by Stephen Machin
As Director of the Centre for Economic Performance (CEP) at LSE, I am delighted that the Centre has been named as one of the two inaugural ESRC Research Institutes. This is testament to the achievements of the Centre, and its significant impact on a wide range of policy over the years.
Whilst the Centre’s mission has always been to study economic performance and its determinants, it has never been a ‘single issue’ centre. CEP has continually evolved to ensure that research attention is placed on key contemporary economic questions.
In 1990, when the Centre began, the main focus of research on economic performance was on productivity and incomes. In the mid-1990s, two major research programmes were added: on the economics of education, a subject that had been neglected in Britain for a quarter of a century; and on globalisation, with a recognition of the increasing importance of closer economic linkage between countries for economic growth and the income distribution.
In these two areas, the emphasis was on implications for both overall economic growth and how the fruits of this growth are shared across the income distribution. This was prescient: the unequal gains from globalisation and new technologies have reflected the economic and social inequality which has since re-emerged as perhaps the defining political challenge of the modern age.
Moving forward in time, CEP set up a macroeconomics programme, to build further on the research implications of more micro-based work for national and global outcomes. In the 2000s, the founding director of CEP, Richard Layard, began to study wellbeing, with a research programme aiming to target government economic policy for wellbeing and better mental health.
From 2003, John Van Reenen, the then Director, undertook a huge research enterprise of original and influential research on management and organisation, developing the World Management Survey. This has shown that management and new technologies account for a large part of the productivity differences both within sectors and between countries. This frontier research continues with randomised field experiments looking at performance in the public sector.
In recent years, we have further widened our research portfolio to carry out leading work in spatial economics, and on the economics of crime and communities. Expanding and refining research areas to study contemporary issues will continue to be a key feature of CEP’s academic remit as an ESRC institute.
Our research has always placed a strong focus on the big questions facing the economy and wider society. It has been able to respond flexibly when these change, often leading public debate. Our work on the impact of Brexit, for example, is rooted in the years of theoretical analysis previously undertaken in our Trade programme.
The Centre’s research also sets agendas rather than merely reacting to policies as they emerge, as the recommendations on growth and infrastructure from the two LSE Growth Commissions of 2013 and 2017 demonstrate.
A defining quality of the way the Centre operates has been to focus different perspectives on the questions under study so that alternative theories can be tested using different models and data. The Centre has developed new methodologies and expertise, analysed large-scale data using robust research designs, and it has collected data where it does not already exist for researchers to use, as well as plugging gaps in research areas when new data emerge.
Our overriding aim is to change the way social scientists and policymakers think about the world and to produce empirical research of sufficient breadth and rigour to help formulate – and evaluate – new policies.
Over the years, CEP has influenced thinking and policies of many users of economic research, including almost every government department, the Bank of England, statistical agencies in the UK and abroad, and a wide range of other policy organisations and practitioner groups. Indeed, some aspects of CEP’s work have by now entered so deeply into popular discourse that they are no longer formally identified with the Centre, and the researchers who did original work on them. Selected examples include the benign economic effects of the minimum wage; falling social mobility; the centrality of management quality to firm productivity; and the polarisation of jobs with different skill attributes in the labour market (PDF).
I am delighted that the new strategic investment in CEP as an ESRC institute will afford us greater stability to pursue ambitious research areas which often require longer time horizons to adequately disentangle complex questions of cause and effect. We also aspire to increase our capacity to provide research leadership, as well as rigorous research underpinning future policy developments.
Stephen Machin is Professor of Economics and Director of the Centre for Economic Performance at the London School of Economics. Previously he has been visiting Professor at Harvard University (1993-94) and at the Massachusetts Institute of Technology (2001-02). He is a Fellow of the British Academy, has been President of the European Association of Labour Economists, is a Fellow of the Society of Labor Economists and was a member of the UK Low Pay Commission from 2007-13. His current research interests include inequality, education and crime, and the interactions between them.