as geologists nothing but craters. The Earth was nothing but craters, either.

But that's a long time ago. And when that rain subsided, then the earth began to have the cycles, which we now think of these inexorable cycles which give the routine, the establishment of the history of the Earth, but are contingent upon the presence of the solar system, which was long worn out, and gave up flinging things at all parts. That the sort of the story.

So this is some view of what I think has happened and is happening. And I should go a little bit further and try to make some statements about what I think is going to be the case in the next 10 or 15 years on the more economic side. Well, I am a reluctant incrementalist. Having read a good deal, especially this year, I tried very hard to-- some lectures I had to give at Cornell-- I tried very hard to read the literature on agricultural economics and agriculture, the Green Revolution and the anti Green Revolution, and all these things. And I've come broadly the conclusion that incremental change in agriculture will continue, probably increase, but we will not see any substantial worldwide change in the situation. People remain hungry until we can grow better crops. They'll grow better crops the way they grow them now, only better. With more inputs, with more attention, with more genetics, with more plant breeding. But nothing different, in principle, from what the prudent farmer has been doing ever since the 17th century and the really excellent parts of the world, the garden spots, ever since 3,000 BC. And it's going to the same thing.

Of course, with the inputs of modern chemistry, modern biotechnology, but it won't look different. Health, too, has the same phenomenon. We have, of course, wonders. I point it out to molecular biologists, and the micro surgeon can do wonderful things. The development of all sorts of hormone and quasi-hormone like systems makes possible the attack on all kinds of human difficulties.

But I think everybody knows that the end of medicine is the reduction of all human ailments to iatrogenic disease. That is, when medicine is perfectly powerful, it will still make mistakes. And mistakes will be the cause of your troubles. So the statistics will tell you, there's nothing to be said about that. There's no question, that that's the case, in my view, is an asymptotic affair. Were far from that now.

But right now it is pretty clear to me that the marginal dollar in public health does a great deal better for the population than the marginal dollar in the best preventive surgery. But it has different purposes and different ends, and we don't like to change our lifestyles quickly, and so that's why we tolerate the way we get along with automobile accidents, and smoking and so on, and traumas and drugs and everything else that dominate the newspapers.

And when we look back upon as a sort of way we look back at the 19th century problems of public health, where there was no sunshine, and no light and no air and no clean clothes, which have done much more than, I believe, all the medicine and all the bacteriology in the world to make a difference in the vital statistics. Which is probably where the answers is to be read, I think what you would call the bottom line, and I think that's the situation.

Well we will improve that too, but it's a very complicated system, which I'm not prepared to unravel. Now, in engineering, and engineering machinery, it's clear, everyone see what's happening, it's happening, it going to happen even more. What we are going to have is, of course, embedded intelligence in machines. We're gradually transferring more and more subtle skills from craftsmanship, artisanship, judgment, to embodiment by analysis, and then by synthesis of the device that can do it, by the perception of the device that feels environment. Every machine, every operation is going to get better and better, and incrementally improve.

But I don't-- I'm not witty enough to see any grand change in this that'll say this is the revolution. It's not so. We saw with the programmable electronic calculator in 1945, we saw the wave of the future, in the sense of the idea. And with the transistor we saw something better could be done about it. But the real change, I think it was an amazing change, which goes well beyond the domain of physical chemistry into what I would call the most elementary, but wonderful kind of engineering, was simply a modification of packaging.

Done by-- well actually, foreseen by an English electronics expert called Dummer, the man who invented the radar position indicator during World War II. The same man came to Washington in the 1950s and said he foresees the time. This is the time when transistors-- this is the time when the bureau of standards and the IBM company we're busy making cord wood circuits by machines it's stamped out, you know, and put resistors on the circuits. And you got cards pretty fast, 42 resistors and nine condensers and some things, and this little circuit was wonderfully put into a shell.

You could put it along the shelf and have a computer that only filled up a room like this. And it was transistor [INAUDIBLE], it was quite nice. And was made automatically, and it was system whatever it was, I think 36o-- thank you-- but it was a failure of imagination. And of course what happened was, the noise, and a few others discovered from Dummers idea, I think.

You could make one transistor that would be subdivided. One little piece of silicon. And now of course this has gone to the point where it's now the equivalent of a million or eventually 10 million gates in that little thing, and we have the chips, and then the world of the future will not go back on that. They'll get better. They'll have quantum mechanical effects that will do very well. But it's the same thing.

And it's a packaging change. It's not really a change in understanding. Now to carry it out required profound understanding of a thousand subtle details, having to do with etching and lithography and dopants and epitaxial deposition, a panoply. So again, it's the same kind of thing. Perception and analytic control of the solid state world, the atomic world, understanding statistics, and that's the power of what we have today. And power will not go away. It will spread, of course, to all countries in all domains. But is not a fast thing.

Now one thing you all know, and I'm sure you deal with, and I have to end this way with what I recall information at the human level. Dealing with people, telling them what they're doing, what's good, what their inputs are, and so on. And here of course, I can't say more as much as you can, about what you see and know. But I wanted to make one remark, which is a very interesting, for me, a very interesting and important remark, and that is, the more we intervene between the observation and the human perception, and understanding, what we tend to do is we have digital processing and collection of information, all those wonderful things, the more we intervene, the more the evidential chain is made complex. And the more, therefore, it is corrupted.

I'm very concerned about this we already see at MIT, it's far gone. Our students, our engineering students, our physics students are farther from the data than they ever were. For them, data appears on a screen. Maybe they were clever and designed the interface that brought it there. But even so, and when our colleagues publish something, we're not so sure what they've said, because the intermediation is so great you haven't the time to go back and examine their software. A software error could corrupt an entire domain of physics today.

And if that's true for the physicist, I suggest it's much worse for everyday life. Because what I hasten to remind you, I'm sure you know this-- once upon a time, the philosophers, popular philosophers of science, Eddington and Jeans were very strong on this-- if you can remember their names, they're very able people, there's no question about it-- pointed directly at the fact that the physicist had reduced the world to a rather abstract structure based on pointer readings.

And they're putting together this collection of coincidences, what meters said was a very strange way to describe the world. It's remarkable effectiveness. I don't think it is that strange. It's much what happens inside the head, but we don't think about that. But in any case, it's, whether they were right or wrong, they were able to talk about pointer readings. And then what came as a great surprise to everyone is that, of course, pointer readings are obsolete. You have a hard time finding meters outside the amateurs laboratories today.

Because it's all being displayed in a complicated way on a screen, even an image. An image is evidential. If I want to know if the smokestack is belching out smoke, I could read the meter. But maybe the meter's wrong. If I see the image on the TV set, the closed circuit TV, it looks at the end of the smokestack. I know it's smoke. You can't have an error that makes the white smoke look black and different, you know.

You don't expect that. The system is redundant. But alas, I can tell you now, that you'll buy an interface pretty soon, that you can connect the image of the white smoke, and comes out black smoke in the image. And this is happening, perhaps is happening in a more subtle domain, we watch the presidential candidate, we see the result of a complex corporate structure, advisers, and makeup men, and speech writers. We know that. But alas, even the image will not be the man or woman one day soon.

You'll buy it from some frame store device that can smooth out the wrinkles and improve the speech, and this worries me a great deal. And therefore, I like to close by saying I think I'm against this world which I've portrayed, and some of the roots of it, and some of the changes that are going to happen. I think that an industrial society, we have to work especially hard to democratize the understanding of this structure. Because we are getting farther and farther from perception. We want to, I think, to make science and engineering, not in detail-- they never will be a place where the population at large can feel at home.

But I'm very anxious to see real ends to a world in which we have a minority who are well at home with these things, and eager for the latest, develop the latest change we can understand, in some degree. It's not that they're going to design the software, but they understand what's going on. And then the vast majority who look rather passively at this and worry about its consequences, as indeed, well they might. I think it's an unhealthy situation.

And the only way to do is not to have experts who tell you more what's going to happen to you. That will not do it. What you have to do is make everyone feel he is at least aware of what those experts can do and cannot do, because he has participated. He doesn't fear, she doesn't fear the poet. Because you can memorize a poem yourself. You could write a poem, very bad poem. And almost everyone has done that. Many, many people. 80% of the school children write something like verse or poetry, and in a good school they can. That's not deathless verse. But it's the same participation.

That's what's got to be there for science and engineering. And I think also, it has to be done, and this is coming too, it has to be done in another emotional tone. If pros, if learning to read and write were always carried out on successive levels of complexity, in contract law, or insurance policy technique, with parties in the first, second, third and fourth part in all the codicils and all the careful logic-- which is a real skill. It's a real skill, and it does make beautiful models of the world, suitable for people to sign contracts on. But if you had to learn how to read and write only on that, it'd be a vast illiteracy in the land.

We learn how to read and write because we use it to describe the moon, to say loving words, to write poems, jokes, graffiti, whatever it is. And science and engineering must play that same role. I believe it a change in the emotional tone. And therefore I think the artists who are doing it now, have to be much encouraged, who are doing what I call playful engineering. Things like use the techniques and even the modalities and the social institutions of the engineer, because they can't do otherwise, to make "useless objects", quote. Which don't make money in the direct way, don't improve health, don't improve foodstuffs, don't make war better, but are part of an improved aesthetic quality of living.

And I mentioned a person I hope who is somewhat controversial, the wonderful artist Cristo, who made, for example, the fence across northern California, 25 miles long and 18 feet high, right across from the Petaluma to the sea, which lasted for two weeks, was viewed by hundreds of thousands of people who flew over to see it, and millions of people on the ground, went through the whole impact statement ecology, even an injunction brought against him.

But had a wise judge looked at the injunction through the blind eye to the telescope and said, yes, it's a very interesting injunction. I must hear it. I will set the date of hearing as two weeks in the future, knowing that Cristo's plan had been from the beginning that this whole event was temporary. The fence would be taken away. The ranchers who had given him the land, right? Were given all the materials to use on the farm, the posts, the cloth, the tie lines, the turnbuckles. The men would come by, and the women, the crews that did it all, and buried the small concrete footings deep below the ground so that the cows would not be interfered with.

The whole thing was gone by the time the injunction hearing was held. So it was wonderful. It was a great event. And I think that it cost $3 million I think. How was that raised? Solely from the art world. Solely from collectors and connoisseurs who wanted to have part of this game. It was a voluntary activity. No doubt some dealers got a little mark up in the cars of it, but that's another story.

And that could be done. And a movie was made, which is perpetual. It was worth-- many movies are made for more than $3 million, they are as good as that one, I can assure you. And there is. It's part of the world of what we call the superstructure. It's very important. And I think that 100 fold magnification of that would not be too much. Everywhere should happen. In many different ways-- I'm not inventive enough to think of all the ways it could happen-- but what I would call engineering is using modern technology, modern social solution, where 1500 people have to work to get something done. You have to have filed papers and make plans and have insurance and worry about the impact and all those real things, but applied to purposes which are playful, essentially playful in nature.

Since we do many other things like sports, and television, and everything else in this domain, we have to do more for science and technology. The fact that those two are viewed always as being of broad economic or diseconomic nature is a very serious defect of the contemporary world. Until it is cured, nothing, I think, will go really well. And that's what I think can begin but will not end in the next decade.

PRESENTER: Thank you, though. That was really marvelous and great.


PRESENTER: That is truly a stimulating beginning for a symposium, and while I can see that everybody is highly stimulated, I'm going to ask that questions and discussion be held until after the break. I'd like now, to switch from the terrain of technology, science, and indeed, art, over to the terrain of economics and politics, which at least, at some level, need to take place within the context of what is physically and scientifically possible.

Lester Thurow is clearly one of the world's most distinguished economists. I first got to know him in his book, The Zero Sum Society, a book that certainly very, very much shaped my thinking about economics. But I think I was even more impressed when some years later, I had the chance to read The Zero Sum Solution. And even at that point, where I certainly have not yet met Lester, I was extremely impressed by the fact that there was an economist who was not only capable of identifying problems, but also courageous enough to suggest that there may be ways around them.

And for those of you know economists, that is if not unique, certainly a very, very welcome kind of behavior. More recently, as you all know, Lester has become the dean of the Sloan School, a school that doesn't have problems, but certainly has opportunities. And Lester has, I think, been very, very forceful in helping us to see those opportunities, and giving us a kind of dynamic that I think few schools have had in recent time. Lester?

THUROW: Let me start off where Phillips left off. Because if you think about economics, you can think of what he described as a field science. And by feel science he means you can't do experiments in the laboratory. And economics is no better and no worse than something like geology or meteorology, because you just can't take things in the laboratory and see how they really work. But the other thing that's important to remember, as he mentioned, there's some combination of causality plus stochastic, statistical error terms.

And what people tend to forget in economics is if you were doing econometrics, and somebody wanted to say, to describe consumption behavior, they would eventually come down to something equation that says, well, consumption behavior is some function of income, changes in people's incomes, some function of their net worth, changes in their net worth, interest rates, some demography, whatever all the thing was. And then at the end they would write plus E. Where E is a stochastic disturbance term, a random error term. The cosmic gambling, the economic gambling, if you want it to be.

And this E tends to get forgotten. Because people spend all their time talking about this. But in some areas, more than half the action may be out here in E. E is not a trivial thing at the end that doesn't explain a lot of economic behavior. And so it's terribly important that you understand not just in quantum mechanics, do you have these random stochastic disturbances. In some sense, probably in economics, they're even more central.

And on some of these things, you have to remember that some ideas go from science, from economics to science, not vice versa. For example, survival of the fittest, which we think of as being associated with Darwin, actually came from an English economist my the name of Spencer who had it much earlier. And he had that idea among human beings. You are going to have survival of the fittest. And in fact, he didn't use the words, natural selections, but had it very closely, because he thought you had an obligation to drive other human beings out of business. And that would improve the species. And that was where that term all came from.

We set up a social security system for the elderly that is based on the assumption that the elderly are poor and the non elderly are wealthier. And one of the purposes of social security system was to bring the per capita standard of living of the elderly up to the level of the non elderly, so that when you cross this magic age 65, you didn't fall into poverty. Well what we have not done in the United States is in some sense have a victory party. Because we achieved that goal about six years ago, and we've now got a situation where the average elderly person in the United States has a per capita income 110% of the non elderly.

But we have a system geared up so that every year-- next year it'll be 112%, the year after that'll be 114%. The time has come to have a victory celebration and say, hey, the purpose of social security system was to bring the elderly up to parity, but not to raise them above parity.

And that doesn't mean you can swap a big lump of money out of the social security system, but it does mean you can slowdown the rate of growth of spending. So that if you're talking about cutting the budget over a five year period of time, you can it over a five year period of time without cutting anybody's income. All you're telling the elderly is, look, your income will grow at the same pace as GNP. It won't grow faster than GNP, which is what it's been doing for the last 20 years. And there, again, there's a lot of consensus on part of both Republicans and Democrats, and now you're talking about a big bucks.

Now if you look at the Medicare part of it, there's a place where there's very consistent analysis. But the question, what you do about it? And what you do about it really depends on making some ethical, social judgments. The Medicare program, which is the elderly program for the eldery-- the medical program for the elderly, spends well over $100 billion. 40% of the money goes to people in the six months before they die.

You get a diagnosis, terminal cancer, we give you $100,000 for the treatment, then you die. Exactly like the doctor said would happen. But somehow in that circumstance, as a society, we don't find it possible to accept the diagnosis, terminal. We essentially just have to throw treatments at that problem, even though we know the treatments won't work.

AIDS is a perfect example we have never cured anybody with AIDS, but we spend $150,000 on each person. Not even obvious we're lengthening their lives that much. And the question is, how much of that, as a society, can you afford, and do you want to afford? And so if you say, you know, I could cut Medicare by $40 billion and change effectively American length of life, not at all. But of course it would require a change in attitude. Because you have to then accept the fact that when the doctor says you will die, we don't have these heroic, throw resources at the problem, which won't work.

And so it's those kind of problems you have to answer on the budget side. Most of them are not economic problems. And most of them are essentially social value political decisions that you want to do those things. Once you want to cut the federal budget, then you can very quickly focus in on those things where there are some legitimate arguments as to why those are the things we ought to change. And so here again, I think the real problem is saying, hey, we've got to do it. And once you come to that conclusion, I don't think it's a terribly difficult problem.

AUDIENCE: I'm thinking a lot of the problem you're talking about right now is predicated on the fact that people don't understand, or they don't want to understand. Don't we have a public educational process on our hands? I mean, you mentioned the fact, you pick up a newspaper the middle of the United States, you can't even read about international news. Now seems to be some movement.

And I guess we're part of that community not to, in corporate America, if you will, to help educate the general populace. I mean, we do have associations with unions. We do have associations with the workplace. Is that something we need to do more of?

THUROW: I think the answer is yes, because we need public education, in the best sense of the word. But the problem is that the education that various private groups do, companies, unions, whomever, all is terribly self interested and self serving. And therefore gets discounted by everybody.

Because what is does corporate community say the solution to every problem in the world is? Cut the corporate income tax. Have you ever heard a group of corporate businessmen say anything else? That's always the number one thing they think would make America better. And even if you think that's true, if you put that on your list, nobody will pay any attention to what the business community says. Because the business community looks self interested and self serving, even if it isn't.

And so I think the problem on this kind of thing is you-- the thing that gets listened to is the thing that isn't in your immediate self interest. Because people say, my god, the guy must be serious, because he's proposing something where he will take a little bit of the bad part of this proposal, rather than somebody else in the society will take all the bads and he will get all the goods.

And so I think the answer is yes, we do need the public education, but it's got to be seen in, what makes the world economy work better? What makes the American economy work better. As opposed to something that looks like, this is going to make me and my firm wealthier? And too much of a corporate education always falls into this category of looking incredibly self serving.


AUDIENCE: [INAUDIBLE] on that question of public education, it seems that there, if I follow that, in terms of the advances that we've made in communication, here in the United States, we've always prided ourselves in an open environment in terms of communication. And therefore, set up a system of, in terms of communications, from basically public television is still self funding from many different agencies wherever we're located. But it seems to me, we've come to a point now, with the education issue, with the access to everyone here, you know, we're certainly an educated group, but there are many people that all have access, and we have a lot of people watching TV that are very young.

That maybe there's a time or for a role for a government sponsored TV station, or Public Broadcasting that provides access and communication and infrastructure to our people, whether they're young or old, and the question of what goes on that agenda, somebody else can decide. And that becomes a very social issue. But do you feel-- Or, how do you feel in that sense.

THUROW: Well, see I think one of the things corporate America could do for the United States, corporate America sponsors a lot of those programs on public television. How about a program that just shows how the rest of the world lives? See, most Americans don't know. I mean, take Korea. Most Americans think that's MASH. It's illiterate peasants in straw huts that are slightly dirty. Because that's the only time in their lives they've ever seen Korea, is on that particular program.

And of course, any of us who've been to Korea since the Korean War know that the relationship between that vision of Korea and the modern vision of Korea is absolutely zero. See I think the kind of-- I'm going to say something that's going to sound like a college professor shouldn't say-- I think no idea has ever persuaded any human being of anything. That's a little strong. What persuades human beings that they're wrong is events. And once the event persuaded you that the old idea is wrong, then you're open to new ideas. And so the question inside the United States and that kind of thing is, how do you persuade Americans-- show Americans events that persuades them that they've got to change their view of the rest of the world.

Well one event is like, not a year or so ago, my wife and I were in Korea, and we went to the Daewoo assembly lines, outside Seoul. Well the Daewoo Assembly lines would shakeup anybody. Because the floors gleam like they're marble, newest Japanese and German automobile making facilities, bright, young, kind of junior college educated, 27-year-old labor force, German engineers doing the design and engineering, and they're making Pontiac Lemans. There aren't any Americans in the facility.

Well that's the kind of event that says, hey, maybe the world really is different. And you can kind of vaguely know they make cars abroad, but seeing that actually happening is the kind of thing that makes you believe, hey, I should look at the world in a different way. And I was mentioning during the break, there are 244 million Americans. How many of us do think have passports?

Passports last for 10 years. So if you don't have a passport you're going to leave the United States. And it's getting even harder to go to Mexico and Canada without a passport. The answer is 26 million. So only one out of every nine Americans ever plans to leave the United States. I mean, that just isn't true in most of the rest of the world.


AUDIENCE: Um, this is a little off the topic, but I see the--

PRESENTER: You have the microphone there.

AUDIENCE: I see the AIDS problem as having the potential for creating a great random disturbance in the economies of the world in future. And I was wondering if you've seen any evidence of the pooling of research or technology and assets of countries or corporations in finding a way to cope with this, the impact that this problem can have in future.

MORRISON: Well it's been taken very seriously by the WHO. And in the last two or three years, the initial response of many third world countries, with very small resources in public health, and not much political power in those agencies, that investigates to deal with it, are slowly changing to an explicit recognition of the seriousness of the problem.

There's no doubt about that it was internationally ill regarded a few years ago, because it was so closely tied, more or less, what [INAUDIBLE] was saying, to the self serving air of vacation resorts, not wanting people to feel there's any danger in going these places. But now that's being overcome by a sense of reality. There really is not much wrong with these issues in the world, would not be solved by a desire to tell the truth and tell people what evidence is, instead of making everything in terms of what you can calculate is your best interest on the short term.

That's really what is behind all of these superstructure problems.

THUROW: See, AIDS is another interesting thing where, I know a cure to AIDS. Not a cure the disease, but how to stop AIDS. The problem with AIDS is the ways in which is spread, all of the ways, homosexuality, prostitution, premarital sex, all those things, all of the ways it is spread we regard as immoral. And therefore, anything you do to make sure it is not spread in those activities is seen as encouraging that immoral activity.

And for example, saturate the world with clean needles, condoms, et cetera, you can stop AIDS without understanding anything about the virus. But people will stop you from doing that, because they say, if you do that, you are encouraging these immoral activity.

MORRISON: It's actually happening in Boston, Massachusetts. To this day it's a huge fight for the past six months for a trial program, for 200 persons to give-- to exchange needles. And it can't be done.

THUROW: And see that's like saying back in the good old days, in the 19th century, I didn't know how to stop pneumonia. But I did know how to pick up horse manure off the streets. And by picking up-- that's where public sanitation came from, by picking horse manure off the streets I stopped pneumonia, even though I couldn't cure pneumonia. And so we know how to stop AIDS socially. We don't know how to stop AIDS medically. But we get ourselves into this tremendous fight about an issue that's peripheral. Now see, we've had it before.

The Catholic Church is against cremation. At the time of the Black Death in Europe, the Catholic Church had to back down for 100 years and encourage cremation, because the effective way to stop the plague was cremation. And at the beginning-- and they knew that-- but at the beginning of the black death period, the church fought the idea of cremation.

But when the numbers of deaths got up to the certain level the Catholic church changed its mind and started to allow cremation. Well if the plague gets bad enough, we're going to have to change our mind and say, hey, the slight encouragement that clean needles gives to drug usage is not important, relative to stopping AIDS, and therefore we will do it. But the question is, how do you speed up that process, rather than slow it down?

MORRISON: Or if you need to do go through the bad experience before you accept [INAUDIBLE]

THUROW: Economically, AIDS doesn't make much difference here, because how many people are dying now? 8,000, 10,000? We kill 55,000 people here on the highways and don't notice it. And so the answer is, now the place we will notice it is in the medical care system. And the way that we'll notice the medical care system is effectively, in the United States, it will force us, 10 years from now, to have a different medical care system. And it will force it on this issue of, throw a lot of resources at a hopeless case.

Because take your favorite estimate of AIDS for 1993, multiply by your favorite cost per year, and you will get a mind boggling number.

PRESENTER: It seems to me that there's sort of theme running through this discussion. It seems to me that we're saying is there are problems out there, problems are soluble, that a lot of the solution to problems has to do with priorities. That priorities are often, at least in our view, distorted by political and ideological and attitudinal reality. I think [INAUDIBLE] that. I guess I may be the last in the world of the naive technological optimist, but I've kind of always [INAUDIBLE] with the idea that, maybe that for all of them, but for at least an awful lot of them, there's a technological solution. And obviously we could talk about that in the context of AIDS, but I think even in some of these other contexts.

You know, some of these problems of waste disposal, that David has sort of at least gotten us into. I don't understand why Phillip and his friends can't invent some super macro laser disintegrator, like we use to see in, you know, the movie serials when I was growing up, and get rid of all that stuff. I don't understand why science and technology isn't making more of a contribution to this problem.

MORRISON: No, they can do it, but you have to pay for it. You don't get a free on. I mean even in the movies, they didn't have free super laser--


MORRISON: It's literally not a problem. I can't believe that it's a serious problem. From the point of view, can we do if we willed? But we don't will. I must also add, the federal government has a considerable sum, not the biggest sum, in the Defense Department. $300 million. Now it's very hard for me to believe that we would not be a safer country if we $50 billion less every year. And I've wrote a book on the subject, I really started rather hard, I tried to be as dispassionate about it as possible, accepting what seemed to be rather Baroque principles in American foreign policy. We've been accepting those principles.

If you do a better job of defending what you have, you don't take quite such a stance to run around the world and bash people on the head. And you can't really bash people on the head that can bash you back because it's too dangerous. To take it out on the Canadians. Well it's very strange. That's going to happen, too. I guarantee the budget of 2010 will not contain the equivalent of the American military budget which has grown so splendidly since 1950.


AUDIENCE: On the economic front presently, there are two contradictory trends visible. One is the industrialized societies or countries are getting [INAUDIBLE] as globalization. On the other hand, one sees the trend of protectionism. Now which do you think would be the most dominant theme in the next decade?

THUROW: Well see, let me start off on what you first mentioned. It's interesting to notice the difference, because you're focusing in on it. In the 1930s, or prior to the 1930s, there was a very conventional view of what international trade is. International trade is industrial countries making products, selling them to third world countries, and buying raw materials. And that partly came about because of the colonies that existed prior to World War II. Britain traded with its colonies. And that was the pattern. Britain made manufactured products, and the colonies paid for those manufacture products with raw materials.

Since World War Ii almost all of the growth in world trade has been between wealthy industrial countries. And in fact, because of the scientific revolution, raw materials are becoming much less important. This isn't just the end of the Iron Age, it's the end of the raw material age, in the sense of things that are in scarce supply.

Look at the units of GNP per ton of steel consumed. The United States today, including imports, consumes one third less steel than we did in 1961, one third less iron products that we did in 1960. And the GNP is twice as big. But the same thing is true of copper, zinc, any of those things you can think of. And of course, those were the traditional exports of poor, underdeveloped countries.

And so you do have this is the situation where the developed world was essentially integrating with itself. Now the thing that should be said is, in the post World War II, we had countries genuinely move from underdeveloped, to at least quasi-developed. The Koreas, the Taiwans, the Hong Kongs, the Singapores, the Brazils, et cetera. There were some great success stories in that thing. Now you notice I don't have Japan in that category, because as far as an economist is concerned, Japan has never been an underdeveloped country.

Japan has occasionally been poor, but never underdeveloped. The Industrial Revolution began in the early 19th century, and in 1830-- and if you want to look at [INAUDIBLE] book on the Japanese, it's fascinating. In 1830, all the evidence is that the standards of literacy in Japan were higher than they were in Great Britain. More people could read write in Japan than could read write Great Britain at the beginning of the Industrial Revolution.

And so when the Magi restoration came along, and again, after World War II when the country was bombed, Japan was poor compared the rest of the world, but it was never underdeveloped. It had an educated, skilled workforce potentially, and a very well developed, integrated central government that was able and willing to provide the infrastructure. And so Japan has gone from poor to rich, but it's very important to understand that Japan has not gone from underdeveloped to developed. Japan has always been part of the developed world.

And of course, we can see that if you look at the military stuff. They beat the Russians. And the [INAUDIBLE] before 1900. And they fight the United States to withdraw in World War II for three or four years. You don't do that if you're an underdeveloped country. And so, you know-- but we have had successes along that line. But yes, you're right. All the growth in world trade, with the exception of energy, oil, has basically been between developed countries.

PRESENTER: And with regard to the question as to whether you expect more protectionism, or more globalization?

THUROW: Well the protectionism really depends on whether we can turn this stagnant growth around. If you assume the world economy is going to continue to slow down, that we're all going to become protectionists. Because in a stagnant world economy, every import is a job lost, and everybody will see the job loss when the import comes in, and they won't see the job gains when the exports go out.

The thing that allows open trade is a world that's growing fast enough so that when you lose a job because of imports, you know that isn't the end of the world. The economy is going to be generating other jobs, and you're going to have better options. And so of course, you can see it if you look at Germany and the steel business. In the 1960s, the Germans were importing steel, no problem. 1980s, they pass a whole set of restrictions to keep Brazilian steel out. Because in the 1980s it looks to a German steel worker like a ton of Brazilian steel means a German job lost on a quasi-permanent basis, while in the 1960s with a 1% unemployment rate, the loss of a German steel making job was not a terribly onerous thing.


MORRISON: I'd like to go back to the question Fred asked originally. Suppose the new president called you in and asked for your recommendation on whether to implement the solutions now, or wait until 1993. What would you recommend? And what pace would you recommend implementing them?

THUROW: You know, that-- I think the sooner you start, the better. Not from a political point of view, but from an economic point of view. Because, see, the longer you wait, the bigger the changes that have to be made. Because this debt's grown at the rate of $200 plus billion, a year which means the changes that have to occur in the structure of the world economy get bigger. You know, if you do it on January 1, 1988, you've got to go from $170 billion American deficit to plus $43.

If you do it on January 1, 1989, you've got to go from minus $170 to plus $70. And if you wait until 1993, you're probably talking about going from minus $170 to plus something like, I don't know, $170? And so the longer you wait, the bigger the change. And of course, from the point of view of the world economy, it's absolute madness to have one of the wealthiest economies in the world following all of the world's money.

You know if there's money in the world to be lent other for economic development purposes, it shouldn't be lent to Americans, it should be lent to poor countries who need it in terms of their economic development. So from the point of view of both in some sense, the American long run interest in the world's long run interest, the quicker you do with the better.

Now the problem is, you can't do it alone. If you say how fast do you do these things, the question is, how fast can you-- how much cooperation can you get them the Germans and Japanese? Because you know, you wouldn't want to cure the American budget [INAUDIBLE] tomorrow if that's all that happened. Because all of a sudden we would take $200 billion worth of demand out of the world economy. That's five million jobs, three million of them would be in the United States. Two million of them would be abroad. That's called a world recession.

You need them to do something at exactly the same time the United States is doing something. And so the answer of how fast depends on how fast can you organize it with at least those two other big actors in the world? Because you've got to do this, you've got to do this in harmony. It isn't something you could do by yourself.


AUDIENCE: On the same subject, you have explained to us how in the last eight years, the US has lived beyond its means, mainly financed by foreigners, which probably means that they have some of the excesses of the US. Now, you have also explained to us that in the future, the US will have to become a net exporter, which means that jobs will move to the US. Doesn't that mean that the US wins twice? Once living beyond its means, and then having the jobs that the others lose that financed that before?

THUROW: No, but remember there's a third part of it, and that is who will work for lower wages? If somebody gives me a job but at a 50% wage reduction, from point of view of an economist, that's a negative. Because I have to give up hours of leisure, and I get paid less. And so it helps you in terms of the unemployment rate. But the name of the game is not minimizing the unemployment rate. The name of the game is maximizing purchasing power.

And see, Americans are going to get lower purchasing power, because if you do what we do, what we've done, is moved our-- you see, what lending and borrowing does is allow you to move your income across time. Doesn't raise or lower your total income. We have moved some of the income we would have in the 1990s to the 1980s by borrowing money from the rest of the world, which at some point we're going to pay interest on, and we're going to pay back.

And when we start to pay interest and when we start to pay it back, our standard of living will be below what it otherwise would have been. And so we've shifted our standard of living around on a time basis. And so we haven't got something for nothing, and we don't win twice.

Now the only way we win twice is to default. Because if we borrow it and then don't pay it, then we've won twice.


AUDIENCE: In the past several weeks, we've heard about the lack of competitiveness from the United States in the world marketplace. And a key element in that seems to be the productivity issue. And I would very much like to hear Professor Morrison and Dean Thurow, your comments on how can we improve on the productivity issue from the viewpoint of technology, management techniques, and education, and specifically what do you think the industry can do along these lines?

MORRISON: I feel very modest about this. I know absolutely nothing about industrial productivity. I know something about education. I feel that the American history education has been excellent, but it has been cut off lately. It is not as good as it ought to be. We need a much greater concern and investment, probably concern more than investment, and so on. Those are the things which I've said. I said something about it from the point of view of broad, forward looking social attitude, entirely apart from the question of productivity. I'm sure the two accompany each other, but I would have to defer to Dean Thurow to talk about the rest.

THUROW: Let me talk about two things. People use this word, competitiveness, and low productivity growth, and it's important to separate the two. Because, see if you think about the trade deficit problem, we are not talking about a long running problem. In 1982, the United States had a $30 billion trade surplus. In 1987, it's minus 170 Now you see, this is a measure of becoming less competitive, but something happened in that period of time. One of the things that happened during that time, we went from 170 end of the dollar to 280 end of the dollar.

So that means if you're an American firm that had costs exactly equal to you Japanese competitor back there in 1980, by the time you got to 1984 and 1985, your costs were 30% or 50% above your Japanese competitor, not because you done anything lousy at all. Simply because the value of the dollar had switched. And we're now back down to a rate of something close to 120 And American firms are going to become more competitive.

But remember, this is not a desirable thing. It may be a necessary thing, but it's not desirable, because this is effectively the way I reduce my wages. Because at 160 end of the dollar, Japanese manufacturing wages equal American manufacturing wages. So if the two firms are equally efficient in terms of management, equipment, et cetera, they run even at 160 end of the dollar. If it's above 160, the Japanese has the edge in terms of labor cost. If it's below 160, the American firm has the edge in terms of the labor cost.

Now if American firms can't compete at 120, it means the Japanese firm on everything else is 30% to 40% better when it comes to management, equipment, technology, everything but the amount that you have to pay the workforce. And we can talk if you like about why isn't the trade deficit getting better faster, and let me do that in a minute. But there's that competitiveness problem which relates to what we've really been talking about this morning, which is this kind of macroeconomic problem.

The other problem that you mentioned is the low productivity growth, which in the United States is about 0.8% per year, and the rest of the industrial world is averaging about 3% plus. And so we're running at about the rate of one third to one quarter of what's happening in other developed, other advanced countries.

Now the important thing to understand is, if you just looked at manufacturing, we're running at a rate approximately equal to the rate in the rest the world. The low productivity growth in the United States is all outside of the manufacturing sector. We've got lots of industry in the United States with falling productivity, like finance. It's a bit of a mystery. If you take banks, you got computerized accounting, and the ATM machines are the robots of the banking industry, and bank productivity is going down 1% a year, every year for the last seven years.

And so outside of the manufacturing center you see a kind of a double mystery. First of all a very low rate of growth of productivity, or even negative. At the same time you've had all this technology put in, mostly information technology, that should have made those places work better. And then the question have to ask yourself is, what's going wrong?

Now see, the other thing the points in the same direction, that [INAUDIBLE] when people say the word productivity, they tend to think of a factory problem. In fact, that isn't where the problem is in the United States. I don't have the exact numbers with me, but if you take the period from '78 to '87, you'll find something like the following. If you looked at blue collar workers in America, the number of blue collar workers in America has gone down by about 1 and 1/2 million people, which is about 5% of the blue collar workforce. Over this period of time real output has gone up by about 20%, which means the productivity on the factory floor in a nine year period of time has gone up by about 25%.

Now, it's just a little less than 3%, and a little off the world rate, but not much. If you look at your offices, white collar workers-- now this leaves service workers out. Service occupations are not included in this data. You will find that American firms have added 11 million white collar workers to their payroll, which is about a 25% increase in white collar employment. So we've got no productivity out of the office, because you've produced 25% with 25% percent more. That's zero productivity.

And American firms have 61 million white collar workers on their payrolls, and 30 million blue collar workers on their payrolls. The American productivity problem is located the office. In this tremendous white collar bureaucracy that you all are adding. And see, you read things in the paper which just aren't true when you look at the statistics. Like you read in the paper that every American firm is trying to become lean and mean reduce the layers of white management, right? And you read these horror stories periodically in the press that such and such a firm is going to layoff 20,000 white collar workers over the next five years.

The actual thing about those stories is if you go back three years later, it's almost never happened. And if you look at the aggregate numbers, it isn't happening. Because in 1987, our economy grew to 2.6%, in real terms. Guess how many managers we added to American payrolls in 1987. 5.7%. So we were adding managers to the American payroll twice as fast as you were adding output. Now the American payroll is your payroll, not the American payroll. And so you tell me, why American firms have to do this? And why American firms can't manage their office? That's where the heart of the problem is. It's not out there on the factory floor.

AUDIENCE: Dean Thurow, you have mentioned that the aggregate index will not be the correct figure to look at in the future. So from a multinational corporation point of view, what is the index that we should be looking at in the future years to come?

THUROW: In what sense?

AUDIENCE: In the economic index. You have mentioned to the president that the aggregate index is not really--

THUROW: Well what I said is he can't just look at the American economy. He's gotta to look wider than the American economy, because many of the important things that are going to affect Americans are going to happen in the rest of the world. If you have stagnation in Germany, it doesn't just affect Germans. It's going to affect everybody else in the world, because it's going to slow down the whole world economy given the way it's constructed. It's exactly, exactly like an OPEC oil shock. If Saudi Arabia does something, and you have an OPEC oil shock, it's going to cause inflation in all of the world. And see, we traditionally in the United States, and certainly American presidents, think of the world where if something goes wrong in America, there is a cure in America.

Perfect example, take the Brady Commission, which was this report on the stock market crash. It was all rubbish. Absolute rubbish. But very good American rubbish. Because what it said was the New York Stock Exchange crashed, and it first of all ignored the entire world. The crash actually was going for six hours before New York opened. The crash began in London. And so if in some sense, if you were looking for a precipitating event you would have looked for something in London. The Brady Report barely mentions that stock markets in the rest the world crashes.

And then it comes to its solution, which of course, where its cause, its devil, which was, of course, the computer. If your package doesn't arrive, what's wrong? Well the computer goofed up. If the stock market crashed, what's wrong? Well of course, it has to be the computer in the modern world. It goofs up everything. So they said well it's portfolio insurance and program trading.

They don't do that in London very much. How can something that's not done in London start a stock market crash in London? Well maybe you could have told us sophisticated stories to have that happen, but they didn't do that. They assume that what happened on October 9 is completely solvable inside the United States. No such thing. We have integrated world capital markets. Many of the same firms are listed in London, New York, and Tokyo. Where if one of them falls, the other's got to fall, because they're measuring the same stocks to some extent.

And it's those kind of things where I think you need a big change in American attitudes, both at the top and the bottom. Because they're it. If you think of the New York financial market as just part of the world financial market. And it doesn't even have to be Americans. If you go to London, the British firms are not the biggest player in the London market. The British market share is well below that of either the United States, or the Japanese in the London market. And so you can be a world financial capital without your firms been dominant in your own geographic capital.

And it's those kind of things where I was arguing you have to look at different numbers.

AUDIENCE: Does that mean that the multinational corporations will be having to pay more attention to the finance instead of production?

THUROW: No, I don't think it means that. But see, I think the trick you going to have to think about-- I would argue that there-- I know what you mean by multinational firm, but in my sense there are almost no American multinational firms. Are almost no Japanese multinational firms. There are almost no German multinational firms. If by a multinational firm you want a mean that really integrates across different societies and groups.

The only multinational firms that really exist come from small countries like Switzerland, Holland, Sweden. Because if you're Phillips, you can't run Phillips as a Dutch corporation. If you're Volvo, you can't run Volvo as a Swedish corporation, because most of your employees are not in Sweden, most of your markets are not in Sweden. Take big American firms that like to think of themselves as multinational and ask yourself, how many of the top 15 executives aren't Americans? Do the same thing for German and Japanese firms.

And if your definition of a multinational firm is one that has a significant fraction of top management that isn't a native of that country, there are, I think-- somebody told me at IBM there's one such person. There's one non-American in the top 15. And there are a lot of-- can't find any Japanese firm with a non-Japanese who would be one of the top 15 people in that firm.


AUDIENCE: Just to pick up on what Herb was asking you about what changes do you think that American management have to be making in the next 10 to 15 years?

THUROW: Well let me pick up on that again, come back to it and then I'll throw question to Philip. See, if you look at from an economist's point of view on the productivity side, related to the technology, the interesting thing is, for some reason American firms do very little work on process technologies. If you look at the scientific things-- I was recently asked to write an article for Science magazine that came out in the middle of December. And they asked on an interesting topic.

The question I was supposed to write on is, why are Americans slow to adopt new technologies? And that's a very interesting question because 20 years ago they wouldn't have asked the question. Because if they had asked the question, the answer would have been Americans are not slow. The editors of this journal are stupid. Why did you ever ask such a silly question? End of article.

Today it's not a stupid question, and so I essentially investigated that topic, and wrote on it. And what you find if you look at it seriously, I broke it down into three different parts. First part is, are we behind in the sense of having consumers willing to buy new things? Are we behind in the sense of having scientists and engineers who invent new things? Or are we behind in the sense of having firms who are behind in terms of process technologies, and therefore they can't produce new things at competitive cost.

Well, if you look at the question about new products, the answer is the United States is not behind. Recently a group of people tried to find the leaders-- they divided all off science and engineering into nine categories. They tried to identify the human beings that were the leaders in this technology, where they were located, and rate countries based on who lead in these various technologies.

Now of the nine technologies, they came to the conclusion Americans lead on five. Americans were tied for first on two. And they were second on two. Well if you have five first, two ties, and two seconds, you're clearly the number one country. Now the thing with different on that dimension is there was a definite challenger. Every time we were number one, Japan was number two. Every time we were tied for number one, it was with Japan. And everywhere we were number two, they were number one.

And so the first thing that was different is the since World War II, we have not had a scientific challenger. Now before World War II we did, it was Germany. But since World War II until recently we haven't had it. But we're ahead. And if you look at the consumer and you say are Americans slow to buying new things? The first reaction is to smile. Can't be true. We're leading edge consumers. But it is true.

There are getting to be an increasing number of things up for sale in the rest of the world that are not for sale the United States, like digital tape recorders. Higher resolution television sets. A number of drugs. If you ask why is the American economy slow on those consumption items, there's always a standard answer. We get ourselves tied up in legal knots. Like we don't have digital tape recorders because the music industry is suing the hardware industry. CBS was suing Sony. That's why Sony bought CBS. It was cheaper than paying the lawyers.

But a legal system can be a handicap. If you have a legal system that's slow, expensive, and cumbersome, it's going to be an economic handicap. But now that brings you to the process technologies. And see, when you think of the process technologies, there it's hard to find a place where Americans are the leaders.

If you want steel rolled to the highest precisions, the Germans do it. If you want silica made with the least impurities, the Japanese do it. If you want the robot that could play something the closest in terms of microns from where it belongs, the Swedes do it. And when you come to these processes technologies, you just see an American scientific industrial establishment, which seems to be behind. And so I will now throw the question over to Philip as to why you think we're behind on processed technology?

MORRISON: First, I'm not so sure that statement's quite right. I strongly suspect that a lot of these firms are licensed by American patent holders. A lot of them. Not everything, because we do have a big competitor now. But it's the investment to carry it to the floor. It's the whatever goes into the bottom line calculations that make the difference. It's the whole look at what the future's like. Well I could only give an example. I know very little about this, but I can give examples from my own trade.

Couple weeks ago, we heard a brilliant talk by one of the people of the MIT physics department who gave a compelling, if not absolutely sure theory of the high temperature superconductor, which people are looking for. And one of things he said about it was that they determined to make the experiments in which this rested by getting large single crystals in the material, which had never been grown before.

Now the growing of crystals is a wonderful, technical art. It's between a scientific and an artistic endeavor. Quite scientific, but it requires great care and great specificity of interest. You can't grow A and then know you could go B, C, and D. Each one is handled separately. In the whole United States, he said, he managed-- there's a small group at MIT, not faculty level, but very good people, engaged in the material science department-- he took over their entire work for six months in order to get this done.

Meanwhile he had friends elsewhere. And enlisted for his support, people at the very highest level, faculty people, and biggest firms in Japan to do this work for him on a contractual basis, as partners. In all United States he said-- I don't need to prove this-- but he did not know of a single faculty member of any physics department in the United States who was a specialist in crystal growing.

He did not know a single good physics department in Japan that did not have such a professor. That's not because there was any special economic demand for this for high temperature-- it was because everyone realized that that's a thing you have to be able to do, even though it may not have the-- in some ways, the greatest expectation of large breakthroughs. But it's a necessary part of the competence of industrial society.

We don't finance it. We don't have people going into it. There are no jobs. There are no rewards. And we don't have any in the entire country. This is some kind of indication of what's going on.

THUROW: See, I think it's this organization thing, because MIT came to the conclusion a few years ago that this is one of the places where we weren't living up our responsibilities. Because if you look at the scientists and engineers who graduate from MIT, none of them go off to do process research or on process things, except for chemical engineer. And the question was why.

Well one answer is, those kind of problems don't automatically pop up a university environment. We don't run processes at MIT, and therefore we don't automatically see process problems in our scientific laboratories. And so the decision was made that MIT should set up a program, which we actually are starting in June, and call it Leaders In Manufacturing, designed to turn out people who are scientifically good in process technologies.

Very quickly you come to the conclusion you can't do it in the engineering school, because there's a huge management component. Because the minute you start talking about processes, you're talking about getting human beings to do things together, and changing what human beings do, and so there's got to be a management component in the process engineering that doesn't have to be there if you're just doing design work.

So the program became a joint program between the Sloan School and the School of Engineering here at MIT. But then we had to recruit some industrial partners. Now part of the problem was getting some industrial partners who would give us some money. That was the minimum part of the problem. The other part was getting a group of firms would, in some sense, let us use their production processes as our laboratories. That was the much harder problem.

Not because they didn't think this was a good idea, but because it would have a long run pay off, and in the short run it would be disruptive, because you're going to have-- some strangers are going to occupy some of your own employees' time, running around your processes. They're going to want to do experiments. The throughput in the short run is going to be a little less than it might be if you didn't have such people running around your facilities.

But as the Dean of Engineering and I went around to sell this program clearly with something else. Processes and production in American companies is the dumping grounds. You pay the lowest salaries, you give the slowest promotions, and everybody perceives it as Siberia, in terms of getting ahead in the industrial world. And very few companies say, if you don't learn how to do this, you won't make it to the top.

The companies give exactly the opposite signals. The right way to get to the top is to go into finance, go into marketing anything but actually building the stuff. And we actually had company presidents from leading American companies say to us, with no sarcasm, we're not sure we need smart people in production. That's what they said. And if you do that, then it shouldn't be a surprise if you don't have world class performance. You're not allocating your world class people to that activity.

There's a MIT commission on industrial competitiveness, or industrial productivity, and we had Young from Hewlett Packard here. And I regard Hewlett Packard as one of America's premier firms. He said the thing he was proudest of in his tenure at Hewlett Packard was for the first time in the history, at Hewlett Packard, the pay and promotion curve for production engineers was as fast as it was for design engineers.

Well if it's just true Hewlett Packard, my god, what is it in the rest of American industry? And if you don't treat people as first class citizens in an activity, first class people won't go into that activity. And I think one of the things you have to ask about American industry is, how did they slip the habit of saying producing this stuff is a second class activity? The first class activity is selling it, financing it, designing it, everything but producing it. And see, I think that's the heart of the problem.

Once you decide that you're willing to pay a competitive wage for production engineers, an MIT new engineer will go to work for you in that capacity. But if you say to them, hey, we're going to give you $40,000 in design, and we'll give you $25,000 if you go to production, what MIT 22 year old is going to take that deal? They're all going to go into design. And that's what you've been essentially offering our graduates. About $15,000 a year more to go into design than you would offer our graduates to go into production. And they're not stupid.


AUDIENCE: In the areas of technology, in the next decade, what do you think are the most important mega projects. And I'm thinking specifically about such things as the Superconducting Super Collider, or mapping the human genome, or any others but you might think are as important or more important. And how do you rate these?

MORRISON: Well I don't want to appear to be negative on these things. These are both wonderful projects. I would be very enthusiastic for either one of them. I don't think it makes a great deal of difference, in fact, whether they're done or not, except it as it bears upon morale and long range intention. Of course, these are fine things to do, and they ought to be done, and it's hard to ask people to wait. But the consequence of doing it is not something that's tied to the year 1988 or any other year.

It's really part of the same problems, attitudinal problem. Do we want to grow? Do we want to do something that will be valuable in future, in a way we don't know quite how? Then let's do it. Let's do it at a considerable scale. We could afford that. That's all I could say.

THUROW: See, let me make a comment here about it, you know, if you think--

MORRISON: Can I make a remark just-- I want to quote one person. I want to quote Frank Yang, a very, very famous physicist. American theorist, who was Chinese in origin. He became, strangely enough, 10 or 15 years ago, a good friend and confidante to Chairman Mao himself. This is a true story. And he tried to convince the Chinese physicists, and with them eventually, of course, the chairman who he spoke to every once in awhile, that perhaps the wisest thing for China to do was not at that time, to build a large accelerator, which would cost a lot of money, a lot of talent, they were just barely able to do it. Start small. Build a few. Spread the enterprises. The community has been built first.

And that was sound advice. They didn't like to take it. And finally, Chairman Mao, said to him, at a certain point, he reported this to me directly, I believe it. He said, you know, it's very well what you say, and there's a lot of sense to it, but to say we are not a rich country, at the same time we have made some progress. We are rich enough to make a definitive contribution to the knowledge of all mankind. That was from this man. Now that's extraordinary. I don't many American presidents who would say that in public.

THUROW: The other thing is, you know, one of things, people, that you have to understand, is it's very hard to figure out what's going to pay off where and why. Take one of the things that Professor Morrison mentioned about the whole question about public sanitation and lengthening life expectancy and all of that. You know, economic historians have a fun problem. After the Black Death, when European populations were grossly lowered, there came a period of time when all of a sudden, population and life expectancy exploded.

There are number of theories as to why this happened, but one is the underwear theory. This is about the period of time people switch from wool to cotton underwear. Cotton underwear could easily be washed, and with the washing of cotton underwear you suddenly had many less general diseases, and you had a much healthier population. And so the single most important thing that led to this, the modern world of lengthening life expectancy, is somebody-- cotton had been around for thousands of years. Wool had been around for thousands of years. But people effectively find a shift from wool to cotton underwear, and all of a sudden the quality of human life improves.

Well that's not something you just kind of-- it happened, but it's not the kind of thing you predict. See, you also mentioned the introduction of electricity, which really was a revolution. But it's fun to go back and read about these introductions of these technologies, and think about in a counterfactual sense. Because I'm going to take it where electricity first came into the world economy, and I think if other developments had happened, electricity would've been delayed for about half a century.

First place, electricity were used to light ships. Wooden ships. Because the thing that destroyed wooden ships was not storms, but fires. Tremendous fraction of all the wooden ships that set out on the seas burned, because you had to have lights and they were lamps. And the first use of electricity for 20 years, the only place electricity in terms of lighting was really effectively used was on wooden ships.

But suppose the developments in steel making and shipbuilding had come first, and metal ships had existed before electricity. There would have been no demand. Electricity was very expensive. There would have been no demand for lights on those ships, because with steel ships, fire was not a problem. There was a different way to solve it. The next place where we first started using lights was on street lights, because the thing we used to like the world was whale oil, and we were running out of whale oil.

They started making coal gas. But of course, that's synthetic feel. And we haven't even solved that problem today. It was very, very expensive. And so we started street lights because the cost of coal gas and whale oil was so incredible. But just a few years after we started electrical lighting of streets, the East Texas oil fields were found and Spindletop. And all of a sudden, we could've lit the world very cheaply based on petroleum. And so if Spindletop had been discovered 15 years earlier, it's highly likely that the electrical lighting of streets would have been very much delayed, because electricity wouldn't have been competitive with the very cheap oil coming out of Texas.

And so here you have to events, steel ships and finding oil wells that have nothing to do with electricity, but in fact are central in terms of how rapidly we use electricity in the 19th century world. And see, I think it's those exact same kind of problems today, if you think about various technologies, because the question is, what's going to go along with those technologies that will make them pay off or not pay off?

Think about the computer revolution. Almost everything people predicted about computers is wrong. The first thing they predicted about the telecommunication computer revolution is that it was going to allow a spreading out of economic activity. We were all going to work at home, remember that? Cities were going to decentralize. Tremendous force for decentralization. In fact, it has been a tremendous force for centralization.

Since the telecommunication computer revolution, it looks like one city is going to gobble up every country in the world. If a city is both the financial capital and the political capital, it's almost Avogadro's number today. At least a third and maybe as much as 50% of all the people in that entire country will live in that one city. Tokyo, London, Buenos Aires, Santiago, you name it. And this decentralization the telecommunication computer revolution was supposed to bring about, in fact, became a centralization. Because it allowed you to put all the financial activity of the world in three cities. And it didn't lead to the decentralization that people predicted.

And so I think that that's one of the reasons why you can't deal with this subject in kind of a narrow economic cost benefit way. Because if you do the economic cost benefit calculations you'll get them wrong, because all of these other things that seem completely tangential or unrelated, in face, are central to making them pay off.

MORRISON: Other thing be equal is fine. But you can't have other things equal.


AUDIENCE: Our discussion this morning is focused on what we call the whole world, but in fact it's really the free world. What changes if any, do you see between now and the year 2000 in terms of the exchange of science and technology, and also goods and capital with the communist world.

MORRISON: Newspapers are as good a source as I am. I find that changes going on in the entire part of the world are extraordinarily rapid and unifying, in some sense. I mean, in a week sense at least. Both in China and in the Soviet Union. And to a degree, in Eastern Europe. All people I talk who've just come back from there say that, they're all saying that's going to be different now. Reconstruction and openness are going to spread, to a degree.

THUROW: See, let me make an argument that is not a different world at all, in two dimensions. In December, a year ago, I was invited to spend a month in the Soviet Union as the guest of a guy by the name of Yakulov, whom I had met when he was head of the Institute for World Economics, but he's now secretary of the central committee, and a member of the politburo.

And in the month that I was there, I guess I came to the conclusion that Mr. Gorbachev has the General Motors problem. First of all, things are different. I spent a few days teaching at the University of Moscow, and the students would talk about draft dodging in Afghanistan. I've taught at the University of Moscow before, but I can guarantee you, when I was there previously, nobody would ever have talked to a westerner about anything personal, much less draft dodging. But it sounded like kind of the United States in 1968, because everybody had these seems to keep out of Afghanistan, much like every American in 1968 a scheme to keep out of Vietnam.

But the reason I say it's the General Motors problem is, it's the middle management problem. Gorbachev wants to change. Top management of General Motors wants to change. The question when you want to change is not how you get the workers to change. They're willing do anything. The question is, how do you get the middle managers to be willing to change? And the middle managers don't want to change for a very good reason.

They may now think the new ball game that Gorbachev wants to play is a better ball game, or they may think the new ball game that Roger Smith wants to play is a better ball game, but they're winning the current ballgame. And therefore any new ball game is a risk to their position, and they don't want to take that risk. And so even if the old ballgame is worse, they still want to play it.

And we had a circumstance when I got there, they said to me, do you want to see some of our factories, and I said, well, the honest answer is no. I've seen a lot of obsolete consumer good factories in the Soviet Union. If you want to drag me through another lousy factory I don't want to go. And that kind of took them back on their heels. And so they said, well, we're going to take you to the leading machine tool factory in the Soviet Union. This is a factory that no American has been in, or any other westerner since 1945, and presumably it makes military equipment, as well as civilian equipment. This factory is in Leningrad. I'm in Moscow.

They get a guy who is the associate director of the Institute for the Study of the USA to take me Leningrad. That's like being assistant director of the CIA. He and I-- and he has a whole briefcase of what I assume is permissions. I know that the number three man has said I can go, because that's Yakulov, and maybe Gorbachev himself had to get permission. We end up at the factory gate, the [INAUDIBLE] Works in Leningrad, and the attitude of this plant manager was, I don't know who the hell's going be running this operation the future, but be damned if I'm going let this happen because somebody in the future may accuse me of letting a spy in this operation.

And he can't say no because the bosses said yes. But he can say not today. So today is not convenient. Tomorrow I gotta check with Moscow. And he can out wait me, because he knows I can't sit there for four months. Four days later, I'm not in that plant. And see, in the papers, they say something that is true. They say it's the bureaucrats in Moscow stopping it. That's not who's stopping it, it's the plant managers. Bureaucrats in Moscow are relevant. The plant managers are not irrelevant. And see, that's exactly the problem you have in your corporations.

You want to do perestroika, restructuring. Who's going to stop you from doing perestroika? Your middle level managers. They're the guys who are going to stop you from doing perestroika. And see, in that sense, Gorbachev has got your management problem. The only difference is that he's got 270 million employees. And I know none of you have 270 million employees.