book tv presents "after words," an hourlong program where we invite guest hosts to interview authors. this week sylvia nasar and her latest book, "grand pursuit: the story of an economic genius." and if the best-selling author of a beautiful mind takes readers through the history of economics, the city's most influential theorists and the intellectual pursuits that she believes have helped people all over the world. she talks with u.s. managing the trip of the financial times, gillian tett. >> host: sylvia, thank you for joining me to talk about your earliest book, absolutely fascinating covering the issues of economics and economic fallout over the last couple of hundred years. can i start by asking you why you decided to write a book about economics now? >> guest: well, i didn't decide now. i decided about ten years ago, and -- but now is actually a great time because when things are going really well, people outside the economics tend not to be as interested in in economics and so since this book is really aimed at people like i used to be which is someone who read novels but wanted to know what was happening in the world i think this is a good moment. it's also because of the financial crisis and the worst recession in the united states since the 30's he it's also a really important time to sort of put things in perspective, to take a longer-term perspective. and of course writing about the birth of modern economics in the middle of the great victorian boom is a chance to do that. and i learned -- first i don't have a ph.d. in economics. i dropped out of a ph.d. program, but i felt like i really learned about economics and a different way writing this book because economics is so history bound, okay? it's so driven. people don't set out to become an economist the way they set out to become a the lady answer or a pianist. they may want to be a physicist or a mathematician. and something that's happening makes the action deutsch economic issues and that's how people at least the characters in this book are drawn in. they go there because that is where the action is and that's where they can affect what's going on. >> host: one of the things that fascinates me is people think economics are about numbers and about complex calculations and quite abstract ideas and yet what you try to do in this book is bring to light her telling it through the stories of people. why did you decide to do that and it's quite an unusual tactic, isn't at? >> guest: it is, and i think because my background is in literature, so came at everything through -- sorry, through novels and when i did "a beautiful mind," i realized that for most people who aren't technical, history and biography, i.e., people, is what makes economics accessible, and it may be that women wind up liking this book better than men who read pop science which is usually, you know, the best stuff is these wonderful synthetic explanations, right? and that's abstract roomy. so i wrote it the way i read in the debris that i came to the subject myself car and i hope that it makes -- i know that economics feels alien to people, and as it always has by the way, including to many of the people like alfred marshall or john maynard keynes or beatrice webb who took it up and it's because it's like a science, and most of us need to come to it through history and through people because that's really what at the end of the day why are people interested in economics? because they are interested in getting some control over their material circumstances >> during the last financial crisis and the ensuing recession, many people felt very angry with economics and economists. they didn't see these problems coming in 2008. they were not able to fix them and gives the fault of the economist but essentially what you are given the book is a story of great hope arising out of the economic profession. can you explain that? >> well, part of it is looking at things a little bit longer term, and it turns out that if you think about it at the peak for the debt of the 09 sessions in the united states per capita income, personal income, which is or in per capita gdp were higher than any year of the clinton boom or the bush boom. >> host: people are richer but it doesn't feel that way. >> 30% higher than in 1990. so, well the sure didn't because, you know, for the very simple reason that a tent of the work force out of work which made everyone else feel i could be next. >> host: so expectations for the material wealth but in some ways they were shocked by the unemployment around them. >> right. so it's a huge disparity between the long-term trend, which is dramatically higher levels of living standards and these periodic crises that make everybody feel very insecure. >> host: your story starts with a much more simpler point which is that before the advent of the economic profession society couldn't actually measure around it and didn't think it could control it in terms of our material well-being. >> guest: winep jane austen was alive, that is around 1800, nine tenths of humanity was destitute, okay, destitute. in modern terms that would be like 90% of the world population living on the equivalent of a dollar a day. and not only was, you know, was to be human meant to be poor, but in what jane austen's time, which of course was a period already of tremendous affluence for a small group in society -- i'm sorry i just lost -- >> host: people who were very fatalistic. there was the sense if you like that the world was the way it was and no one could actually measure it or even change eight. >> guest: yes, that was the point that not only were nine parts of humanity condemned to judge their way through the short and miserable lives, but no one fought even the most liberal, enlightened, radical individuals fought this was anything except a human condition. >> host: but then starting in the 19th century people began to think maybe we do not need to be quite so fatalist but we can actually try to change >> guest: 50 years later you have charles dickens writing a christmas carol, which is an attack on that kind of fatalism. so what was the difference? well, in the middle of the 19th century, the modern economic miracle begins and what does that mean? it means that for 2,000 years the average human being lived like a roman slave in material conditions that comparable to livestock lived in one-room with a lot of other people and animals couldn't read, eight bad and inadequate food, you know, etc.. okay? and by the time that dickens comes along in the so-called hungry forties, he is writing about another possibility in other words and economy that is so abundant, so productive that that old, you know, life sentence most people is no longer necessary. >> host: but of course one of the things that change moving away from this vision of the inevitability that when the population got bigger resources got exhausted because there's a finite limited number of resources people began to abridge the fact that you could actually increase the resources to becoming more productive. t want to explain how that shift took place? >> guest: what happened is that you never before had a sustained rise in productivity, and just for the benefit of people who are listening to us, productivity is just the amount of produced per worker. so -- and what it means is if a country as a productivity it means that they are taking the same resources, the santa human beings, the same natural resources, but accomplishing a lot more. okay? and productivity naturally determines how much is available for consumption. so it is the determinant of the wages and of living standards. and for 2,000 years through the rise and fall of the great empires, the roman, the chinese, the ottoman, all of which made great inventions, great discoveries, you know, had great artistic achievements, none of that human invention, none of that progress in science and philosophy ever change the way the average person lift, okay? and then from the middle of the 19th century write about time that marks and ingalls say that what you can expect is just increasing misery from then on until now you have had a tenfold increase in the standard of living around the world, this is the world average, including the poorest as well as the richest countries. so this is something -- this is not, you know, a few good years. this is a complete take off from what had been the human condition, and the fury which said that a few good years with rising wages would simply result in earlier marriages and more children and therefore return to subsistence actually was a brilliant description of what had happened for all of the recorded history until a few decades after his death. >> host: and then people realize it is possible to increase supply with -- >> guest: yes, and i thought a lot about -- okay, so why is the first society on earth, england, the first society to have a sustained permanent rise in productivity and average living standards, why is victorian england the symbol of the horrors of the industrial revolution? in other words why do most people who learn about it see it as a period of retrogression coming and i think -- what i concluded, is that once you acknowledged, once you imagine that mankind could control its material circumstances, then poverty became a problem instead of just -- >> host: an inevitable -- when people begin to realize poverty could actually be controlled, then it became incumbent on the government to think about ways of actually responding to that and trying to eletes g8 and of course that began to feed into the and first lady is of the role of the state which we take for granted now but of course that in the 19th century there were a novel, weren't they? >> guest: that's right. and this is another area where my preconceptions really overturned because i had always thought that the welfare state was either the invention of the new dealer under fdr in the great depression or else the 1945 labor government after world war ii, and lo and behold -- so a product of disastrous times and quite advanced into the 21st century, and lo and behold it turns out that the idea of the welfare state and the first experiment in the welfare state were products of, you know, this victorian boom before world war i and the invention of a woman. >> host: i thought that's one of the most fascinating parts of the book because i didn't think this particular woman was at all well known not in sight of the economics profession but let alone outside of the economics profession. tell me a little about this woman concerned. >> guest: beatrice webb who was born beatrice potter was a rich, beautiful heiress, the daughter of a railroad man and she had eight sisters. they all unmarried rich, powerful and influential men. well, beatrice was an odd and lonely child who had other ideas for herself. it turned up at her mother had written a novel, had been an activist in the free trade campaign of 1840, had come from a family have manchester sort of liberal businessmen, and was best friends with a philosopher named herbert spencer, so beatrice really had to invent herself. she spent about 15 years trying to figure out what to do. she -- and she was terribly torn between her own family and the society expectations that she married a rich and powerful man and in fact she became, you know, hopelessly in touch we did with really i think the best looking and definitely the best dressed politician in england, joseph chamberlain who come fyi is mevel timberlake's father. >> host: and never really reciprocated the affection. >> guest: and plus -- on top of not knowing should i forge my own career as these middle class women were doing in sort of bohemian circumstances becoming social workers and writers but beatrice wasn't really sure that was what she wanted to end up in or should i mary ann on top of that he kind of rejected her. it looked like -- and then her father got ill and she had to care for him. she was in so many ways epitomized i don't know if you have red portrait of a leedy but she did an iced the first generation of one who had enough trace the one could talk about what is she going to do with her life and there was suspense because it might not be the conventional. in the end, beatrice was very lucky because she married a short and not very handsome but very smart socialist who was best friends with. she went from being a total free-market purists and disciple to the point of view that was actually becoming very popular in mainland, which is one of social reform, and she became involved in the fabians and focused on the government role in preventing not only in alleviating but preventing poverty, and you know, reading her book, she wrote a book called poverty and destitution, and which is an analysis of poverty in the sort of 18 etds period come and i think people should read it today. she was set at time until her death in 1940 she was one of the most famous women in england. she was considered the first major female economist, even though today we would think of her as a sociologist. she was active in not only with the fee the ends of the labor party and nobody knows who she is, but that book is a brilliant analysis of poverty in the sense that it makes it clear that in contrast to say marks and ingalls analysis was, you know, simplistic would be a kind word but she shows that there are different reasons for poverty, and that preventing poverty has to be based on understanding those reasons, and the the argument for the government role was actually very sophisticated. she picked up on something that offered marshall had identified which is some kinds of poverty that are caused by poverty and that of course is the intergenerational stuff, so she did allow the russian offer government activism. she wasn't -- you couldn't have called her a modern-day liberal because in many respects, she was quite conservative, but she had the idea is that winston churchill, when he was a young man rising politician discovered poverty in the early 1900's she was the inventor of the think tank, and she supplied churchill and his political partner david lloyd george the sort of policy vision that they implemented in a liberal government are not 1908. crusco it's a great testament that he's managed to bring this person to life who is so little known and so some of the other characters in your book like karl marx and friedrich engels are better known. he tells her story and try to explain how their lives helped to develop their idea, too, didn't you? >> guest: i have a lot of fun with marks and ingalls because again, look, all these people that i write about, there are dozens of biographies and i'm not pretending to have come up with a great new and original facts or insights, but again, i never realized that karl marx never went into effect. >> host: he was cut off while ingalls did all the hard work. >> guest: that's right. literally. i mean, the one job -- he was also the world's biggest slacker because the one job that he held in england which is constantly being described in glowing terms, he was a columnist supposedly for the new york herald, and until the civil war, and it turns out that ingalls goes through every single one. now the other thing that really blew me away is that the income which can largely from inheritance and of course from his guardian ansel put him in the top 5% of british households okay? so these were all kind of revelations. i mean i'm sure that, you know, in fact i know that some scholars have discovered these facts but never emphasize them enough. post could affect you bring together the human stories and their development of ideas and try to explain how to get their you weave them into the tapestry of intellectual history through the 19th and the 20th century but i must say another character i found fascinating in your book is again lesser well known was hijacked and his often rather tragic life which in many ways captured the attention is ripping apart. in the 20th century. >> guest: i was very absorbed by hyatt because he was in that generation with his cousin of john men who had grown up in one world, and then, you know, just as they were getting ready to go to the wound up in this war that then destroy it but globalized economy on which dni in particular depended and also witnessed the rise of totalitarian socialism. what i find so interesting about him is that by the time he died in 1992 and i wrote an open it for him in "the new york times" he was a great figure on the right and associated with ronald reagan and thatcher, and i was going to say seemed like an ideologue but in going over and learning about his of earlier work it's much easier to understand the to the intensity with which they pursued their ideological positions. if you understand the intensity with which they actually experienced and seen where the world's literally ripped apart. >> guest: and also why he was really wrong about some things namely the great depression would cure itself he was also really write about some other things, for example, she went to new york in 1923 to study the economic forecasting which the was the golden age. that's when people who developed it, fell in love with it, and he sought to couldn't predict the economy, and when people see what's wrong with economists, they didn't see this coming. well, guess what, modern economics is not about a prediction. it's about figuring out how you can have a successful economy or a successful portfolio without the need to predict. that was hayek and to the two. in the 20's its extreme forms of socialism were extremely popular and of course the soviet union was just founded and was exporting revolution. he and his associates in vienna figured out for the very modern reasons that it could work because they saw the competitive economy the information system. when the socialism collapsed most people think that one of the reasons was exactly he then pointed. >> host: one that emerged from the world which is fascinating is what someone might call the dialectic, intellectual fought goes in one direction, it goes too far and reaction on the other direction and of course it was partly because people like hayek were quite critical of the free economics in reaction to marks and ingalls but the then paved the way for them to become much more influential going forward and saying actually there is a role for the welfare state trying to manage the economy. >> guest: i was fascinated. i can't be the first person to point it out, but after world war ii, keynes who had been the dever site peace conference at the end of world war i hadn't been able to convince the allies but by neglecting economic recovery they were courting a political disaster after world war ii of course keans was instrumental in setting up the international monetary system because if you think about it, you know, the kind of debt crisis that we have now after world war i and world war ii is immense, and that is one of the reasons that the economy a specially of europe was frozen, and the conventional wisdom was that it would reconstitute itself and keens to chiapas it what you pence brentonwood and the effort of the allies to make sure they didn't make the same mistake as after world war i. well, you know, isiah berlin actually wrote the best biography of marks was stationed in the british embassy in washington during and after the war and when hayek had written all people who couldn't participate in the effort wrote books and sort of prophetic books and hayek's book was about the danger totalitarianism to the free market and space societies. so she came over on the book tour and all these republicans were, you know, just waiting to make him their poster child when she turned around and supported the cause that they hated most of all which was brinton -- brenton woods. these 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