In a recent fireside chat, Nobel laureate Professor Michael Spence shared his insights on a range of topics critical to understanding the current and future state of global economies. Hosted by Giovanni Amodeo, the discussion delved into Spence’s work with private equity firms, the impact of rapid structural changes on economic models, and the potential of technology, particularly Generative AI, to drive productivity growth.

Spence, a senior advisor to several firms, including Jasper Ridge Partners and General Atlantic, emphasized the value of close engagement with the private sector for gaining realistic insights into growing sectors and technologies. He highlighted the challenges central banks face in making accurate forecasts due to rapid structural changes, advocating for a blend of economic history and real-world observations to keep conceptual frameworks up to date.

A significant portion of the conversation focused on the concept of “Permacrisis,” as discussed in Spence’s recent book. He argued for the necessity of adaptive growth models and a shift in macroeconomic management mindsets from a deflation-focused approach to one that acknowledges the end of an era of minimal inflation concerns. Spence pointed out the critical role of technology, especially Generative AI, in overcoming productivity stagnation. However, he cautioned against an “excessive automation bias,” advocating for the use of AI as a tool to enhance human productivity rather than replace jobs.

Spence also touched on demographic trends, suggesting that while aging populations in major economies pose challenges to growth, productivity improvements and better integration with the global economy could offer solutions. He underscored the importance of inclusivity in technology adoption to ensure broad-based benefits across the economy.

On investment topics, Spence shared his views on gold versus US bonds and the potential of the Japanese market. He noted the complexity of predicting gold prices and suggested that Japan, with its strong technology sector and reasonable asset prices, presents interesting investment opportunities.

In summary, Michael Spence’s fireside chat offered a comprehensive overview of the challenges and opportunities facing the global economy. From the need for updated economic models to the transformative potential of technology and the importance of demographic considerations, Spence provided valuable insights into navigating the current “Permacrisis” and fostering sustainable growth.

Key timestamps:

00:09: Introduction to ION Influencers’ Fireside Chats
00:43: Michael Spence’s Work with Private Equity Firms
02:12: Economists and Academics Working with Companies
03:47: Structural Changes and Economic Forecasts
05:31: Supply Side Constraints and Interest Rates
07:03: Impact on Global Economy and Slow Growth
07:47: Optimism about Future Technological Changes
09:12: Demographic Trends and Productivity Gains
11:01: Labor Force Expansion and Global Economic Integration
11:48: Global Economic Growth and Inclusiveness
12:18: Role of Large Companies and Productivity Improvement
14:14: Accessibility of Technologies and Inclusive Deployment
16:14: Inequalities and Misuse of Technologies
17:58: Automation Bias and Impact on Jobs
19:31: Investment Insights: Gold vs. US Bonds
21:10: Bank of Japan Interest Rate
23:33: National Security Issues