My Story

Life stories rather like ‘letters to the editors’ of our major newspapers often reveal unusual insights.

 

They help us to spot points of view that are quite different when looked through the lens of received wisdom. Mine in a word is exposing and challenging the often unseen consequences of path dependence and the funny old law of unintended consequences. I have spent my life trying to make sense of these things. 

 

I’ll begin with the last concept first. Unintended consequences might equally be portrayed by the expression “overtaken by events”. Its essence is that we often do things being very clear about what it is we intend to do but end up achieving something different. This problem is commonplace.  For example over a lengthy period we have been trying to champion and promote measures to combat climate change. This is because the objectives are mostly viewed as being of the highest importance.  But after years of effort we have made no significant progress. The situation has definitely worsened. How so we may ask?

Einstein, splitting the atom

In trying to answer that we need to consider the impact of path dependence. What this tells us is that even though we may all agree on the importance of a specific policy objective how we end up trying to achieve those objectives may vary a great deal between different cultures even though they appear to share the same values. In reality the EU has always engaged more with climate change objectives than either the US or Britain. Some may see this as the difference between the social market economy of Europe and the so called free market economies of the US and Britain.

 

In trying to make sense of how it is that we have achieved so little where climate change is concerned at least two problems can be identified. The first and most destructive is populist denial. The Trump administration denies that climate change is a pending catastrophic. They argue that the claims are false or fake; that there is no scientific evidence of causality in terms of the human footprint, CO2 emissions and climate change. To make sense of these differences of view we have to then address complex topics like bounded rationality, asymmetric information, heuristics and other biases. The response to the Covid 19 pandemic has brought many of these matters to the fore. It is baffling and confusing to the public at large. It is above all dangerous.

 

There is a second pervasive problem well summed up by the “tragedy of the Commons”. In short form this reveals the conflict between private goods and public goods.  It boils down to this: what is good for society at large is not always good for the individual; perhaps more poignantly what is good for the individual is too often not good for society. This last observation is increasingly in evidence. We are seeing the rolling out of a conflict between “tribal truth” and “objective truth”. Collaboration requires co-operation based on commonly shared perceptions. Populism prevents this from happening. It ultimately destroys shared values on which civilisation depends. It must be resisted. The challenge is how to do that without mimicking populist behaviour.  

 

Where do I stand in all of this? My professional life has largely focused on trying to find sensible ways of promoting reasonable “truths” that help us to identify practical ways forward - for the benefit of the many rather than the few. This remains the driving force in my ambition to foster fundamental reforms in corporate governance. Unitary boards in Anglo American jurisdictions cannot as they exist promote effective stakeholder engagement. This is sometimes dismissed as a chimera –something which is in the end illusory. Remember the words of Milton Friedman – a major force in shaping business education and culture. He claimed that the first and only duty of the director is the pursuit of profit for the shareholders. Any other objectives such as corporate social responsibility were a time wasting distraction. But the independent supervisory boards of northern Europe tell a very different story in terms of stakeholder inclusion. 

 

That was the 1970’s. What do we think now about Friedman’s definition of directors duties and corporate purpose?  Many I believe are shocked with the outturn. Things have to change if we are to alter the course of history across a much wider front - for benefit of the many and not the few. These challenges must be addressed if the failures of the past are to be reversed

Richard Tudway, Oxford University graduation

 
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Centre for International Economics

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