Interview with Professor Danny Quah

You are a professor at the London School of Economics (LSE) a very prestigious school in the United Kingdom. Why did you choose to teach at LSE? Why not another university?

I like LSE for its being so international and for its focus on the Social Sciences. We have representation from over 200 economies - nations, independent territorial units - more than appear in the IMF's Balance of Payments accounts.  It is very exciting to be part of this stream of ideas. London, moreover, is globally central and well-placed to be sensitive to ideas from both West and East. LSE is close to the heart of decision-making in many different spheres: the Bank of England, for UK monetary policy, is just down the road; the Houses of Parliament basically across the street; museums, theatre, fashion, literary writing, music - London is an important cluster for the emergence of ideas in all these different areas.  And, of course, the high-quality journalism that comes out of The Economist and the Financial Times both are based close to the LSE.

While now and then I miss the excitement of being closer to university-based innovations in science and technology - such as I saw at MIT - well, there's only so much richness in close-up exposure to exciting ideas one can fit in 24 hours.

At what point did you decide to study economics and why? Perhaps I lack proper context but if I’m not mistaken, during your childhood a great deal of emphasis was placed on becoming an engineer or scientist. Where did economics fit in at the time?

I switched to economics in my second year at university because I felt it important to connect better with society around me.  But then also just before then I had been studying physics (and before that, engineering), and the people around me doing physics suffered from the intellectual equivalent of testosterone poisoning.  I like competition as much as the next person but it wasn't fun any more.  As it turns out, however, a lot of academic economics is more abstract than physics anyway, and many of its practitioners share characteristics with academic physicists.  Oh well. 

Of course, today, the real glamor-field is Engineering - so it's like I make bad decision after bad decision.

More seriously, though, economics gives you tools and you can decide whether you want to pursue physics envy, chasing one unified standard model to explain the whole world, or you want to apply those ideas in economics ad hoc  to understanding the big important questions confronting society.  So, actually, economics is a good choice.  It lets you do different things.

Most of your recent work focuses primarily on the rise of the East as an economic super power. When did you realize that Asia was going to overtake the West? And was there a specific moment of realization when you decided to focus on the rise of the East?

My early work was extremely technical - econometrics, business cycles, economic growth - and abstract.  Economists working that way never use proper names, like the East or China.  It's always "the economy", "individual j", or "time period t" - anything else is de-meaning and ad hoc.  In that vein, however, in the late 1990s I noticed that all the results, empirical regularities, maps I was looking at - for incomes, for income distributions across the world - all changed dramatically in character after 1980.  That effect turned out to be the rise of the the East.  But in the standard way of analyzing these things, you can't say "China or the East matter hugely".  What you are supposed to say is, there was an outlier, and econometric theory told me to diminish its effect as that single observation was distorting the sample.  So, basically, the standard way of looking at data told you to discard pretty much the single most important thing happening in the global economy.  So I switched perspectives, and I now look at the rise of the East but in as analytical a way as I can.

There is no inevitability about the East overtaking the West.  We can just go by the evidence, and there's a high likelihood of that occurring.  But even when that occurs, however, in incomes or in the world's economic center of gravity, the average Asian or the average Chinese will still be a lot poorer than the average European or American.  And political power, soft power, cultural ascendancy ... all will still remain firmly Western.  Likely there will be global tensions as a result, and they will become more pronounced.  But there's no inevitability on East overtaking West.

Professor Danny, what is your opinion on the current economic state of Malaysia? Do you think that the original goal of becoming a developed nation by 2020 is still possible if the recent trends continue?

Malaysia's economy faces tough times ahead these next couple years.  But then so does every other economy in the world, I don't think Malaysia is special in this regard.  Achieving developed economy status is both more and less than just getting in that high per-capita income.  It will involve the development of a responsible civil society, lowering crime rates, raising education, elevating political debate, ... all hard work ahead.

You compete in taekwondo tournaments at a regional and national level in Great Britain. Many education systems are now trying to produce students who are not just good in studies but who excel in sports, are well versed in current world issues and such . In your opinion what is the importance of being “all rounded”?

It's a bit surprising to hear these days about education systems trying to produce well-rounded students good in studies and sports and knowledgeable about the world and current affairs.  When I was a student, that was what we were told by the Malaysian educational system then.  Of course, many of us completely ignored that; we figured that from what we'd seen, being a narrow student who did well in studies was a good way to be successful.  Now, I realize that the school system was right all along - to the extent that I find success and reward and satisfaction in my work and my life, it is precisely from all those added dimensions - being able to see analogies and examples in sports, being aware of world affairs and connecting to them in what I research.

I recently conducted an email interview with a professor Walter Lewin from Massachusetts Institute of Technology(MIT) who compared sports to Julius Caesars famous quote “ panem et circenses” Do you feel that the competing in taekwondo tournaments and the training have widened your horizons ?

Competing in TKD tournaments gives one an inner peace of mind and a strong resolution, with clear vision about what needs to be done.  You ignore everything that is petty and inessential - that clouds your mind and your vision - and you learn to use what you need to get done what you have to get done.  Without all this, I would waste too much time worrying about silly things.  So, yes, martial arts training and competition have not just broadened my horizons, let me meet all kinds of people I ordinarily never would, but also has helped me think more clearly about the things I would have been doing anyway in my ordinary, everyday life as an academic and an economist.

Many students here in Taylors College aim to go to universities like Harvard, Cambridge or LSE to further their studies in economics. What advice would you give them?

If a university says they will look only at someone's exam marks, there's not that much helpful advice I can give, apart from Do well on your exams.

For others, students need to be clear in their own minds what will make them attractive or notable to universities to which they are applying.   Is it what they plan to do with their career ("become a professional and earn a steady income" - doesn't really stick in the mind of a university selector)?  Is it something they've done in secondary school that gives an indication they will achieve something special in the future?  Is it some burning motivation they have?  Students need to ask [and answer] the question, What is it that I will do afterwards that will bring special credit and raise further the reputation of the university that they will attend.

What is your opinion on the lack of Malaysians to enter Ivy League universities in the past 2 years? As someone who has been to not one but two ivy leagues what do you feel about those universities? How did you feel when you first attended Harvard ?

Ivy League universities are good places, as good as anywhere else in the world.  But what one gets out of them depends on what one puts in.  If someone goes there just to study and get good grades, then likely those universities are no different from anywhere else.  But if one goes there to broaden their own experiences, with an open mind meet and learn from other people from all over the world, then those universities are the top places to be at.  Sometimes I see in different settings, foreign students spending time with only others from their own region, or minority students only ever spending time with other minority students, or engineers only with other engineers, that hardly ever justifies the cost to society of putting together highly-motivated, intelligent, hardworking students of all different backgrounds and experiences in a top university.  It'll be too bad if Malaysians stop going to these places, or if they go, not to fully appreciate all the different experiences available to them there.

The education system in many countries has come under fire in recent years not just in Malaysia but also in Britain and in the United States. After doing some researching I have come across many people saying that the difficulty of examination boards around the world have dropped. What do you think has caused the drop or the perceived drop  and what long term implications do you think this will bring ?

The quality of examination questions and the difficulty of exam boards might have dropped - I don't have a firm view on those.  But the inherent quality of students has not.   So it might be that traditional exams are no longer fit for purpose.  They don't really test the student and they provide little indicator of the potential of the student.  Soft skills, collaboration aptitudes, lateral thinking, fast response to unusual situations - those are all really useful, and perhaps traditional exams don't pick those out properly.

What is your opinion on books such as “Freakonomics” and the “Economic Naturalist” ? Do you feel that they give people the wrong idea regarding economics?  If I’m not mistaken Steven Levitt stated in his revised and expanded version of Freakonomics that many economists do not consider him a real economist. Do you feel that their opinions are valid ?

I like those books by Levitt and others.  If many more traditional economists consider those people non-economists, then I think the economics profession needs to ask itself what it wants economics to be.  Economics is, however, likely not different in this regard from other academic disciplines:  As academic economists, we are closed-minded and protectionist.  We seek validation mostly only from each other, and we defend this attitude by saying this is how good science is done.  The remarkable thing is, economics is supposed to acknowledge the significance of market tests and to accord value through demand and supply in an open market.  Restricting the domain by which valuation can be validated only breeds inefficiency and, in asset markets, irrational bubbles.  Economics needs to be more open in where it takes ideas and in where the audience and market is from which it accords value.

BY IAN QUAH