Promoting economic growth

Some thoughts on ESRC's role and ambitions

One thing my colleagues and I are currently working on is ESRC’s future strategy, and our 2025-27 Strategic Delivery Plan. I wanted to talk about a significant aspect of this strategy: a new commitment on ESRC’s part to the promotion of economic growth

I wanted to set out how we plan to approach this urgent issue. But I thought I’d begin by saying a little about why this is so important to us; there are in fact three reasons, which we might class as societal, personal and organisational.

A national necessity. First of all, addressing the UK's economic growth problems is an essential prerequisite to creating the kind of society we want to live in.

The story of the UK’s economic stagnation is wearingly familiar; but it bears repeating to underline how serious the problem is. Twenty years ago, the UK’s low productivity relative to other rich countries was already common talking point – Romesh Vaitilingam's 2004 ESRC-funded summary offers a fascinating time capsule of how the issue looked then. Since the 2000s, the UK has embarked on an accidental and grimly fascinating twenty-year experiment in degrowth.

Productivity in the UK has scarcely increased since 2007. Real GDP per head is 20% adrift of its pre-Global Financial Crisis trend. Growth in disposable income has, in the words of the Resolution Foundation, “slowed to a crawl”. Where once people talked about a “productivity puzzle”, our economic performance now involves at least four: the long-term productivity issues that were known in the 2000s; significantly slower productivity growth since 2007, especially relative to the US; a fall in business investment after Brexit; and further underperformance following the pandemic. Labour market participation is not looking great either, with economic inactivity still over a percentage point higher than before Covid and over half a million more people out of work because of long-term sickness.

Fixing this is a huge prize: higher growth enables higher household incomes and better lives. It also means better public services, and more resources to tackle big challenges, from the green transition to national defence. Helping to deliver this ought to be a central goal of economic and social research.

A personal priority. As well as a national priority, economic growth is something of a personal obsession for me. I’m with Robert Lucas that once you start thinking about economic growth, it’s hard to think about anything else. I’m highly sceptical of the supposed virtues of degrowth, not least because the UK over the last decade and a half has offered us an uninspiring glimpse of what an actually existing ‘steady-state economy’ is really like. And I’ve spent a fair amount of time and energy trying to persuade successive governments of the merits of policy that takes economic growth seriously

A statutory obligation. It goes without saying that my own personal prejudices should not dictate the strategy of the ESRC. But in this case, my views are in sync with my legal obligations as Executive Chair. Under s.95(4)(a) of the Higher Education and Research Act 2017, which governs ESRC and our parent body UKRI, ESRC is required when discharging its functions “to have regard to the desirability of contributing (whether directly or indirectly) to economic growth, or an economic benefit, in the UK”. Though the language isn’t exactly rousing, this to me is a clear sign that neither I nor ESRC as a whole can be equivocal on the matter of economic growth: it must be at the heart of our strategy.*

It seems to me that the importance of economic growth has a few implications for ESRC.

To begin with, we’ll be putting the importance of economic growth at the heart of the new strategy we will shortly be publishing. In ESRC’s previous ‘Strategic Delivery Plan’ (the official document that research councils are required to publish, setting out their funding programme), we had five areas of focus for the research we fund, but economic growth was conspicuous by its absence. Our new strategy, which we will be publishing later in the summer, has two thematic priorities, and one of them is economic growth (more on the other one later). While inflationary pressures and long-term investments mean new money is limited, economic growth will be a priority focus for new investment.

ESRC has two main ways to support growth in the context of UKRI: funding research (or infrastructure, or talent) that helps the UK make better economic policy decisions, and harnessing social science to advance technological progress and business growth. In our new strategy, we will be doing both. We’ll also be looking at how we can develop the practical application of economic and social insights to help drive growth directly.

Here are some thoughts on what that might involve.

Economic and social research for better economic policy

Rigorous research is the foundation of real-world impact. The ESRC will continue to support this through our “applicant-led mode” research funding streams, including our investment in world-renowned research groups like the Centre for Economic Performance at the London School of Economics and the Centre for Advantage in the Global Economy at Warwick.

We’ll back this up with a major push to improve the data on which economic research and policymaking relies. (When I speak to researchers interested in growth, the topic quickly turns to the challenges of working with UK microdata; I have heard many anecdotes of researchers, especially early-career ones, who would like to research UK economic problems but choose reluctantly to focus on other countries instead, simply because there is better data available, enabling better research.)  An important part of this is our significant new investment in Administrative Data Research UK, which brings together government datasets to make them accessible to researchers; the new investment will have a renewed focus on data for economic growth, including opening up access to a UK-wide benefits and income data set, and a linked employer-employee data set (a very useful data linkage that many other countries have, but the UK is still waiting for).

Economic growth is too important a topic to be left to economists alone. There is insight from a wide variety of social sciences, from political science to law to management studies to psychology on important questions like mechanism design, firm behaviour and institutional structure. Qualitative approaches have an important role to play too, for example when it comes to understanding detailed questions of legislative design or industrial structure. Understanding barriers to investment, for example, often involves detailed study of specific regulatory regimes and systems, using the time-honoured “asking the right people the right questions about how things work and writing down the answers” method.

We also recognise the crucial importance of bridging the gap between research and policymaking - and how difficult it is to get this right. Scientists and engineers often talk about the ‘valley of death’ between research and commercialisation; when it comes to social sciences, the same phenomenon exists but is less frequently discussed. Getting this right is hard: rarely a week goes by when I don’t encounter an example of either a brilliant researcher who simply doesn’t know what questions are of the greatest interest to policymakers in their domain, or a policymaker who fundamentally doesn’t understand what researchers can (and can’t) do and how best to engage with them. We’ve learnt from the experience of organisations like the Institute for Fiscal Studies, the What Works Centres, the Economics Observatory and the Productivity Institute that these channels of influence and collaboration are challenging to build, and require a lot of tacit knowledge. (Case in point: there’s a great interest among policymakers in which policies have sufficient evidence that the Office for Budgetary Responsibility will be willing to include their effects in its forecasts - this is a highly specialised and nuanced question.)

That’s why we fund people exchange schemes like the UKRI policy fellows scheme, which this year we’re focusing on economic growth, alongside the Government’s four other missions. (And I am keen to investigate how we might get more social science PhDs and early career researchers contributing directly to growth through ‘innovation fellowships’, placing them with innovative businesses.) And it’s why we support ESRC investments like the Productivity Institute and the IFS to work with government partners and international organisations to translate research ideas into practice e.g. the upcoming OECD Global Forum on Productivity, or the recent IFS productivity conference.

One mode that I’ve long been intrigued by is the HM Treasury’s Productivity Unit that existed in the 2000s as a model for how this might work. “Prod”, as it was known, brought together officials, researchers and other experts to lead timely reviews on politically important topics. Examples included the Barker Review of land-use planning and housing supply, or the Stern Review on the economics of climate change - documents that were reasonably rigorous, very timely and politically significant.

Economic and social research for technological progress

The other dimension of how economic and social research can help drive growth, especially in the wider context of UKRI’s work, is through furthering the development and deployment of new technologies. Alongside the familiar role of social science as a sort of watchdog against the negative effects of technology in the critical tradition (something that has been prominent in academic social research on AI), social research has a valuable role to play as an accelerant of progress, helping to achieve our technological aspirations and driving prosperity.

During the design of the Industrial Strategy Challenge Fund in 2017, when I was working as a ministerial adviser in the UK’s business department, I remember looking at the proposals that crossed my desk - which covered applied R&D programmes of £100m+ in size on fields like battery technology - and wishing that just a small fraction of the budget could have been set aside to properly study the relevant industrial value chains, the technology landscape and how to improve it.

There’s a big opportunity to use social sciences to support UKRI’s investments in critical technologies, from AI to quantum to engineering biology, mapping innovation systems and identifying opportunities for R&D investment. The same is true of the Government’s industrial strategy. Making this a reality would help realise the vision of a strategic brain for the UK innovation system I wrote about recently. Because innovation and the spillovers of innovation investment are to some extent place-specific, and because of the longstanding divides in innovation investment in the UK, geography plays a central role in this, so as part of this we are looking at ways of deepening our investment in place-based economic data and policy.

The drive to harness social science to inform and increase technological progress links neatly to our investment in metascience, in particular the work of the UK Metascience Unit, which we run together with DSIT and which is one year old this week, and our partnerships with international co-funders such as Open Philanthropy and the Sloan Foundation; we hope to build on and deepen this investment, to the benefit of the wider innovation system in the UK.

In the coming weeks and months, we’ll be working with researchers, policymakers and other partners to develop this agenda, and turn it into specific funding opportunities and partnerships. But our overall commitment is clear: economic and social research has a vital role to play in promoting growth, both in the context of UKRI’s wider R&D funding and a source of research, data and insight in our own right, and we are making it a core priority.

* A further implication of this duty seems to me that ESRC should have quite a high bar against funding applied projects that advocate for degrowth, steady-state economics and similar agendas. At the very least, the duty “to have regard” would suggest a research council would need to seriously weigh up how such research meets UKRI’s duty in the Act, and document its reasoning.