After 20 years when digital giants dominated the limelight, the real economy has regained its footing over the past two years. From the supply of toilet paper to the price of wheat, from the shortage of personal protective equipment in early 2020 to the Russian tank train in early 2022, it is clear that the economy does not depend on Twitter and Dogecoin, but on the kind of honesty that can be lost every day. something on the foot.

At least, that’s the new conventional wisdom. In addition to conventional wisdom, there is lamentation about decline: why are we in the UK not doing something about it anymore? Didn’t the Chinese show us how they built a Covid hospital in a week?

There is some truth to this cry of despair, but also a great deal of confusion. Looking closely at the events of the past two years, the invisible economy seems more important than ever.

Consider Covid. The success or failure of China’s response has nothing to do with their ability to manufacture personal protective equipment or build hospitals in a matter of days. They’re all about the ability — and sometimes the inability — to identify the virus, trace contacts, and lock down population centers. The same goes for other places. A shortage of oxygen or equipment is sometimes a problem, but not as serious as a shortage of effective contact tracing systems, testing capacity, or medical professionals.

High-quality statistics are another great asset, the equivalent of a pandemic radar. Without solid statistics, we grope in the dark and make big decisions. As these data improve – from infection surveys conducted by the ONS to the RECOVERY trial, which excludes poor treatments and identifies effective treatments – our responses are more targeted.

The most obvious success is the rapid development and production of vaccines. Vaccine programs are not purely invisible. Vaccines require vials, needles, cryogenic refrigerators and complex supply chains. But the importance of intangibles is core and absolute: no know-how, no vaccine.

These intangibles contain more information than mRNA molecules. Developing a vaccine requires years of early research. Proving they work will require rapid, large-scale clinical trials. Ensuring that doses are produced quickly requires risk-sharing — especially when governments commit to buying large doses before it becomes clear whether they will work.

Perhaps the most undervalued intangible asset in this launch is trust. Hong Kong has suffered a catastrophic coronavirus wave, not because it lacks a vaccine – it has plenty – but because its elderly residents are the least likely to trust it. When Hong Kong’s Omicron wave began in February, two-thirds of people over the age of 80 were not vaccinated.

Overall, the experience Covid is a reminder of how important the intangibles are, whether it’s the expertise of heads of healthcare professionals, data in spreadsheets and databases, life-saving clinical trials, the policy environment around vaccine development, or simply trust (or distrust). ) ) provided.

So let’s see ukraine warTangible physical factors are inevitable here, from boots on the ground to bullets on unarmed civilians. Europe nervously considers its natural gas supplies, while North Africa braces for the consequences of a disrupted Ukrainian wheat harvest: unaffordable bread.

But if physical assets matter most, Vladimir Putin is already cementing a quick victory. As Stalin never really said, “quantity has its own quality”. But quality also has its own quality.

The early success of the Ukrainian resistance was built on intangible or partially tangible advantages: better tactics, more motivated troops, and anti-tank weapons that incorporated some of the latest Western technology. President Zelensky’s rhetorical talent has won him the sympathy of Western public opinion, and thus the sympathy of Western governments. This sympathy is most evident in financial sanctions that resemble evil. Separating the Russian Central Bank from the world economy is perhaps the ultimate example of invisible warfare.

Clearly, a prosperous society is more than material things. In a new book, reboot the future: How to fix the invisible economy, Jonathan Haskel and Stian Westlake argue that not only is the invisible economy more important than ever, but we have failed to take this fact into account and therefore fail to develop the right institutions and policies. This failure largely explains some of the disappointments of the modern world—low growth, inequality, corporate power, vulnerability to shocks, and growing concerns about untrue “nonsense jobs.”

“Intangibles” is a broad term that covers everything from the software in a Javelin missile to the soft power of a charismatic president. But that doesn’t make the idea hollow. It explains why fixing the invisible economy is such a delicate challenge.

So the pendulum is not returning to the real economy as conventional wisdom would have you believe. The 21st century is the century of the invisible economy, and little else has happened in the past two years.

Tim Harford’s new book is “How to make the world add up“

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