Hi. My name is Larry Summers and I'm glad to be with you. I'm doing something a little different than most of the other classes in this series. Rather than talking about a specific area of knowledge, rather than talking about my field of economics, I'm going to talk about knowledge in general, talk about Universities, talk about ideas and talk about their importance.
Since it's going to be a personal prospective, I thought I'd begin by just saying a little bit about my background. I grew up in an academic family of economist; became an economist, was a professor of economics at MIT and Harvard, then went into government working at the World Bank in the United States Government, and ultimately becoming secretary of the treasury, then served as Harvard's president for five controversial years between 2001 and 2006. I went back to being a professor, then served as President Obama's Chief Economic Advisor for the first two years of his administration.
That gives me a perspective on universities, I think and a perspective on life beyond universities. It gives me also the perspective of an economist and the perspective, more generally of a social scientist. I think that's something very important and it's something I want to emphasize. If you think about a high school education, you study English, you study literature, you study music, you study art. If you think about a high school education, you study biology, you study chemistry, you study physics. But you don't study social science in the same way. You don't learn about scientific approaches to how societies function and how societies operate. And part of what I'm going to try to convince you of today is that such approaches have greatly enhanced their understanding that understanding them better is hugely important for your future.
Before I say anything else, I want to say something about my philosophy of education and my philosophy about why what we do in universities is so profoundly important. And I'll illustrate it with this story.
Some years ago, I was fortunate enough to receive an honorary degree from one of America's great Universities and of course, the president of that university gave the commencement speech. It was a very very good speech. At one point, the president said, "and the great thing about our university is we consider every subject, we discuss every question, we look at every kind of evidence, we focus on every approach to analysis. And out of that dialogue, out of that debate, comes" and then the sentence was completed "a greater understanding of each other's perspective." And I felt very let down when I heard that. Because I thought what came out of considering every argument debating every question, looking at every kind of evidence was a closer approximation to truth. And out of a closer approximation to truth, came better understanding of our world. And out of better understanding of our world, came a better world. And so it is my strongest conviction that the reason what you are engaged in is so important is because understanding, getting closer to truth, progress is the most important thing there is for making lives better for all our people.
I want to talk about three things today. First, I want to talk about the importance of ideas, the importance of intellectual life. Second, I want to talk about the importance of some of the trends that are defining our time. I'm going to do that by posing a question that we can't know the answer to but that we can guess at. What will historians say about our time 250 years from now? And third, I want to take a perspective on what all this means for your education, what all this means for the work of universities and colleges.
Think about what is remembered of any society in the longest run. Does anyone remember who ruled England when Chaucer wrote or when Milton wrote or when Shakespeare wrote or even when Dickens wrote? Their names will be remembered long after any political rulers name is remembered. Does anyone know who ruled France while the Great Impressionist created their work? Isaac Newton's name will be remembered far longer than any person of wealth or fortune. Einstein's reconceptualization of the universe likely will last longer than almost any monument than anyone constructs to themselves or to any triumph. As the Harvard scholar, Helen Veldlar wrote, it is for the works of creation that ultimately civilizations are remembered. And so it is ultimately when one takes the longest view the kinds of ideas that you were exposed to in this course. The kind of ideas that you will be exposed to in the remainder of your education that are most important.
But of course, for most of us it is not conceivable that we are gonna create a sonnet like Shakespeare did or a painting like Picasso did. But what is it that shapes the way our nations function? The decisions our nations make that can affect the lives of millions of people? Now John Kennedy was not a typical Harvard undergraduate and he certainly didn't have a typical post Harvard career. He did write an undergraduate thesis. It was entitled, "Why England Slept." He had a father who was very ambitious for him; he had access to help from journalists. He published that thesis under the title Why England Slept and it was basically a vicious critique of Chamberlain’s errors of appeasing Hitler at Munich.
That set of ideas shaped U.S. foreign policy for over a generation. The lessons John Kennedy learned about international relations, the research he did helped shape his approaches to how, as President of the United States, he would protect America’s national security. He learned important lessons about restraint and but for his wisdom, the Cuban Missile Crisis could have ended in conflagration. He learned important lessons about resolve, about avoiding the appearance of appeasement and some believe that those contributed to the tragic errors of America’s entry into the Vietnam War.
You can debate the particular substance of the lessons he learned. What you cannot debate is that it was his ideas. His ideas learned from his education that shaped the direction of our nation.
In much the same way, economists today, presidents today debate our great recession, they debate how best to drive our economy forward. They take it as a given that their objective is to raise something called the GDP, the Gross Domestic Product. You know, it wasn’t always thus. People didn’t know there was such a thing as the GDP a hundred years ago until it was conceptualized by economic research, taught to generations of students. Generations of students learned that demand had a great deal to do with what happened to economies.
It says something that the works of the great British economist, John Maynard Keynes were taught in Harvard and Yale in the 1950’s, but alumni protested that they were a communist plot. And just 20 years later, Richard Nixon, one of our most conservative presidents declared that we are all Keynesian now. To be sure, the world moved away from Keynes’ doctrines as economies changed in the 1980’s and 1990’s, and now with the current downturn, they’re moving back in those directions. Again, the specifics don’t matter, what does matter is the basic idea that it is ideas; it is what becomes conventional wisdom that shapes the choices of nations.
I started by talking about how civilizations are remembered. Then I talked about what shapes the course of nations. How about the ways in which ordinary life is carried on. What is it that is done by businesses? What is it that is done by individuals? We take it for granted in our lives that there are things that happen consciously and things that happen unconsciously. One hundred and fifty years ago, there was no idea of the unconscious until Freud developed such an idea. Five hundred years ago, there was no idea of childhood as we now conceive it. Children were thought of as miniature adults. This is life-changing because of ideas.
Activities that people think of as the most mundane are revolutionized by intellectual sophistication. The example I like to give is Major League Baseball. For a hundred years, until about a decade ago, baseball teams chose their players by hiring scouts. Sending former baseball players out to watch people play baseball and pick up and try to recruit strapping, strong-looking, young guys. There is still some of that, but now, any successful team drafts based on careful statistical analysis. They’ve found all sorts of patterns that had never been noticed before having to do with what kinds of players play well and what kinds of players play less well. It was driven by inspiration and the product of that inspiration was competition. Baseball makes progress; stores make progress in how they sell things. We don’t think of it as a source of knowledge or as a great innovation, but I would suggest to you that the idea of the double blind experiment, the idea that you test a medical therapy by giving it to some people, not giving it to other people and doing a controlled experiment is one of the most important innovations in medicine that took place during the 20th century.
Thought, evidence, ideas, change, progress. It’s not just at the civilizational level. It’s not just at the level of whole nations. But it’s at the level of successful organizations of every kind.
And then there is, of course, the individual and what determines how successful individuals are. And here too, the evidence is strong and the world has changed. The economic return to being better educated is far greater than it was even a generation ago. Look at the difference in income between college graduates and high school graduates. But it’s not only the economic return. The gap in life expectancy between those with more education and those with less education has doubled as more and more practices have been discovered that the educated can follow, that improve their health and improve their well being.
It’s more difficult to gauge life satisfaction, but increasingly psychologists are finding ways of measuring happiness and they’re finding that those who are better educated enjoy more satisfying lives as well.
So if you look at it at every level, we’re finding that ideas, understanding, comprehension, their contribution to progress are becoming that much more important. Indeed, I would suggest to you that if one wanted to describe how the world or at least large parts of the world had changed over the last 60 years, it has been a movement from a work that is governed by the idea of authority to a world that is governed much more by the authority of ideas. And such a world carries with it staggering potential, but only potential for those who grasp, who use, who cherish and who develop ideas.
What will people look back on when they look back on our time 200 or 250 years ago, from now?
What are some of the ideas that shape our time? There’s a way of getting at that question. Let’s try to think about what a historian 250 years from now will say about this quarter century or this half century that we are right now in the middle of. It won’t actually say that much, if you think about it, we, most of us, can’t distinguish in a terribly sharp way what happened between 1675 and 1700 from what happened between 1700 and 1725. But I think there are some things that they’re likely to note. Now to be sure, there could be catastrophic events. If global climate change is not contained or managed in some way, how that story plays out could be the defining feature of history.
If nuclear proliferation has the consequences that some fear, some kind of nuclear conflagration could be what people remember from our time. But those, it doesn’t seem to me would be the things one would expect. And instead there are three aspects of the world all in the main favorable, all in the main reflecting the power of ideas that are, I believe going to be the legacy of our time.
First, we now are headed for a truly global progressing economy and society. If you look at economic history, what you see is that there was essentially no progress through most of the history of humanity. Scholars debate vigorously and bitterly whether the standards of living in London in 1800 were the same as they had been in the Athens of Pericles or whether that they were 50 percent greater, whether perhaps even they were 100 percent greater. But even if they were 100 percent greater, a doubling of standards of living over 2,300 years works out to a negligible annual growth rate.
The reason they called it the Industrial Revolution, was that for the first time in all of human history, progress started at a rate where it was noticeable within a human lifespan. For the first time in all of human history, at the end of the human lifespan, the conditions of life, the conditions of existence were importantly different than they had been at the beginning of a human lifetime. Why did the Industrial Revolution happen in England in 1800 rather than in Brazil in 2000 or in China or India in 1200? That’s a matter of much debate and much analysis. Was it an accident? Are there deep reasons? These are matters that are extensively debated.
But what is not debated is that the Industrial Revolution had to do with the application of scientific ideas to the basic tasks of growing food, making clothing, providing shelter. What’s not in doubt is that the Industrial Revolution was propelled forward by innovations which were the product of thinking human beings, incentivized to develop better ways of doing things. What is not in doubt is that the Industrial Revolution benefited from emulation and imitation. That good ideas were carried out not just by the person who had them, but by others who saw them being carried out and emulated success. And what is not in doubt is that competition, argument, debate, trial and error pushed all of that forward.
But the Industrial Revolution, as great as it was, led to growth rates of income, of growth changes in standards of living of perhaps one percent a year, perhaps slightly more. Over the course of a human lifespan, which in those days was only 40 years, living standards might rise 40, perhaps 50 percent. That was unprecedented and unimaginable relative to anything that had come before. But it was very little compared to what was to come.
As the Industrial Revolution spread across Europe, as America proved to be particularly innovative, particularly successful in applying technology, to have a culture that particularly rewarded those who were prepared to do new things in new ways. You saw progress in the United States at the end of the 19th century that was considerably faster, perhaps twice as fast, perhaps even a little more than twice as fast as had ever been seen in Britain during the Industrial Revolution.
And so it was possible to imagine around the turn of the century that living standards in the United States would rise by a factor of three or by a factor of four over the course of a human lifespan. That too was an immense achievement and it was the reason that the United States emerged as a power, a great power in the first half of the 20th century.
Now think about what has happened in China, in India, in other parts of the world. Growth rates not of one percent of two percent or three percent, but growth rates of seven percent or eight percent or nine percent. Einstein is said to have said, that compound interest is the most power force known to man. At seven percent a year growth, a quantity doubles in 10 years. Think about what seven percent growth means for an economy. It means doubling in one decade and then doubling in the next decade. It means that with a 70-year lifespan, it is imaginable that living standards would differ by more than a factor of 100 from where they were when a person was born, at the end of a human lifespan. It means that in a decade, an individual goes from walking to having a bicycle, in another decade a motorcycle, in another decade to an automobile. It means that areas that on photographs 30 years ago were green rice fields, large gleaming cities are built today. It means that at one point, one in six sky cranes on planet earth were in Shanghai.
And this is not a matter of something that is happening in one corner of the globe. Close to one in five people on planet earth live in China and close to 40 percent of the population of our planet live in China and in India. Why are they enjoying this profound rapid growth? Again, the matter is studies and debated extensively.
But most people would accept that it has a great deal to do with their being prepared to open up and to emulate and to learn from economies, from companies from individuals who are producing in more sophisticated ways than they have. Most people would accept that it has a great deal to do with a move to systems in which individuals have an opportunity to benefit from their own success. You know, it has been said that no one every washed a rented car. And it captures an important truth that when people own things, when people get the fruits of success, they work harder to produce success.
As those societies have opened up to learn from the rest of the world, as those societies have moved to systems where individuals can share in success, the results have been more rapid growth than the world has ever seen. Now that growth will not continue forever. Much of the growth comes from convergence. It comes from catching up and after you grow fast enough, long enough, there’s no longer for you to catch up. With standards of living in China still where they were in the United States in the 1920’s, there is substantial room for this progress to continue.
There is no guarantee that it will continue though. Environmental challenges, the challenges of avoiding the kind of financial problems that set back the United States during the Depression. The challenges of maintaining a political system that is on the one hand authoritarian and based on central control along with an economy that depends on information being disseminated widely will be a great one for the Chinese. The challenges of engaging with the rest of the world on very different terms than has been the case historically will be a great one for the Chinese and for the Indians as they prosper.
No one can say how this story will end. But we know enough to know that it will be a very big story of our time. We know enough to know that it is a story that is about progress through knowledge. And we know enough to know that if you want to be part, fully of the adventure of our times, it’s a story you want to understand and be part of.
There’s a second thing, a second aspect of this time that will be remembered for a very long time to come. And that is the revolution that is underway in the sciences. Especially in the information sciences and the life sciences and the way in which we bring them together.
You know, if you think about it, through much of history, medicine has proceeded as much by luck and trial and error as anything else. Fleming found Penicillin more or less by accident as a mold. Jenner found the Small Pox Vaccine by stumbling on something with cattle. We are now at the brink of a very different approach to understanding human health and to improving the human condition. For the first time, we have sequenced in the last decade, the human genome. The map that describes our common humanity. It’s a code that’s written in four letters, ATC and G, the basis that are part of DNA. And here’s the kind of understanding we have. You can think of the human genome as a book of several million pages. If you go to page 2,600,453, you go down 14 lines, you go over 11 spaces and you have a “T” instead of an “A” then you may well have cystic fibrosis.
That’s a kind of understanding of the disease process that is at an entirely different level of rigor than we’ve had before. And it points to prospects for intervention, for change unlike any that we have seen before. No one can know all that will be possible, but for the first time it is imaginable that we will find cures for dementia, that we will enable people to repair their hearts. That we will stop labeling cancers by where they take place in the body and instead identify them by the type of tumor and have an appropriately targeted agent for each type of tumor. These are likely to be years of remarkable progress in physical health, and they may be even more remarkable progress in mental health as we come to understand brain functioning better and better.
To be sure, these will involve difficult ethical questions. The drugs that are taken by man on college campuses, even high school campuses today to help concentrate or pull all-nighters before exams point in the direction of what might be called mental steroids. And as better and better mental steroids are developed, some of the same issues that arise with respect to physical competition are going to arise with respect to mental competition.
The process of medicine will be transformed just as information technology transforms what we think of as routine life. Maybe it provides some perspective or maybe it will just make you think of me as ancient, but I remember very well giving a speech in Chicago in 1988 and I was to give a speech to a given group. And a car picked me up at the airport to take me to my speech. I got into the back seat of the car and there was a telephone in the back seat of the car. And that was something so exciting to me that I called everyone I knew to say that I was in the backseat of a car with a telephone and they shared my excitement because it was that novel in 1988, just 23 years ago.
Today, more than half the people on earth have access to cell phones. In large parts of the world, there will never be land line networks created. Cell phones will simply be a leap frog technology. And a leap frog technology that will be used in the way we are accustomed to thinking about cell phones. To talk, to text, but also in large parts of the world, your bank account will reside on your cell phone; you will transfer money using your cell phone. You will monitor your children using your cell phone and so forth.
We don’t know all the places that individuals will take information technology. It was a revelation 40 years ago when sociologists formulated the observation of six degrees of separation. When they formulated the observation that it was possible for people to be connected, almost any two people in the world with six links. I know you, you know someone else, that person knows someone else and so forth. That was a kind of theoretical possibility. Now with social networks, people find their way along those chains and find their way very rapidly.
No one thought in 1960 the world would have use for as many as 100 computers. The people who first found the copying machine didn’t see that it would be pervasively used because mimeograph was available. We can’t yet know where the degree of connectivity that social networks make possible will take things. But we can know that those effects are likely to be very, very large.
Notice that exponential growth has a special property. Suppose I take the series of numbers, one, two, four, eight, 16, 32 and so forth. Each number is twice the last, but 32 minus 16 is twice as much as 16 minus 8 and 64 minus 32 is twice as much as 32 minus 16. It’s a feature of exponential growth, of steady percentage growth that the increment of change that takes place gets larger and larger each year. And that’s what happens with knowledge. As we know more and more, even if each bit of knowledge is expanded at the same rate, the total accretion to knowledge each year becomes that much greater. And that’s why we are likely to see as much scientific progress in the next quarter century as we’ve seen in the entire previous century.
Now these are not unrelated development that I am talking about here. This scientific and technical progress and these changes in standards of living that I have just described. Precisely the reason we are able to see more rapid progress than ever before is because there is more technological progress, more that can be emulated than ever before.
So far, when I’ve talked about what people will look at when they look at our time, I have emphasized what in a sense is external to the individual, external to the human heart. I talked about rapid growth in some parts of the world and all that that may mean for the global system. I’ve talked about progress in science and technology. There’s another difference, and it’s a difference that has been underway for many, many years, but it also may be accelerating. And that is and ever widening sphere of human concern and human compassion.
Think about the fact that a half century ago, at the places where you might be likely to listen to this tape, there would have been very, very few African-American students, in some, there might have been no African-American students. Institutions like Harvard and Yale did not have women students and even allied colleges had numbers of women that were a quarter of the number of men who were studying. Homosexuality was a crime in every one of the 50 states and the idea that gay soldiers could fight in the military, whether gay people could be married would have been an inconceivable kind of notion. The idea that those with mental illness had rights to be involved in shaping their care, the idea that those with serious medical illness had the right to be told what their condition was, none of these were norms in our society.
The set of concepts that we were prepared to accept as objects of our sympathy was far more limited than it was today. Here’s a great question that I hope you will all think about. It was asked of my daughter as we sat at a dinner in Washington. A guy asked my daughter, he said, “Ruth, 150 years ago, sitting in this room, we took slavery as absolutely natural and for granted. And yet sitting here now, it seems inconceivable and barbaric that we would accept the institution of slavery. A hundred years ago, we took capital punishment; we took flogging for kids who were out of line as absolutely natural. And that seems inconceivable today. It is unlikely,” he said, and I think he was right, “that we have reached some apex of civilization now. What is it that we do that seems natural to us that will seem barbaric 100 years from now?”
I don’t know what the answer to that is. Perhaps it is aspects of the way we treat the poor or the very young or the very old. Perhaps it has to do with the ways in which we treat animals. Perhaps it has to do with the ways in which superstition continues to shape our approaches to important human problems. I don’t know the answer, but it would be very surprising if there are not important aspects of how we live today that will shock the consciences of those who look back on us just as our consciences are shocked by those who came before. And what will change those consciences? It will be individuals, it will be protests, it will be ideas, it will be philosophies, it will be better thinking than the thinking that came before.
This is the reason you are here in a university. You are here to be educated. You are here to understand thinking better and to think better yourself. It’s not a chance you’re going to have throughout your lifetime. Believe me, you will have a job, it will be enormously fulfilling, but it will come with a set of tasks, some of it will be about thinking, but all of it won’t be about thinking. But for the next few years, you have a chance to focus on thinking.
I think about some of the students who I’ve had a chance to know over the years who took advantages of their opportunities in a university. One of the stories I always like to tell is of a freshman seminar that I had a chance to teach at Harvard when I was president of the university. I taught a seminar on globalization, some of the issues I just referred to actually. And I assigned a reading that I had written, a lecture that I had given to the American Economic Association when I was the United States Treasury Secretary, about global capital flows. And as I did each week, I asked one of the students to introduce the readings.
And this young man in October of his freshman year said something like the following. “The reading by President Summers on the flow of capital across countries, it was kind of interesting, but the data did not come close to supporting the conclusions.” And I thought to myself, what a fantastic thing this was. In how many human institutions that have ever existed could somebody who had been there for five weeks, tell the person who had the title, “President,” that he didn’t really know what he was talking about and have nobody even to find it very surprising. And it was a special moment.
Now, I don’t want to be misunderstood. I explained to my student that I actually thought he was rather more confused than I was and I argued back, but what was really most important about that was the universities stand out as places that really are about the authority of ideas. You see it in faculty members who are pleased when their students make a discovery that undermines a cherished theory that they had put forward. You see it when professors will suggest topics to students, but they like it best when students find their own topics to write about, to think about, to study about.
You are embarked in a university where it is the authority of ideas that is going to be most important and it is up to you whether like that student in my seminar, you choose to pursue your own ideas to put them forward and do so with your convictions.
I think of another student I had who came to me one morning, one evening actually, walked into my office and said that I had written a pretty good paper, but that it had five important mistakes and that he wanted a job. You could debate whether they actually were mistakes, but you couldn’t debate that young man’s hunger to learn. You could not debate that that young man was someone who wanted to make a difference in economics and he is today a professor of economics. And his works are more cited as an economist than any other economist in the world.
I think of a young woman who studied economics, whose interests were never in economics as an abstraction, whose interests were never in the theory of economics, but whose interests were in how using this knowledge, you could help to make the world a better place. She came to me wanting to write an undergraduate thesis on a topic that might not have seemed natural for an economist. Her topic was “Spousal Abuse,” and the economics of spousal abuse. And her theory was that when spouses were better educated, when they were less dependent when they were more able to pursue their own opportunities, they had more bargaining power, they were better able to leave a difficult situation and so you would have less abuse. So she collected data and she proved that that theory was right. She supported her conviction that insistence on strength was very important for women. Her name was Cheryl Sandberg, and today she is the Chief Operating Officer of Facebook. And her ideas, her willingness to look at data to decide what is true is helping to guide that network that is reaching some 700 million people.
I can give more examples like those of Cheryl or Andre Schleifer, of people who set a direction and a pattern as they were students that then shaped the rest of their lives. But the students who are most successful, the students that get the most out of their education are not the ones who copy someone else’s path. They’re the ones that set their own path. But the paths that matter most are the paths that involve better understanding ideas, putting forth ideas, urging one’s own ideas while being prepared to change one’s mind in the face of evidence and recognizing that we all have a chance to be part of the story as the world evolves from a world governed by the idea of authority to a much better world governed by the authority of ideas.