As we move towards a fifth industrial revolution, how can physics and economics work together to make a global difference?
Well, let me take my favourite example: fusion. This is literally the power source of the stars. If we can harness this power, it is carbon-free energy at scale. But it is prohibitively expensive, so what economics can then do is provide both the incentives and the kind of market forces that take it from a research project that's funded by governments to something that can be deployed at scale around the world. And you should never underestimate the power of a combination of physics and markets in changing people's lives.
Is the growth of economics dependent on physics and its advancement?
I'm not sure I buy the argument that economic growth is tied to physics. The important thing about how we organise the kind of market forces and societies is partly the outcome of the democratic process. There might be the perfect equation in physics, but I think it's hard to say there's a perfect way of organising things. It will depend on the will of the people of the day and structural forces such as automation and hybrid working.
Further, we wouldn't have been able to support so many physicists 300 years ago, because most people would have been working on the basics all the time. Now that we're a much richer society, we can afford to have much more of that stuff and economics has helped deliver that.
There are basic needs that a good understanding of physics, can help with – like energy, your heating, and maybe even food to some extent. That's the kind of wealth that physics can help with.
As someone with a foot in both camps, how do you see the relationship between physics and economics?
At a very high level you can understand the world through both processes. Physics provides you with this natural lens that helps you understand things like how high a helicopter can fly, why the sky is blue, and all the amazing natural phenomena.
What economics can do is provide you with a different lens. Some people think economics is all about money, but I don't think that's true – although money is important to understand. The lens of economics allows you to understand human behaviour better, particularly when it comes to incentives. And that's important, too, because if we're going to design social systems, then we need to understand what people's incentives are, what motivates them, and maybe how they're going to behave in certain situations.
Where they have a deep connection is that they both use models to try and understand features in the systems they seek to explore.
Can one exist without the other?
Physics exists in the natural world, whether we're here or not. Economics is more of a human construct, but it can still provide deep insights: one of its greatest results is that trade can make all parties better off. I think they could be independent, but they are quite heavily linked in some ways. And that's been great for both, particularly as there's been a flow of ideas from physics to economics, in the form of mathematical ideas – like constrained optimisation and a mathematical object called the ‘Lagrangian’, which is widely used in economics as well.
With companies becoming more trusted, is it acceptable for them to drive change through physics to become more profitable?
If the private sector is working well – by which I mean there are competitive markets and firms do not create harm, then yes, they can create products based on an understanding of physics. Look at firms producing solar cells or wind turbines, or perhaps fusion reactors. We all need energy, and an understanding of physics is essential for those products, so firms are incentivised by profits to put physics to use and provide energy that people need and want to buy. But it’s true that in competitive markets, profits should be driven to relatively small amounts, and in those situations, the consumer is the biggest winner.
Finally, is it fair to say that wealth is a derivative of physics?
Probably not. What is wealth? I'm going to broadly interpret wealth to mean being well-off. And so, what makes people feel well off? Spending time with their family and friends. Can physics deliver that? To a certain extent, yes. Because there are basic needs that physics, a good understanding of physics, can help with – like energy, your heating, and maybe even food to some extent. That's the kind of wealth that physics can help with.
But then there are other things which are about organising and market forces coming together in such a way to produce things like leisure time. The competition between firms for workers can cause them to provide better benefits and conditions. Of course, there are lots of places where that process isn't working as well as it should. But when it does work well, in terms of competing to provide a good work-life balance, then people feel well off just by being able to spend time with people they love.