fst journal The Journal of the Foundation for Science and Technology

Volume 20, Number 2, December 2009

Higher Education Higher Ambitions for education Sir Alan Langlands: The future of Higher Education in England Professor Michael Arthur: Maintaining our position in the world Sir John Chisholm: A business viewpoint Transport emissions Professor Brian Collins: Understanding the full picture Professor Dan Sperling: The three-legged stool of transportation reform Professor Neville Jackson: Reducing carbon emissions from transport Biodiversity Professor Bob Watson: Can a value be put on biodiversity? Pavan Sukhdev: Safeguarding the treasury of the poor Lord May: The ethical dimension in valuing diversity Medical research Sir Leszek Borysiewicz: From bench to bedside – strategic aims of the MRC Sir John Bell: Supporting and coordinating medical research Sir David Cooksey: Economic challenges in drug discovery Cities and science Boris Johnson: Can city managers make better use of science? Sir Alan Wilson: Social sciences in the city – think big! Professor Tim Allen: Science and technology in local government Financial models Professor John Kay: The role of models in directing economic activity Paul Sharma: The problems of mathematical modelling Professor David Hand: Did over-reliance on mathematics create the financial crisis? Lord Lloyd of Kilgerran Lecture Lighting up the brain

T H E F O U N D A T I O N F O R S C I E N C E A N D fs t TE C H N O L O G Y THE FOUNDATION The Foundation for Science and Technology FOR SCIENCE AND 10 Carlton House Terrace TECHNOLOGY London fst SW1Y 5AH Telephone THE FOUNDATION FOR SCIENCE AND TECHNOLOGY 020 7321 2220 Registered Charity No: 274727. A Company Limited by Guarantee No: 1327814 Fax PRESIDENT 020 7321 2221 The Rt Hon the Lord Jenkin of Roding Email VICE PRESIDENTS [email protected] The Earl of Shannon The Lord Flowers FRS Editor Sir Brian Jenkins GBE Professor Sir John Enderby CBE FRS COUNCIL Production Editor CHAIRMAN Simon Napper The Earl of Selborne KBE FRS Sub-editors Wendy Barnaby, Judy McBride, The President of the Royal Society The Lord Rees of Ludlow OM PRS HonFREng The President, The Royal Academy of Engineering The Lord Browne of Madingley FREng FRS Charles Wenz The President, The British Academy Sir Adam Roberts KCMG PBA Design and layout The President, The Royal Society of Edinburgh The Lord Wilson of Tillyorn KT GCMG PRSE James McQuat The President, The Academy of Medical Sciences Sir John Bell FRS PMedSci HonFREng The President, The Science Council Sir Tom McKillop FRS FRSE FMedSci Chairman, EngineeringUK Sir Anthony Cleaver www.foundation.org.uk Chairman, The Arts and Humanities Research Council Sir Alan Wilson FBA FRS Chairman, The Biotechnology and Biological Sciences Research Council Sir Tom Blundell FRS FMedSci Chairman, The Economic and Social Research Council Dr Alan Gillespie CBE Chairman, The Engineering and Physical Sciences Research Council Mr John Armitt CBE FREng Chairman, The Medical Research Council Sir John Chisholm FREng FIEE Chairman, The Natural Environment Research Council Mr Edmund Wallis FREng Chairman, The Science and Technology Facilities Council Professor Michael Sterling FREng Chairman, The Technology Strategy Board Dr Graham Spittle CBE

Professor Polina Bayvel FREng The Lord Broers FRS FREng Sir Geoffrey Chipperfield KCB Sir Graeme Davies FRSE FREng The Lord Haskel Dr Geraldine Kenney-Wallace FRSC Sir David King KB ScD FRS The Lord Krebs Kt FRS FMedSci Sir Rob Margetts CBE FREng The Lord May of Oxford OM AC Kt FRS FMedSci The Rt Hon Sir Brian Neill The Baroness O’Neill of Bengarve CBE FBA HonFRS FMedSci The Lord Oxburgh KBE FRS HonFREng Dr Peter Ringrose The Lord Soulsby of Swaffham Prior FMedSci The Lord Sutherland of Houndwood KT FBA FRSE Sir Mark Walport FMedSci The Baroness Wilcox Sir Peter Williams CBE FRS FREng

Dr Robert Hawley CBE DSc FRSE FREng (Deputy Chairman) Mr Patrick McHugh (Honorary Secretary) Mr Tony Quigley (Honorary Treasurer)

CHIEF EXECUTIVE Dr Dougal Goodman FREng

Neither the Foundation nor the Editor is responsible for the opinions of contributors to FST journal. © 2009 The Foundation for Science and Technology. ISSN 1475-1704 fst journal Volume 20, Number 2, December 2009 contents

update fst Scientific advice to Government; Higher Education review; Engineering a climate resilient journal Britain; UK’s continuing research excellence; 8,500 graduate internships available. . . . 2 The Journal of the Foundation for Science and T e chnology Editorial Volume 20, Number 2, December 2009 A climate where curiosity can flourish Higher Education Higher Ambitions for education Sir Alan Langlands: The future of Higher Education in England Professor Michael Arthur: Maintaining our position in the world Sir John Enderby...... 3. Sir John Chisholm: A business viewpoint T r ansport emissions Professor Brian Collins: Understanding the full picture Professor Dan Sperling: The three-legged stool of transportation reform HIGHER EDUCATION Professor Neville Jackson: Reducing carbon emissions from transport Biodiversity Professor Bob W a tson: Can a value be put on biodiversity? Higher Ambitions for education...... 4. P a van Sukhdev: Safeguarding the treasury of the poor Lord May: The ethical dimension in valuing diversity Medical research The future of Higher Education in England Sir Leszek Borysiewicz: From bench to bedside – stra tegic aims of the MRC Sir John Bell: Supporting and coordinating medical research Sir David Cooksey: Economic challenges in drug discovery Sir Alan Langlands...... 5. Cities and science Boris Johnson: Can city managers make better use of science? Sir Alan Wilson: Social sciences in the city – think big! Maintaining our position in the world Professor T i m Allen: Science and technology in local government Financial models Professor John Kay: The role of models in directing economic activity Professor Michael Arthur...... 6. P a ul Sharma: The problems of mathematical modelling Professor David Hand: Did over-reliance on mathematics create the financial crisis? Higher Education – a business viewpoint Lord Lloyd of Kilgerra n Lecture Lighting up the brain Sir John Chisholm...... 8.

T H E F O U N D A T I O N F O R S C I E N C E A N D fs t TE C H N O L O G Y transport emissions Understanding the full picture Professor Brian Collins...... 9. The three-legged stool of transportation reform Professor Dan Sperling...... 10 Reducing carbon emissions from transport Professor Neville Jackson ...... 12 biodiversity Can a value be put on biodiversity? Professor Bob Watson...... 13. Safeguarding the treasury of the poor Pavan Sukhdev...... 14 The ethical dimension in valuing biodiversity Lord May...... 16. medical research From bench to bedside: strategic aims of the MRC Sir Leszek Borysiewicz ...... 17 Supporting and coordinating medical research Sir John Bell...... 18. Economic challenges in drug discovery Sir David Cooksey...... 20. cities and science Can city managers make better use of science? Boris Johnson ...... 21 Social sciences in the city: think big! Sir Alan Wilson...... 22. Science and technology in local government Professor Tim Allen...... 24. financial models The role of models in directing economic activity Professor John Kay ...... 26 The problems of mathematical modelling Paul Sharma...... 27 Did over-reliance on mathematics create the financial crisis? Professor David Hand ...... 28 lord lloyd of kilgerran lecture Lighting up the brain...... 30. Comment Reasoned advice for policy makers Archimedes ...... 31 Events...... 31 fst journal >> december 2009 >> vol.20 (2) update

UK’s continuing Scientific advice to Government research excellence The fifth annual Science and Innovation Guidelines to ensure robust scientific tists, science journalists and Government Investment Framework 2004-2014 report and engineering advice to Government colleagues over the coming weeks to out- for 2009, published by the Department for are the subject of a consultation line principles for independent scientific Business, Innovations and Skills (BIS) at launched by the Government Office for advice which will underpin the relation- the end of November, shows that the UK Science. The Government says this is ship between Government and scientists. remains second only to USA in worldwide a long-planned consultation and runs These will be published before the end of scientific excellence, despite increasing in parallel with the exercise Science the year and will feed into the guidelines competition from other countries. It is Minister Lord Drayson will be carry- consultation. also the most efficient and productive ing out to deliver a clear set of rules of Government Chief Scientific Adviser nation for research in the G8. Key high- engagement for the provision of scien- Professor John Beddington said: “The lights include: tific advice to Government. provision of expert scientific advice to • the UK’s continued strong perform- The consultation provides an oppor- government is critical to ensuring that ance in delivering world class, sustain- tunity for scientists, academics and ministerial policy decisions are made in able research demonstrates that recent members of the public to help revise the the context of the best possible science investments in research infrastructure guidelines, last updated in 2005. These and engineering evidence. It is vitally have paid off; will set out the way Government depart- important that the independence of sci- • knowledge transfer and commercialisa- ments obtain and use scientific advice and entific advice is preserved and the work tion activities from the science base have underpin the Government’s commitment announced today will help reinforce this.” been firmly established across the univer- to evidence-based policy making. The consultation will remain open sity sector and within Research Councils; Alongside this formal consultation, until 9 February 2010. ☐ • there has been an encouraging increase Lord Drayson will lead work with scien- www.berr.gov.uk/consultations/ in the proportion of young people tific advisers, the learned societies, scien- page53603.html reaching expected levels in science and mathematics; Higher Education review • the UK’s strengths in the services and cre- ative industries – where innovation is less Lord Mandelson has appointed Lord serious one: to make recommendations to likely to be picked up in indicators such Browne of Madingley as chair of the secure the vitality of Higher Education in as R&D – mean that overall the UK’s in- Independent Review of Higher Education this country while ensuring that finance novation performance is under-stated. Funding and Student Finance. The cross- does not become a barrier to those who www.dius.gov.uk/science/science_fund- party appointment signals the start of have the ability and motivation for further ing/ten_year_framework this review, with Lord Browne leading study. We will be open and consultative in a group of independent figures drawn how we examine the issues and will set out 8,500 graduate from academia and business to analyse the process for taking evidence shortly.” the challenges and opportunities facing Lord Browne will be joined on the internships available higher education, and their implications review panel by Michael Barber, Diane HEFCE has called on universities to assist for student financing and support. Coyle, David Eastwood, Julia King, Rajay unemployed graduates through the eco- In assessing options the review will be Naik and Peter Sands. nomic downturn, and support employers expected to take into account the goal of The review will make recommenda- in the Government’s priority areas as part widening participation, affordability and tions to the Government next year on the of the Backing Young Britain initiative. the desirability of a simplification of the future of fees policy and financial support Higher education institutions (HEIs) are student support system. for full and part-time undergraduate and being invited to take part in the scheme, Lord Browne said: “The Review comes postgraduate students. A report is expect- which will provide £13.6 million to sup- at an important time and our task is a ed in 2010. ☐ port 8,500 graduate internships. Prime Minister Gordon Brown recently announced 5,000 graduate internships Engineering a climate resilient Britain available for small businesses which sit alongside 3,500 announced as part of The future of a climate resilient Britain UK’s engineering sector is vital to tackling Backing Young Britain for other prior- depends on the engineering sector’s this challenge and is well-placed lead in ity areas. HEFCE will work with HEIs, response to the challenge, according designing and engineering climate resil- Regional Development Agencies, Higher to Environment Secretary Hilary Benn ient and low carbon infrastructure for Education Regional Associations and the speaking at a joint Defra and Engineering global markets, as well as the UK.” Federation of Small Businesses (FSB) to the Future conference in November. Engineering the Future is a ban- deliver graduate internships in each region. Mr Benn called on the sector to lead ner under which organisations from the HEFCE will provide £1,600 for each the way in building Britain’s future infra- professional engineering community are internship. Employers will also contribute structure – from transport networks to working together to promote the con- funding to ensure that graduates are paid nuclear power stations to withstand the tribution of engineering to the UK’s to at least the level of the minimum wage. changes to our climate. economy. Professor Robert Mair, Senior Through this additional funding, institu- Hilary Benn said: “The floods of last Vice President of the Royal Academy of tions will be able to place significantly month, and the collapse of bridges, show Engineering said: “Resilience in the face of more graduates with suitable organisa- us how much a resilient infrastructure climate change is a challenge all engineers tions in ways which provide a useful and matters. Protecting ourselves against must rise to. Engineers can provide the productive experience for both the gradu- negative impacts, and also taking advan- solutions that will protect us from the worst ate and the employer. ☐ tage of the benefits of a changing climate, effects of climate change. The challenge has www.hefce.ac.uk is all part of building Britain’s future. The never been greater for engineering.” ☐

2 fst journal >> december 2009 >> vol. 20 (2) editorial A climate where curiosity can flourish

count myself lucky to have known life expectancy has changed from the John Maddox, most notably through low thirties in the 18th Century to mid- his membership of the Royal Society seventies and beyond today. How did this Dining Club. At our meetings, he amazing revolution occur in such a short Ialways had something interesting to say time span? and his essential humanity, beautifully When one reads the letters, diaries captured by Charles Wenz’s obituary in and other writings of Newton and his the last issue, was apparent to all present. contemporaries, one is struck by how I feel deeply honoured to follow John in driven they were by curiosity. This was his editorial work for the Journal. not idle curiosity, but curiosity embed- John had a deep appreciation of history ded in rigorous experimentation and and it is from such a perspective that I theory. Nevertheless, it was curiosity wish, in my first Editorial, to address a per- and with this in mind, let us fast forward ennial issue and one that has often formed to today. DNA fingerprinting has trans- that subject of discussion meetings here at formed forensic science and only a few the Foundation. For every pound spent weeks ago exonerated a man who had Professor Sir John Enderby on scientific research by the State, how served many years in prison for a mur- CBE FRS is the Editor of FST many pounds accrue in economic benefit? der he did not commit. Sir Alec Jeffries Journal. He was Professor of Economists have never, to my knowledge, was driven not by the needs of forensic Physics at Bristol University reached a consensus, with estimates for science, but an intense curiosity about the benefits varying from zero to factors of the unique character of highly vari- from 1976 to 1996. He was ten! The point is that one is dealing with able and repeatable patterns in human elected a Fellow of the differences of large numbers, so assump- DNA. I cannot imagine that when Sir Royal Society in 1985 for tions made about true costs of research on Tim Berners-Lee proposed a novel way his pioneering studies into the one hand, and benefit attribution in to link experimenters working on high the structure and properties cash terms on the other, can lead to widely energy physics, he had any idea how divergent answers. the web would transform the social, of liquids and amorphous economic and business life of the 21st materials. He served as The lesson of history century. Vice-President of the Royal Instead, let us go back in history and look Curiosity, tempered and informed by Society from 1999–2004 and at my favourite year, 1642. It was the year rigorous and outstanding science, is the that Isaac Newton was born, arguably hallmark of those innovators whose work was responsible for the greatest scientist ever to have lived. eventually impacts on thought and trans- publishing. Sir John was 1642 was also the year in which Galileo forms current practice that ultimately President of the Institute of died, having narrowly escaped execution leads to social and economic benefits. Physics in 2004. He is Chief for suggesting that the earth was not the centre of the Universe. It was also the The challenge Scientist at Institute of year that no less a figure than the Vice- The challenge facing those responsible Physics Publishing. Chancellor of Cambridge had worked out for science policy is how to maintain and precisely the year, month, day and time enhance an intellectual climate in which when Adam was created. Charles I, who curiosity can flourish. This is a theme to believed in the divine right of Kings, was which we shall doubtless return in future still on the throne (just). In short, Newton discussion evenings. At the very least, was born into a world where superstition, those in authority must internalise the excessive deference to established author- importance of curiosity-driven research. ity and dogma were the norms. By the By ‘internalise’, I mean testing every pro- time he had died in 1721, the scientific posal for ‘reform’ by asking: will this pro- method as we now know it – and which posal actually help successors to the likes has guided all subsequent developments of Alex Jeffries, Tim Berners-Lee and in science, engineering and medicine – Peter Mansfield? Such a test will, over was hard-wired into intellectual life. the next few months, become of increas- The extraordinary results of this revo- ing importance as research budgets are lution are plain for all to see. For example, squeezed. ☐

Presentations from the events held by the Foundation for Science and Technology can be found on the Foundation’s website at: www.foundation.org.uk fst journal >> december 2009 >> vol. 20 (2) 3 higher education

The Government launched its new framework for Higher Education on 3 November 2009. Higher Ambitions for education

he Government framework, set out in a document entitled Higher Ambitions, sets out a strat- First degree full-time 1,108,685 egy which aims to ensure that First degree part-time 198,155 Tuniversities remain world class, that the nation has the high level skills needed to Other undergraduate full-time 123,320 remain competitive, and that the UK con- tinues to attract the brightest students and Other undergraduate part-time 374,810 researchers. The document notes that “in a knowl- Postgraduate full-time 248,380 edge economy, universities are the most important mechanism we have for gener- Postgraduate part-time 252,755 ating and preserving, disseminating, and transforming knowledge into wider social Figure 1. Student numbers by mode and level of study. and economic benefits. They are crucial, too, as the providers of life chances for indi- • a requirement for universities to set engineering and maths. The strategy also viduals in an environment where skills and out clearly what students can expect foresees a greater element of competition the ability to apply those skills are essential in terms of the nature and quality of between universities for new contestable preconditions for employment.” courses offered; funding as an incentive to fulfil this prior- It adds that the demand for higher • a continuing focus on excellence in or- ity. The Government says it will – with education continues to grow but our par- der to sustain our world class research employers and universities – identify where ticipation rate, though improved over the base, concentrating research funding the supply of graduates is not meeting last decade, is still below that of many other where needed to secure critical mass demand for key skills. And it says it will developed economies. Access to higher and impact; seek to re-balance this, by asking HEFCE education remains significantly correlat- • encouraging collaboration between to prioritise the courses and subjects which ed with parental income and wealth. Too universities on world class research, match these skills needs. many people with the ability to benefit especially in high cost science. The Government also wants business from higher education are still not entering Announcing the strategy in the House of to be more active partners with universi- the system. Lords, Lord Mandelson said: “Able people ties. The strategy says that employers need Meeting these challenges is made all and bright ideas are the foundation stones to be “to be fully engaged in the funding the more important, says the strategy, by of a thriving knowledge economy and in and design of university programmes, the the current economic circumstances and the next 10 years we will want more, not sponsorship of students, and offering work the need to renew our economic base. fewer, people in higher education and placements”. Universities have a vital role to play in more, not less, quality research. “In the decade ahead we will expect that process. But the constraints on public “We have made great progress in the more from our universities than ever finances will make it impossible to sustain number of young people going to univer- before,” said Lord Mandelson. “They will the growth in public spending on universi- sity at 18 or 19 to do a three year degree. need to use their resources more effectively, ties seen over the last decade. But the challenge for the next decade is to reach out to a wider range of potential stu- Among the key measures proposed in offer a wider range of new study opportu- dents and devise new sources of income, the strategy are: nities – part-time, work-based, foundation at the same time as they maintain teaching • more competition between universities, degrees and studying whilst at home – to a and research excellence.” giving greater priority to programmes greater range of people. All students must The Department for Business, that meet the need for high level skills; continue to enter higher education on their Innovation and Skills has also announced • business to be more engaged in the merit. But I believe this means taking that Sir Martin Harris, the Director for Fair funding and design of programmes, account of a student’s academic attainment, Access, will consult with Vice-Chancellors sponsorship of students, and work their aptitude and their potential. Many and provide the Government with a report placements; universities are already developing their on what further action could be taken • the creation of more part-time, work- use of contextual data in admissions and to widen access to highly selective uni- based and foundation degrees to make we hope that all universities will look at versities for those from under-privileged it easier for adults to go to universi- their examples and consider incorporating backgrounds. Announcing this, Lord ties, with routes from apprenticeships such data in their admissions processes.” Mandelson commented: “Wider and fairer through to Foundation Degrees and The Government wants universities access to university is a question of basic other vocational programmes; to make an even bigger contribution to social justice and it is right that able stu- • the encouragement of universities to Britain’s economic recovery and future dents with the talent and ability to attend consider contextual data in admissions, growth. It is therefore proposing to give highly selective universities are given a fair as one way of ensuring that higher edu- greater priority to programmes that meet chance to do so, regardless of where they cation is available to all young people the need for high level skills, especially live or the school they attend.” ☐ who have the ability to benefit; in key areas such as science, technology, www.bis.gov.uk/policies/higher-ambitions

4 fst journal >> december 2009 >> vol. 20 (2) higher education

The Higher Education sector has received substantial funding support from Government over the last decade. But over the coming years, more focus and prioritisation may have to take place. What those priorities should be was the subject of a meeting of the Foundation on 17 June 2009. The future of Higher Education in England Alan Langlands

was reassured by the acknowledge- eroded by cost pressures and the recent ment of the Secretary of State for Sir Alan Langlands is budget announcement, which reduced Business, Innovation and Skills the Chief Executive of recurrent funding by £263 million for (BIS) that universities and colleges the Higher Education 2010-11. Some universities and colleges are “as much about the cultural bedrock Funding Council for will only manage to get through the next I England (HEFCE). of our society as the competitiveness of three or four years by reducing costs and the economy”. He has also been quick He was formerly the jobs and developing new ways of work- Principal and Vice-Chancellor of to acknowledge the centrality of a high ing. The budget changes represent 4.64 the University of Dundee and Chief degree of autonomy to the success of uni- per cent less funding for teaching, and Executive of the NHS in England. versities, the importance of the dual sup- He chairs the boards of UK Biobank just under 1 per cent less for research port system of research funding and the and the Health Foundation, a when compared to the projections of the importance of spreading the opportunity UK-wide charity committed to 2007 Comprehensive Spending Review. and social mobility that comes through improving the quality of healthcare. So how do we respond? higher education. Sir Alan is also a co-opted mem- I certainly believe it is possible to ber of the Office for the Strategic In the shorter term combine higher education and research Coordination of Health Research. If the international standing of Higher with the knowledge and skills which are Education is to be maintained through required to help the professions, busi- this period of financial restraint, a clear nesses and public services innovate and effect could be exacerbated by further decision will have to be taken about the prosper. I would argue that the broad pressure on the student support relative priority to be given to public base of research undertaken in our uni- budget and any delays in resolving the investment in universities. The review of versities has relevance and impact. outcome of the review of student fees; variable fees and student support funding The total turnover of our universities • threats to university income result- also needs to be completed in time for now exceeds £20 billion. There are about ing from cuts in other areas of public implementation in 2011-12. Even then, two million students studying in England spending (e.g. in the NHS, teacher some explicit choices may have to be and by all international comparators training and the RDAs), cost pressures made between protecting the quality of – research impact, trade and overseas (e.g. in relation to National Insur- education and research, overall student recruitment – we continue to do well. ance, pensions and banking charges) numbers and levels of participation, and Strong investment in recent years – and fluctuations in the financial and the pursuit of new initiatives. Doing coupled with the Government’s long-term property markets affecting endow- fewer things better may be a perfectly commitment to sciences and publicly- ment funds and estates rationalisation sensible strategy for the future. funded research, as well as the introduc- programmes. If the reputation of higher education is tion of variable fees – has enabled UK to be maintained, action is also required universities to maintain their interna- At the end of 2007-08, the higher edu- to ensure that the quality of learning and tional competitiveness whilst support- cation sector had strong cash balances teaching is maintained in the future and ing the policy of widening participation. and healthy reserves, but these are being that steps are taken to preserve research There are significant risks on the horizon, however, which must be taken seriously. d i s c uss on These arise from: Concentration or diversity? • intense competition from the United States, China and India, improve- If research excellence is focussed on too small a number of universities, the ments in European universities and scope for desirable research-led education for undergraduates will suffer. Yet the continued development of city perhaps a policy of widening participation in higher education has led to a states such as Abu Dhabi and Singa- decline in quality and an undesirable attempt to have degree level studies in pore which are investing heavily in fields which are not appropriate? It is wrong to expect universities to produce education and research; graduates tailored to the needs of particular jobs – employers had to take respon- • reductions in the growth of public sibility for job-specific training. It should be remembered though that vocational spending – with spending set to in- education is cheaper than university education and politicians could decide to crease by only 0.7 per cent per annum move away from the 50 per cent target for universities. in real terms from 2011 to 2014. This fst journal >> december 2009 >> vol. 20 (2) 5 higher education excellence. Excellence Framework (REF) – in it seems likely that the strong progress The quality and standards achieved a form that recognises and rewards being made by the Government and in Higher Education have been in the excellence of all kinds, across the full HEFCE will be at risk over the longer spotlight over the past year. A high level spectrum of disciplines and types of term. We will have to strike a new bal- sub-committee of HEFCE has found no research activity; ance between public expenditure and evidence of systemic failure in the present • continuing to develop the infrastruc- student contributions, develop a sustain- arrangements, but some improvements ture and human capital required to able system of student support and, even need to be made. For example, action is support research excellence, inward in- allowing for some further improvements required to ensure that: vestment and industry collaborations. in efficiency, recognise that there may • the Quality Assurance Agency (QAA) have to be trade-offs between volume has a more public-facing remit, one It important to avoid a narrow interpre- and quality. that reassures the non-expert while tation of the current research strategy. The HE Framework can be a vehicle encompassing a more flexible ap- The place of curiosity-driven research is for these short- and long-term responses. proach in its audit methodologies; secure and, in all the talk of lifesciences, I hope that it will go with the grain of the • applicants, students, parents and low carbon technologies, Digital Britain work currently being undertaken in uni- employers have ready access to infor- and advanced manufacturing methods, versities and, whilst recognising the need mation about programmes of study we need people who are thinking deeply to make best use of existing resources, and what is expected of students who about bioethics, the regulation of energy that it will support advances in the quality undertake these programmes; markets, the psychology of human/com- and flexibility of educational provision, • the external examiner system (a key puter interaction and the importance of that it will be even more responsive to part of the system of self-regulation design. students and to the opportunities of new and peer review at institutional level) research collaborations. is formalised, perhaps through more The longer term In the clamour to deal with the short- training or a mandatory code of Recent changes in the structure and pri- term financial pressures facing the uni- practice. orities of Higher Education have large- versities and colleges and the imple- ly been achieved through additional mentation of detailed elements of the The plurality of funding for higher edu- investment. For example, the Strategic Framework, it will be important not to cation research, from public and other Development Fund, set up in 2003, has lose sight of the cliff-edge facing public sources, is a major strength of the UK provided £656 million for a wide range spending and the difficult policy choices system. HEFCE funding, as one leg of projects including: the realignment that this is likely to pose. The review of of the dual-support system, enables of college and university activity in fees and student support will set the scene institutions to maintain a dynamic and Cornwall; the merger of the University of for a much more important discussion responsive research base of world-leading Manchester and UMIST; and the devel- about the future. quality. This enables ground-breaking opment of university centres in commu- The Government has delivered sus- basic research, with the potential to drive nities with no previous provision. There tained investment and universities and future innovation and respond quickly has also been a £3.7 billion investment colleges have used this money wisely for to changes in the external environment. in research infrastructure in the last four the public good. Many of the people who Challenges include: spending reviews 2002-2011, leveraging work in our universities are fizzing with • maintaining the balance between additional resources from industry and ideas and it is important that we build on funding for curiosity-driven research the charitable sector. their enthusiasm – to ensure that we have and for work targeted on identified Faced with the prospect of intense the high-level skills and the research base national needs and priorities; international competition, sustained we need for long-term economic suc- • developing a new research quality reductions in public spending and signif- cess, and that universities maintain their assessment framework – the Research icant cost pressures at institutional level, essential character. ☐ Maintaining our position in the world Michael Arthur

s Chair of the Russell Group tional excellence; our performance and the future of HE in this country. I wish to make the case for our impact on a global scale. research-led education and The second is our institutional sup- International excellence international research excel- port of creativity; they are surprised and Our Higher Education system is ranked Alence. I think the future is bright, if amazed at how well we do in terms of the second in the world to the USA. We are somewhat more complicated than a year ideas and knowledge we generate given a highly attractive destination for inter- ago. My focus, though, is on our future in the level of funding for our system. The national students. With just one per cent a global system. third is the creativity and skills of our of global population, we produce 7. 9 per When I travel internationally there graduates. cent of world research publications and are three main things that people in The rationale for focussing on these we account for 12 per cent of all citations other countries envy about our Higher three issues is that, in my opinion, they and 14.4 per cent of the most highly cited Education system. First is our interna- lie absolutely at the heart, the very core, of papers (top 1 per cent). In terms of cita-

6 fst journal >> december 2009 >> vol. 20 (2) higher education tion impact – in other words looking a is focussed on being of direct value to little more at their importance and qual- Professor Michael industry and society, ready to fuel inno- ity, rather than just the volume – the UK Arthur is Vice- vation and create value for the economy. is ahead of the USA in health, biology, Chancellor of the I believe that such institutional sup- University of Leeds environment and physical sciences. port of creativity is fundamentally impor- and Chair of the We are one of the highest perform- tant to the future of HE in our country. It Russell Group of 20 ing sectors in the UK. This has not is vital to our relationship with business research-intensive universities. The always been the case. We have certainly Government appointed him DCSF and industry in helping to drive the UK improved dramatically over the last 15 to Champion for the 14-19 reform pro- economy. We must protect science fund- 20 years, since we concentrated research gramme, and in 2008, he became both ing for both basic research as well as for funding in our top performing universi- a board member of the Qualifications applied activity. ties via the Research Assessment Exercise and Curriculum Authority and a US/ (RAE). Other nations, including China, UK Fulbright Commissioner. He is a Graduates Australia, Germany and France, are now member of the Council of the Medical At Leeds, and I am sure this is true attempting to emulate our approach. Research Council. of other Russell Group and research- However, in the UK things have also intensive universities, we aim to inspire changed. After RAE 2001, 75 per cent of our students and lift them to a level that all research funding from the Government These observations should precipitate a they did not think they were capable was concentrated in the top 24 universi- discussion about strategic research policy of, by concentrating on the relationship ties. After RAE 2008, that proportion at a national level: we should be clear between research and education. of funding was spread across the top 28. about the importance of critical mass For us, importantly, this means involv- That is going in the opposite direction and research concentration in driving ing students in the research process itself. from our international competitors. With research excellence and the international This is not achieved through simply being the removal of thresholds of interna- competitiveness of our research base. taught by people who are themselves tional excellence that informed stepwise researchers. We like to get our students increases in funding, some £70 million Institutional support of creativity actively engaged in research as early as was directed away from the Russell Group In looking at institutional support of crea- the first day of their course. We want and the 94 Group universities into other tivity and its relationship to dual funding, them to understand how knowledge is HE institutions. I would suggest that this I will again use the University of Leeds as created, we want them to get used to the is a long-term mistake. This change in an example. We are striving to produce fact that knowledge changes all the time. RAE methodology also led to an essential outstanding graduates and scholars and We want them to have the thrill of creat- protection of funding for STEM subjects to conduct research that has impact on ing knowledge themselves; we want them (Science, Technology, Engineering and a global scale. We have set up a ‘trans- to learn how to handle the uncertainty Mathematics): yet this was at the cost of formation fund’ to which staff can apply that goes with this process. other subjects, particularly, but not exclu- with ideas that will lift their subject area We aim to create rounded individuals sively, the social sciences. and our university into a different place. who are, themselves, capable of becoming Let me highlight one practical exam- Helped by our dual-funding system, we the leaders of the future – and certainly ple from the University of Leeds. Our have created a strategic fund of £4 million individuals who are of value to industry, School of Social Sciences and Social per year (and will be increasing that to £7 to the public, the Government and the Policy is ranked fifth overall in the UK. million per year) to invest in innovative, voluntary sector. We increased the volume of research sub- largely interdisciplinary research ideas mitted by 59 per cent between 2001 and with the potential for global impact. The future 2008, but the Quality of Research income To give you some examples, we have a The future of higher education in the has dropped by £250,000 over our next particular emphasis, in biomedicine and UK will be best served if we concentrate planning period. The amount of money health, on diagnostic devices and medi- research funds appropriately. We must per active researcher in that School has cal engineering. Another area is food debate and then decide how tight that con- fallen from £37,000 per annum to just security and human health, where we centration should be. We must create and £24,000 per annum. In the social sci- are aiming to combat global food short- maintain an environment that allows insti- ences and humanities, our international ages. Some of this activity is at the basic tutions to be supportive of creativity and we competitiveness is already threatened. research end of the spectrum, but much must link this to research that is of value to civil society and to business, industry and d i s c uss on innovation. I would put our dual funding Maintaining high standards system at the heart of that. And finally, we should recognise and acknowledge the real How to ensure that the quality of teaching remains high? On the whole, the present long-term benefit of a research-led educa- mechanisms seem to be working reasonably well but more use could be made of tion. The real issue is how we achieve that professional bodies whose influence on university education can be very benefi- for as many students in the country as pos- cial. Some isolated areas do exist where there are problems, though, and a well- sible in a tight fiscal regime. publicised failure can attract disproportionate and highly damaging consequences. Quite simply, we must; our Government Experience in recent years in other fields has shown how quickly loss of autonomy must continue to invest in higher educa- or respect for self-regulation evaporates in the wake of failure. The risk of such tion in the UK if we are to retain our political and public reaction is all the higher at a time of financial stringency. international competitiveness and help our country out of recession. ☐ fst journal >> december 2009 >> vol. 20 (2) 7 higher education Higher Education — a business viewpoint John Chisolm

want to look particularly at the rela- College at Bloomington, both about 90 in tionship between universities and Sir John Chisholm the Shanghai table. What struck me was business. What do companies want FREng FIEE became that Cambridge and Birmingham had Chairman of the MRC from universities? From talking to a very similar revenue pattern, whereas in October 2006. Sir many fellow industrialists, I would sug- Harvard and Bloomington had very dif- I John brought together gest five themes: ferent ones. That plays to my point that the UK Defence • graduates and postgraduates with Research Establishments which, diversity is a good thing. excellent subject skills; in July 2001 became QinetiQ, of So, what is the best way to encourage • graduates who have life skills such as which he is now Chairman. Sir John the necessary diversity in the HE sector, self-motivation, social poise, network- was a founder member of the UK without compromising the excellence we ing and knowledge-gathering skills; Government’s Technology Foresight are rightly so proud of? Well we could go • flexible continuing education; programme and he is Chairman for the central planning route – we could • new knowledge that provides a basis of the National Endowment for ask HEFCE to be ever more inventive in for innovation; Science, Technology and the Arts its distribution algorithms. Or could we, • a focus for clusters where innovative (NESTA). perhaps, take a different approach? activity can take place. There was a survey carried out by The market approach Prospects.ac.uk in 2007 which looked at are all centred around academic excel- Could we take a more market-orientated what people were doing six months after lence. At the institutional level, core approach? In most markets, the product graduating. funding is actually volume directed, but is not designed; independent providers Amongst those actually earning, ‘tra- those things that are variable – such as in a competitive arena focus on niches ditional jobs’ are the ones which we all Quality of Research funding – are excel- where they can be excellent – that is how know about – being scientists or engi- lence-directed. So it is not surprising markets evolve. This has proved to be the neers or lawyers or teaching – what many that institutions focus their strategies on most efficient way of allocating resources used to think university was about. These demonstrating excellence. The Shanghai in most communities and most markets. people account for about 7 per cent of Ratings show that we have two universi- So to encourage a similar variety of excel- the total. ties in the top 10, four in the top 30, 10 in lent participants in HE markets, we might Then there are ‘modern’ jobs – things the top 100, which compares to just 23 in consider concentrating research income like computer programming, being a deal- the whole of the rest of Europe. on truly excellent institutions and teams. er in the city, or indeed joining a manage- From that point of view we have We could make student users more ment training scheme. But graduates also a university system which works very important through a variable fee struc- go into the ‘new’ jobs across the service well. Yet we also need a diverse HE ture so the market operates more fluidly. sector, becoming salesmen, hoteliers or sector for all users. Now there is no We could channel more money to the physiotherapists. There are ‘niche’ jobs – conflict between diversity and excel- students and stimulate what used to nurses, sports trainers. There are a whole lence, in my mind. Raymond Blanc be an excellent arrangement – indus- bunch of graduates who choose ‘non- and McDonalds are both in the food trial scholarship. It has a great benefit graduate’ jobs – being a PA, for example. business, and are both excellent – but in in that it provides students with extra Finally, there are the ‘non-earning’ group different aspects of the job. They both money and also a line of sight to what which comprises those still in education serve their markets extraordinarily well. they can productively do with their lives and those doing voluntary work as well So we need diversity within the HE sec- afterwards. those who are unemployed. tor which serves the diversity we have in Finally, I believe there would be That is today’s reality. Universities the economy today. great benefit in stimulating an endow- produce people who go out into a very, Now in any market, you expect pro- ment culture. This not only promotes very mixed community. We have to think viders to focus on niches where they can a ‘giving’ culture but more importantly how we best educate our people for this be excellent. You would not expect to provides ‘free’ resources. When I say world. find a market in which all providers aim ‘free’ I mean ‘useable’ resources for We have been living in a ‘golden era’, for one part of it – and only serve the universities to use in the way they certainly uniquely in my experience, of other parts by accident. I looked at the think they should in order to pursue having a Government that has gone out of funding of various universities. I am a an independent strategy of their own. its way to fund the HE sector – and that is strong believer in the ‘follow the money’ The idea of universities operating, as far certainly not something we can count on principle. In life generally, if you look at as possible, as independent organisa- for the future. the money flows, you will discover the tions, making up their own strategies, Now while companies want educated core motivation. I looked at universi- pursuing their own ends in the market people from the HE sector, within the ties in North America and in the UK: I in order to create the most diverse and sector itself the focus is on academic compared Cambridge with Harvard, both excellent market – that is where I think excellence. At the individual level, career about the same place in the Shanghai companies would really like to see uni- progression, peer esteem and promotion table, and Birmingham with Indiana versities going. ☐

8 fst journal >> december 2009 >> vol. 20 (2) transport emissions

How can we use technological innovation to deliver the carbon savings in the transport sector that will be necessary to meet our climate change commitments? The subject was debated at a 0meeting of the Foundation for Science and Technology on 29 April 2009. Understanding the full picture Brian Collins

e have to consider a com- to us to be the only way to deliver the plex set of interactions Professor Brian Collins sorts of targets that we expect to agree in between social, technical, FREng FIET is Chief Copenhagen at the end of the year, so we economic and political Scientific Adviser (CSA) have to kick-start this market, recognis- processes if we are to accelerate the reduc- for the Department ing that in the short term we will have a W for Transport and also tion of carbon emissions from transport. ‘mixed mode’ with hybrids and improved We need to understand the impact of policy for the Department internal combustion engines. for Business, Innovation and Skills decisions about transport and energy on Each country will have a different (BIS). Professor Collins has a other sectors of the infrastructure, such as mix because each is starting from a dif- special interest in the exploitation water, food (the connection here of course of information in modernising ferent baseline. We have different jour- is biofuels) and waste. We are undertaking national infrastructure, particu- ney types, social habits and geographical a project now to try and understand how larly in transport and energy. He is scales, so no one size will fit all. reducing emissions from transport would Professor of Information Systems at The fuel market, though, is a global impact on this complex set of relationships. Cranfield University. market. We must ensure that we main- tain our continuity of investment and Current emissions scrutiny in these areas of technology In 2006, emissions from the transport because it is somewhat counter-intuitive. development because this ‘transitional sector constituted 22 per cent of that That will affect where we put our invest- stage’ will last about four decades. That from all sectors excluding aviation. This ment in innovation. sustained investment will be quite diffi- is the third biggest after commercial and cult to achieve politically and we have to domestic energy emissions. Within the Road map do it globally as well. It is a challenge for ground-based transport sector, cars and Having done this analysis, a number the science and engineering community motorcycles together with road freight of UK Government Departments have as well as the investment community and account for a substantial fraction of emis- developed a road-map to the achievement our politicians. We have to stay together sions. That means we have to target these of sustainable, low-carbon road trans- on it. modes in the transport sector itself. port. With industry and academia, we One current popular mantra is ‘behav- If we then want to know how we can see considerable advantage (and it goes ioural change’ – understanding what will reduce the emissions of cars, we need on for quite some time because of the make people change the way they live. The to understand how they are used. A maturity of the market), in further devel- Government is trying to understand the 2002-6 analysis from the Department for opments in internal combustion engines, barriers and motivators to overall change Transport shows that, for commuting pur- in transmission systems and in the use of and what causes them to occur swiftly, in poses, most trips are less than 25 miles. A renewable fuels. particular with regard to journey choices. large number of business trips are much We need greater market penetration How people choose between different longer than that, while the rest are quite by hybrid vehicles, as well as break- transport options is pretty important. evenly scattered in terms of length. throughs in energy storage – batteries We need to get people thinking about From a policy point of view, we have to and, later, fuel cells – in order to achieve climate change and the impact of jour- understand the interventions needed to mass-market electric vehicles. That looks neys. Do they have any information at the give us the reductions that we seek, either as cross-cutting measures or at different scales – national/international, regional/ dis cu ssion local, and in cities in particular. Policy and regulation We can illustrate this differently by Policies need to be consistent, long term, technology-neutral and market-based. looking at CO2 emissions as a function of Much can be done through tighter regulation and a greater focus on driver per- the journey length. While 34 per cent of formance. But the danger is that such regulatory activity could affect other the total trips in the UK are between two values (such as the cost of time) and impact on individual systems. Systems and five miles, they contribute only 15 engineering and much better data on the impact of policies should underpin any per cent of the carbon dioxide. Most of regulatory activity. There is a doubt whether the necessary data will be available the CO comes from the journeys that are 2 quickly enough and our systems engineering capabilities sufficient to feed into up to 50 miles and a further 20 percent or more comes from journeys that are longer new regulations which are needed now if 2020 and 2050 targets are to be met. than that. It is interesting to see where However, this does not mean we should not attempt to change regulations if new the balance lies between the frequency of conditions show current practice is out of date. journeys and the emission density of CO2, fst journal >> december 2009 >> vol. 20 (2) 9 transport emissions

2006 emissions from all sectors, 2006 emissions from the ground energy we are going to need to power excluding aviation based transport sector electric transportation? We have many routes that we could 100% = 44.3 million tonnes CO 100% = 9.6 million tonnes CO 2 2 pursue in terms of transport innovation: better internal combustion engines, use of Ground-based biofuels, hybrids, electric vehicles. Just at aviation Industrial the moment we lack the funds to do all of 7% Ground-based them at once. We must choose what we transport National Rail 11%* Car & do and when. We need to ask whether 22% Underground 4% 4% motorcycle we have the data and the metrics for Taxi & PHVs Commercial 4% understanding our innovative processes 33% Bus 5% 49% sufficiently well to know we are making the right choices. Which options should 38% 23% we prioritise and which should we put to one side, at least for now? Domestic Road freight Some of these processes under con- sideration need to be done at industrial scale and that means we need financial models for investment in projects that *Emissions from aircraft whilst taxiing and during the take-off and landing cycle (i.e. below 1,000m in altitude) Source: Mayor’s Energy Strategy and TfL analysis. Transport numbers reflect 2004–05 data are intrinsically risky. At the moment the appetite for risk is rock-bottom: this could not have come at a worse Figure 1. CO2 emissions from UK transport sectors. time. Yet somehow we have to persevere moment that helps them to do that? We Challenges because the climate change clock is tick- are working to give them better informa- While much of the developing transport ing away. So we have to understand how tion, but it is not yet extensive enough, policy is situated in a renewable energy to generate investment for innovation in it is not accurate enough, it is not timely context, if we do not deliver renewable this sector. enough. Helping them understand the energy in time, electric vehicles may not Last, but by no means least, we have the trends is particularly important. The provide a solution: all we would do is dis- challenge of incentivising people to travel role of information in increasing public place carbon dioxide emissions into the less and to be more energy-efficient, while awareness of these issues is crucial. energy domain. Now we have got a great still somehow maintaining the quality of Innovation is not only about technol- deal of technology for renewable energy, life that we have all grown up to expect. ogy and science and engineering. It is also but do we have the systems engineering That is as much in the realm of politics as about being innovative in understanding capability or capacity to deliver enough in the sphere of science and technology: people’s behaviour. of it in time to provide the amounts of they are all coupled together. ☐ The three-legged stool of transportation reform Dan Sperling

he easy way to think about we really are talking about new types of Professor Dan Sperling the challenge of transporta- vehicles, new types of fuel and new ways is Director, Institute of tion reform is that we have of moving around. Transportation Studies, the vehicles, the fuels and the The principal long-term energy University of California, Tmobility. Think of this as the three legs options for vehicles are biofuels, elec- Davis, USA. He is a lead- of a stool. I would suggest that trans- tricity and hydrogen. For now, though, ing international expert on forming vehicles is turning out to be efficiency is the real winner. This is the transportation technology assessment, the easiest, transforming fuels is harder technological innovation that will pro- energy and environmental aspects and transforming mobility is by far the vide large near-term returns, is highly of transportation, and transporta- hardest. I will focus on the first two, but cost-effective, and can (and should) be tion policy. He chaired the Davos I will address the third. done over the next few decades. World Economic Forum’s Council Some non-petroleum fuels are much on ‘The Future of Mobility’, is a Vehicles and fuels better than others as far as their green- former chair of the US Transportation It is forecast that we will have, globally, house gas emissions go, and thus we Research Board’s standing commit- two billion vehicles by 2020: cars, trucks, must become much more sophisticated tees on Sustainable Transportation buses, cycles and scooters. There is no about policy. A biofuel mandate, for and Alternative Fuels, current way we can reduce emissions from exist- instance, is a bad idea because it does board member of the California Air Resources Board, and co-author of the ing vehicles and fuel by 50 or 80 per cent not distinguish between the high-car- book Two Billion Cars. by 2050 with existing technology. So bon and low-carbon options. Both the

10 fst journal >> december 2009 >> vol. 20 (2) transport emissions

EU and the USA have opted for such a dis cu ssion mandate. In both cases, those mandates Emissions sources and business inaction should be converted to performance- Private vehicle use is not the only king of transport that causes CO emissions. based policies. The EU and USA are 2 Buses, trains, ships and aircraft also play a part. It is too easy to suggest that both moving in that direction, but very slowly. public transport can take the place of the car: lightly-loaded buses and trains Unfortunately, governments and the are just as damaging for emissions. Aircraft only account for a small fraction media often seize upon single solu- of emissions, but failure to take action to restrain them is a significant fac- tions: the ‘technology du jour’ or the tor in the public mind. Alas, the international politics surrounding air travel ‘fuel du jour’. For the USA 30 years ago, make changes in this area very difficult. There is also concern that companies this was synthetic fossil fuel (tar sands, have still not factored into their thinking the environmental changes that glo- heavy oils, coal liquids, oil shale). In the bal warming will bring about, nor understood the environmental issues facing 1980s, we focused on methanol, in the us. Business schools do not always include environmental issues in their cur- 1990s on battery electric vehicles, in the riculum, and hence graduates do not see how company behaviour can affect early years of this decade on hydrogen. behavioural change nor focus on adaptation to environmental challenges. Then two years ago it was ethanol, and today it is plug-in hybrids and electric vehicles more generally. What is going to be next? Without strong policy, we will start all over again with the synfuels and pick you up at your home or your do. One important difference between (now known as unconventional oil). office and take you where you are going. California and others is that cap-and- You can call from your mobile phone or trade plays a relatively small role, at least Picking winners the internet. You can develop a smart through to 2020. There is merit in keeping the Government car-pooling, ride-sharing service. This Only about 20 per cent of the reduc- away from the temptation of pick- suits the behaviour of the generation tion targeted for 2020 will come from ing winners. I am a member of the that is now moving into car-owning and cap-and-trade. The rest will come from California Air Resources Board, which transportation adulthood. a whole suite of distinct policies and is the agency responsible for adminis- instruments: requirements on electric- tering the climate policies for the state. The California model ity utilities to use renewable energy; We have recently adopted a low-carbon California passed a law in 2006 that energy efficiency standards; low-carbon fuel standard which gives oil refineries requires the state to reduce greenhouse fuel standards; and so on. The cap-and- a performance target of a 10 per cent gas emissions to 1990 levels by 2020. In trade programme is really an umbrella reduction in carbon intensity by 2020 for some ways that is not as aggressive as over the whole process, but not the main transportation fuels. The EU is moving Europe’s target, but it is very aggressive policy instrument. in that direction with the Fuel Quality for us because we have high population The complementary policies for Directive in its renewable energy pro- growth. This represents roughly a 30 transportation target vehicles, fuels and gramme. per cent reduction from business as vehicle use. We even have a revolu- This is good policy. It harnesses mar- usual, to be implemented over a 10 year tionary law enacted in 2008 to reduce ket forces by creating tradable credits, is time period. Plus, we have an 80 per vehicle kilometres travelled. The law performance-based, does not pick win- cent reduction goal for 2050. imposes a carbon cap on each metro- ners and is robust. The California model involves the politan region, leaving it to local gov- I want to highlight the use of infor- development of policies and rules that ernments to determine how to achieve mation technologies in the transporta- could (and hopefully will) be adopted these reductions – through controls on tion sector. We can achieve transforma- elsewhere. We strive to make sure that urban sprawl, expansion of public trans- tional change using IT. We can use it for everything we do is compatible and portation, pricing, and whatever else smart services, where a vehicle can come consistent with what others do, or might they might dream up. Most fundamentally, in California we believe that if we innovate, if we develop

dis cu ssion new technologies to reduce greenhouse Regulating public behaviour gases and carbon, we will be successful economically as well as environmentally. Some research suggests that early regulatory action on the demand side — such In closing I will quote Woody Allen: as behaviour, speed or shopping patterns — would be acceptable to the public. “We stand at a crossroads. One path California has a 30 miles per hour speed limit; why not the UK? But should gov- leads to despair, the other to destruc- ernments play a role in altering behaviour? And anyway, if people cannot see tion. Let’s hope we choose wisely.” I that regulation or innovatory practices are to their advantage quickly, or that must say that I am much more optimis- they apply internationally, politicians may be reluctant to act. Public percep- tic than Woody Allen. Certainly there tion of regulation is negative; it restricts freedom without delivering compensa- is reason to be pessimistic. But humans tory benefits. Low carbon use should be fostered by emphasising benefits — for are highly creative. When we focus our example, free parking and priority use of motorway lanes — rather than by taxing resources and capabilities, we find a way or penalising high carbon drivers. Such changes must also be preceded by full forward. Let us hope it does not take dissemination of information to the public and full research and debate. us too long to become committed to a sustainable planet. ☐ fst journal >> december 2009 >> vol. 20 (2) 11 transport emissions Reducing carbon emissions from transport Neville Jackson

want to look at several issues. First, order to get there we need breakthroughs what are our low carbon options? Professor Neville for electric vehicles and fuel cells. Second, what are the difficulties in Jackson is Group At the moment vehicle fuel efficiency Technical Director, technology selection and how do we is regulated by tailpipe CO2. Increasingly know what the answer is? Then I want to Ricardo plc, a global we will see these regulations based on I independent technology consider electric vehicles – how can we well-to-wheels CO2 emissions: where did make electric vehicles work and where are provider and strategic the fuel come from, and did we produce consultant to the world’s automotive they best suited? I will then move onto carbon getting it into the tank? and associated industries. He is also long-term vision and road map, where we We must make sensible use of lifecycle a visiting Professor at the University see technology moving over the next 30 analysis: how much has it cost us in ener- of Brighton, Vice Chairman of the to 40 years. From a UK perspective, what European Automotive Research gy terms and in carbon terms to produce are our opportunities? We are a small Partners Association based in this vehicle, to use it and then dispose of country working in a big global market. Brussels, and a member of the it at the end? When we know that we can What can we expect to do? I will end European Council for Automotive make the right decisions. with three key messages. Research programme review board. What are the challenges for the UK? There is very little advanced automotive The options research and development carried out There are many technical options for reduc- car and then lease them the battery. The here. Yet we have many opportunities. ing vehicle CO2 emissions. First of all, we total cost of ownership then becomes clos- The formation of a new automotive inno- can improve the vehicles’ energy efficiency er to a conventional vehicle, although this vation growth team has stimulated UK with combustion-engine/battery hybrids, is highly dependent on the price of petrol auto-industry cooperation, so is a major alternative ways of storing energy, down- and diesel. If these remain inexpensive, it step forward. sized combustion engines, next generation makes the economic challenge greater. I am very encouraged by what is going combustion engines with heat recovery, A fuel tank with a 300-mile range on in the UK Research Councils: a much and we can make vehicles lighter. costs around €250 for petrol or diesel that bigger focus on the economic impact The alternative strategy (in fact we is in use today. For compressed hydrogen and extra coordination with industri- should follow both) is to reduce the car- at 700bar, the tank would cost €12,000 in al research and funding of industrial bon in fuel. Possibilities here include volume production. A nickel, methyl- research. second and third generation biofuels, hydride or lithium-ion battery is around The UK’s leading position in motor- hydrogen fuel cells (as long as we get the €25,000 and it would also weigh about sport can also be used to stimulate auto- low carbon hydrogen), natural gas and 1000kg to travel that distance. motive skills, especially in engineering. biogas, and the plug-in hybrid option For long distance driving, quite frankly We have a world-leading industry in that where we can use part of our energy from the best solution is the internal combus- sector. What can we do to exploit it and the grid. All of these technologies have tion engine with a very efficient transmis- move us towards low carbon? challenges and there are no clear winners. sion. In between, we have some choices. We are likely to need all of these; there In the city, maybe a parallel hybrid is Key messages is no single, simple solution. We should possible (plug-in as well, very similar to My three key messages are, first, that the beware of jumping from one favourite a Prius). Alternatively, rather than mak- auto industry should be more innovative. solution to the next. ing a bigger battery to drive our electric Second, economics rules, OK. Lower So, being realistic, what can we do? vehicle further, it is a much better idea to carbon vehicles cost more money to make As far as plug-in hybrids goes, the fit a smaller battery and a small, range- than they can deliver in savings on fuels challenge we have is the cost of the bat- extender petrol engine so you never run bills, and that will be the case for the fore- tery. At the moment we have not even out of range. ‘Range anxiety’ is a huge seeable future. We need to work on long attained £800 per kWh, although in the issue with battery-electric vehicles, which term, not short term, fiscal and/or policy long term we hope to achieve £400 per are anyway likely to be more efficient just support for them to be viable – and we kWh. If we have just a 10-mile range that for city use. need stability. will use 80 per cent of the total capacity of Third, the UK strategy should be to the battery, the battery will probably cost Long-term vision lead in key areas and not try to do every- between £1,000-£2,000. If we want a 40 Ricardo estimates that by 2050 over two- thing, because if we attempt that we will mile range, though, we are talking about thirds of energy for transportation will fail. Personally, I would concentrate on anything between £8,000 and £16,000 come from electricity, maybe less than 25 efficient diesel engines, intelligent trans- just for the battery pack. This is a big per cent from conventional oil and the port systems, next generation battery challenge. rest from liquid bio, natural gas, biogas chemistry and the developments towards These electric vehicles will be expen- and so on. That will achieve a 70 to 80 lighter weight structures coming out of sive. One alternative is to sell people the per cent reduction in carbon. But in the UK motor sports sector. ☐

12 fst journal >> december 2009 >> vol. 20 (2) biodiversity

Is it possible to put a value on biodiversity — and if so, how should it be done? These were the questions considered at a meeting of the Foundation on 6 May 2009. Can a value be put on biodiversity? Bob Watson

uch of the conceptual think- that some climate change adaptation strat- ing on ecosystem serv- Professor Bob egies – hard structures such as sea walls, ices and economic valu- Watson CMG is Chief levies, etc – can have a negative impact on ation originated with the Scientific Adviser for biodiversity. the Department for Millennium Ecosystem Assessment (MA). It is equally clear that ecosystem man- M Environment, Food There are four types of ecosystem serv- agement can contribute to the mitigation and Rural Affairs ices that underpin human wellbeing. First, of climate change, e.g. the slowing of defor- (Defra). His early career was at there are provisioning services – provision JPL, NASA and in US Office of estation and the processes of reforestation, of food, fibre, fuel. They are traded in the Science and Technology Policy afforestation and low/no till agriculture. marketplace and so have ‘economic value’. at the White House. He became Obviously there are some activities that Then there are a series of regulating serv- a scientific advisor, manager and contribute both to mitigation and adapta- ices such as climate, pollination, air quality, chief scientist at the World Bank tion. We need to bring these activities and floods, which are not normally traded before moving to the UK to take up to the attention of both the Biodiversity in the marketplace (although the new car- a Chair of Environmental Sciences Convention and the Climate Change bon trading system provides a market for at the University of East Anglia and Convention. climate regulation through carbon). There become the Director for Strategic To make ecosystems more resilient we are cultural services – aesthetic, spiritual, Direction for the Tyndall Centre. need to consider both global ecosystems educational, recreational – but few of those and more focussed protected areas. What are traded, except recreational and some for building a third runway at Heathrow, is the right spatial scale, to what degree do educational services. Finally, there are sup- or a road. The methods have to include a corridors work, etc. We need to assess how porting services such as nutrient cycling combination of both economic and non- to manage protected areas – the pluses and and soil formation. All of these services economic valuation techniques. minuses of fire management, for example – provide the basis of human wellbeing – and we need to think about functional con- security, the basic materials for a good life, Biodiversity and climate change nectivity. With respect to species, in situ human health and good social relations: One question is how to apply the ecosys- adaptation measures need to be considered ecosystems add value to human wellbeing. tem approach to biodiversity and climate alongside human-aided translocation and We have recently initiated a UK nation- change – two issues that need to be ex-situ conservation. al assessment, covering England, Scotland, brought together. For too long they have One example is that of coastal ecosys- Wales and Northern Ireland, which should been viewed as independent, but we all tems – mangrove swamps, coral reefs, sand be complete in two years time. It will mir- know that climate change affects biodi- dunes and salt marshes. These can play a ror the international assessment and, like versity and changes in biodiversity affect very significant role in adapting to sea level the MA, will comprise three elements: climate change. Climate change is a major rise, storm surges and extreme weather • current status and trends and how threat to biodiversity at the species and events, e.g. cyclones, while continuing to these link to human wellbeing; ecosystem levels, biodiversity needs to deliver other goods and services. They act • scenarios for the future to 2050; adapt, and a resilient/healthy ecosystem as buffers against such events and can be • options for action to capture the posi- is likely to be less vulnerable to climate integrated with ‘hard defence’ measures, tive outcomes and avoid the negative. change in the future. for example sea walls. It is quite clear that biodiversity and When we consider intervention in spe- Ecosystem services contribute directly ecosystems can contribute to adaptation to cific areas, we need to consider the impact to economic welfare through the genera- climate change and we have to recognise on all services. For example, if a mangrove tion of income and wellbeing. While the provision of food and fibre has market dis cu ssion value, the provision and protection of Underestimated and misunderstood coastal infrastructure by coral reefs and People are now more aware of the hazards of climate change, but they mangrove swamps has non-market value: have not yet had to deal with the concept of biodiversity whose impor- we need to recognise both. We there- fore, have to consider the ‘value’ of all tance is often underestimated or misunderstood. There is of course an services. international convention on biodiversity, but action to cope with species When we assess the impact of a poten- loss often has to be taken at local rather than global level. This means tial policy, or when we evaluate the impact improving public understanding and involving policy makers at all levels, of climate change on ecosystems, we need especially local. People today may be preoccupied with the credit and to take a ‘whole ecosystem’ approach. The financial crisis, but the threats to the natural environment are of much approach works equally well for converting greater significance. a mangrove swamp to cropland, as it does fst journal >> december 2009 >> vol. 20 (2) 13 biodiversity swamp is converted to housing or shrimp is obviously one of the classic examples. alone. We need to pay farmers not only for farms or crops, we have to ask what serv- It is quite clear that forests, especially producing food, but also for maintaining ices we have today (nursery/adult habitat, primary forests, are extremely rich in bio- and enhancing ecosystem services. seafood, fuel, wood, timber, etc) and what diversity and ecosystem services. We need We need to integrate biodiversity into is the current value (either to an individual to reduce deforestation and forest degrada- every sector. We need appropriate pric- or to society at large)? If this mangrove tion and we need sustainable management ing policies for natural resources such as swamp is to be converted to housing, a of our forests coupled with afforestation water – without putting a price on scarce shrimp farm or crops, what services do we and reforestation. We need to think about resources they tend to be wasted. We can lose and what do we gain in both the short non-forest land management practices as a also apply fees, taxes, levies and tariffs to and the long term? mechanism for bringing biodiversity and discourage activities that degrade biodiver- Another example is water adaptation. climate change mitigation together. sity and ecosystem services and we need Freshwater systems can provide water market mechanisms to control nutrient regulation in the face of climate change. The economic framework releases, carbon emissions, etc. Therefore we need to reduce the degrada- So, how do we change the economic frame- At international level, we have a series tion of watersheds as they can contrib- work? As noted earlier, we have to take all of environmental Conventions, e.g. on cli- ute to water purification and potentially ecosystem services – and not just those mate, biodiversity, wetlands and land deg- flood control. An example of this was the bought and sold in the marketplace – into radation and, of course, the World Trade Catskills Watershed outside New York City. account when making a decision. We must Organisation. These entities need to work A new water purification plant was esti- remove the subsidies in agriculture, fisher- together: they cannot remain isolated. mated to cost between $8 to $10 billion, yet ies and energy that rarely help the poor. The bottom line is we are spending the protecting the Catskills environment was Instead, we should make payments to land- Earth’s natural capital. We are putting a estimated to cost just $1 billion. The choice owners, in return for them managing their strain on the ability of the planet’s ecosys- was between a hard structure, a water puri- lands in ways that protect and enhance eco- tems to sustain future generations – and fication plant, and protecting an ecosystem system services. Agriculture today should these services are absolutely critical for – they chose to protect the ecosystem. This no longer be thought of as production their survival. ☐ Safeguarding the treasury of the poor Pavan Sukhdev

s it sensible to put a value on bio- biodiversity in the wider meaning of the diversity? Why should we need Pavan Sukhdev is word. We have identified five impor- to? Can we just not do what is Project Leader for tant aspects of this which we have been sensible and obvious, which is not the United Nations attempting to quantify: to destroy biodiversity and not degrade Environment • Species richness – its diversity, its I Programme (UNEP) ecosystems within which we survive as recreational and medicinal value, Green Economy initia- a society, and within which, in turn, the and the contribution to ecosystem tive, a major UNEP programme to economy survives? The answer, at least resilience and robustness; demonstrate that the greening of on present evidence, is that we cannot Species rarity – identifying species economies is not a burden but rath- • do what should be sensible and obvious. er a new engine for growth, employ- close to extinction, quantifying their So we have to give biodiversity a ‘value’ ment, and the reduction of persist- ethical and recreational value; if we are to include it in our economic ent poverty. He is also Study Leader • Biomass density – important for calculations and decisions. To put it in for the G8+5 commissioned report delivering carbon storage, water pro- context, the problem is that nature is on The Economics of Ecosystems visioning and regulation, etc; a wild and wondrous thing and we are and Biodiversity (TEEB). • Primary productivity – production trying to equate it to something which of biomass and food production is very simplistic, which is the value of potential; money. can give that a ‘value’, then we have at • Genetic diversity – quantification of In a sense, we already do this in the least some glimmering of a comparison, bio-prospecting value and insurance implicit trade-offs we make when we using today’s money yardstick, of those value against future floods, etc. give production and the flow of goods interactions. We picked these because each of them and services a higher priority in our Without such a yardstick we rely on is an answer to the question: ‘what in economic system – in terms of the jobs implicit trade-off choices. I say ‘implicit’ nature is valuable to human beings?’ they generate, the economic wealth because our system is so geared toward that is generated and the reduction in the production of goods and services Assigning value poverty. and towards the measurement of jobs So that is the ‘what?’ The next chal- We can apply a degree of measure- and money flows that we do not recog- lenge is to assign dollar values to some- ment of the interaction between nature nise the ‘externalities’. This inevitably thing so complex and difficult. There and humanity by measuring the eco- leads to the emaciation of ecosystems is an acceptance that, yes, ecosystem system services. We can measure the and the destruction of biodiversity. functions do provide food, fuel, fibre, envelope, if you like, of humanity’s inter- So what is biodiversity? We are flood prevention, drought control, etc. action with nature and vice versa. If we evolving a consensus which recognises And the availability of these services

14 fst journal >> december 2009 >> vol. 20 (2) biodiversity

is changing. The incremental changes dis cu ssion in availability can be ascribed a dollar Global and local value (see Figure 1). There is a great need for better evaluation of what is going on, and bet- In Phase 1 of our report, released in ter measurement of species loss. They should perhaps be brought into Bonn in 2008, we looked at land-use change in terms of ‘mean species abun- national accounts, together with new ways of measuring wealth and dance’. We found that we have lost more wellbeing (such as is now being undertaken in a variety of places, rang- biodiversity in the last 50 years than has ing from the Joseph Stiglitz/Amartya Sen commission to the work of the ever happened in the same period at Club of Rome and even the Financial Times). There is an obvious diffi- any time in the history of mankind. It culty in dealing with local issues within a framework of universal values. means that an area the size of Australia We have to decide how to bring an understanding of the issues into our (7.5 million square kilometres) has been educational systems as well as to the attention of society in general. converted into other uses during that The world is becoming more aware of environmental issues, but under- period. standing biodiversity is among the most difficult to grasp. People sometimes jump to the con- clusion that the main driver of this land-use change is agriculture, but in our model the human imprint on natu- are numerous forecasts about the loss of The next stage ral areas was the largest driver. We fisheries and what it means for wellbeing, The second phase of TEEB is now call it ‘infrastructure’ but it is actually but it is not just about the $80 billion of underway1. All of the numbers I have encroachment, largely: as societies get income, it is really about the fisher-folk mentioned are based on valuing eight richer they expand faster into natural and their jobs which are at risk. When out of the listed 18 ecosystem services areas to convert them into residential we control trawling in our areas, then of of forests. In Phase 2 we aim to cover use. The second driver, interestingly, is course it moves elsewhere. A man from the others. climate change. The third largest is agri- Africa once told me, in very memorable We are looking at the thresholds culture, which is the conversion of natu- words, “When you stop trawler fishing in beyond which ecosystems cease to func- ral areas into, first, extensive agriculture your areas, they come to my land and my tion – the whole question of valuation and then intensive agriculture. canoes come home empty.” So it is those then becomes irrelevant because you Three key messages came from the jobs, the livelihoods of the poor, that they just do not have the system anyway. We report. The first was the sheer economic are talking about. had not explored the true connection size of the losses in terms of human Actually it is the risk to health of losing between biodiversity and ecosystem – in welfare. The second was the very strong fisheries, of losing fish as the main source other words, resilience aspects – and we link between poverty and the losses of of animal protein for a billion people in need to do that. We also had not looked ecosystems and biodiversity. The third the developing world, that is the real ‘ele- at urban and agricultural biodiversity message was about the ethical issues sur- phant in the drawing room’ that we have because our focus really was forests. We rounding discount rates. to worry about. So it is not just about the had covered discount rates and ethi- So the first point we made was that numbers, it is about jobs. And it is not just cal choices but we had not provided an on this model of ‘business as usual’ over about jobs, it is about livelihoods. appropriate framework within which to the 50 year time-span between 2000 and So biodiversity is not the preserve or address the future. 2050, we would end up, if we did nothing luxury for the rich, it is a necessity for the If I were to describe our efforts in different, with a 7 per cent loss of GDP. poor. Nature is truly the treasury of the Phase 2 in one word, that word would But you see it is not just the numbers. poor and that is the point which often be ‘mainstreaming’ because if there is a The second point is about poverty and I gets missed. We have tried to make this benefit from this recession it is to finally use fisheries to illustrate this point. There point in economic terms. make us understand that financial and physical capital are not the only form of capital. We understand human and social capital, we understand the impor- tance of community. We need to recog- nise better the value of nature. OECD Baseline One important priority is to under- stand how to enable the citizen and the scenario Change Change in in Change consumer to take responsibility for their Economic Land use, in impacts on ecosystems and biodiversi- Value Climate, Biodiversity Change ty. That could result in an Economics In Pollution, of Ecosystems and Biodiversity for Water use Ecosystem International Services Consumers, if you like, which sets out the Policies Change economics of what it takes to produce a in kilogram of beef – for example, the con- Ecosystem sumption of 15,000 litres of water – and functions what that means for the Earth. ☐ 1. The TEEB for Policymakers report was released on 13 November. It is available at: Figure 1. Translating changes into economic value. www.teebweb.org fst journal >> december 2009 >> vol. 20 (2) 15 biodiversity The ethical dimension in valuing biodiversity Robert May

ver the past 150 years, in a a few percent of annual GDP. If we were manner which has no prec- The Lord May of Oxford managed by a supreme dictator who was a edent, the human population OM AC Kt FRS holds really rational accountant, that is what we has expanded seven fold and in a professorship jointly would be doing. that time energy consumption per capita at Oxford University Yet these decisions are compounded O and Imperial College, has also increased seven fold. So in that by questions of equity. A study carried sense alone we are stamping a 50-fold London. He is a former out a little over 10 years ago found that President of The Royal Society, and larger footprint upon the earth. two thirds of the threatened species are in Chief Scientific Adviser to the UK That shows up in a variety of ways. countries which had an annual GDP per Government. His research interests Some time ago, researchers at Stanford include how populations are struc- capita of about $500-600. estimated that, of all the organic material tured and respond to change, par- More generally, if you ask about the size that grew each year from the equator to ticularly with respect to infectious of the human footprint in different regions the poles, something between a quarter diseases and biodiversity. In 2007 he you see there are huge disparities of equity. and a half – they estimated 40 per cent in received the Royal Society’s Copley It is why, in setting the UK’s climate change fact – was taken directly or indirectly for Medal, its oldest and most prestig- targets we first estimated the globally sus- human use. Interestingly, just a couple ious award. tainable emissions of carbon for the mid- of years ago that same number, 40 per dle of the century which would limit the cent, emerged from land-sat studies. More probability of a 4°C rise in temperature recently Jeffrey Sachs’ book has an inde- than mammals. Estimates range widely to less than 1 per cent. We worked on the pendent estimate of 45 per cent. about the total number of species on our basis that we had to do to come down to Sachs estimated that perhaps 60 planet and we therefore know even less that, while recognising the need for China per cent of all run-off water is used by about how many are becoming extinct. and India to come up to that, albeit more humans. The Natural Environmental Suppose, though, you look among the slowly than their current trajectory. Research Council’s Centre for Ecology better known species and ask what frac- and Hydrology at Wallingford believes tion became extinct in the last 100 years. Social science that rising global demand (more people, Assuming that is representative, how does Those problems of equity are why the real- higher demand per person) will exceed that correspond with the average extinc- ly important science here is not biological the declining (as a result of deforestation tion rate, the average species life-time from science, it is social science. It is a difficult of watersheds) sustainable supply of fresh origination to extinction, seen over the kind of social science – we have to ask ‘why water around 2040. half-billion year sweep of the fossil record? do we care about valuing biodiversity?’ I Well, in the last 100 years, the rate has group the reasons under three headings. Consequences increased by two or three orders of magni- First, there is the narrowly utilitarian This inevitably has consequences for the tude – it is now in the same order of mag- reason that it provides specific sources continuance of other species. Of all known nitude as the five great mass-extinction for items of value to human beings – like species, about 20 per cent are in one of the events in the fossil record. drugs. I do not think that is a good reason defined categories of threat drawn up by What would it cost to do something myself: before long we will design drugs the International Union for Conservation about preserving some of the diver- direct from the molecular level. of Nature and Natural Resources (IUCN). sity? Andrew Balmford and others at You could, second, try and establish a Not many fish, not too many plants, and Cambridge have carried out some signifi- value for ecosystem services – the things by the time you get to invertebrates, only cant work here. The costs of preservation we really depend on – but even here, six in 10,000 species of insect are known are necessarily imprecise but their argu- maybe we could be clever enough to live to be threatened. However, this is only a ment is that to do a better job – enlarging in an impoverished world. Such a world, measure of the species we know about. We protected areas, compensating local peo- though, would probably resemble that of know far less, for example, about insects ple, greening agriculture – would only cost the cult movie Blade Runner, and that rais-

dis cu ssion es the question ‘do you want to live in that Measuring and understanding world?’ So the final reason is ultimately ethical and cultural, it is about the kind of Although the information now available about damage to ecosystem servic- world we want to live in. It is less tangible es may be incomplete, it is reliable as far as it goes. We have to put much and it is certainly a reason that is easier to more effort into measurement, understand the impact of our actions, embrace if you live in the privileged, devel- and draw the right conclusions for future policy and behaviour. In some oped world than if you live elsewhere. respects it is easier to measure the damage to plants and vertebrates That is why I think we need a social than to invertebrates, and in particular the worms and micro-organisms science that understands us well enough whose functions are vital to life itself. Nor do we properly understand the to ask ‘how do we motivate human beings effects of such human activities as the use of nitrogen fertiliser. to care about our own futures and act accordingly? ☐

16 fst journal >> december 2009 >> vol. 20 (2) medical research

Medical research has received significant extra funding over recent years and a new funding struc- ture. The issue of which areas to prioritise and the challenges still facing the sector were discussed at a meeting of the Foundation on 20 May 2009. From bench to bedside: strategic aims of the MRC Leszek Borysiewicz

he aims of the Medical Research Research, Global Health, and Training Council (MRC) are deceptively Sir Leszek Borysiewicz and Careers. The Strategy Board advises simple: ‘to encourage and sup- FRS FRCP FMedSci on the allocation of resources to Boards port high quality research with is Chief Executive at and to specific areas of research, the aim of improving human health; pro- the Medical Research We have identified 10 priorities for T Council. Previously he duce skilled researchers; advance and dis- health research in the UK: was Deputy Rector at seminate knowledge and technology to stratification of phenotype; Imperial College London, respon- • improve the quality of life and economic regeneration and replacement; sible for the overall academic and • competitiveness in the UK; and promote scientific direction of the College. • tracking response to intervention; dialogue with the public about medical He was a founding Fellow of the • measure, understand and modify en- research’. Academy of Medical Sciences. As vironmental and inherited influences In 2007-8 our operating expenditure a physician, Sir Leszek specialises on health; was about £625 million. We made 300 in viral immunology, infectious • early detection of the opportunity for grants to researchers and distributed £236 diseases, cell-mediated immunity, effective intervention; million in grants and training awards to virus-associated malignancy and • primary prevention; universities and medical schools. We vaccine development. • behaviour modification; also provided £343 million to fund over • understanding the burden of illness; 500 programmes in our research units • development of new interventions. and institutes, which produced more than development is supported through all These 10 priorities have been used to 2,000 publications in peer-reviewed jour- stages and that the journey from bench inform the development of a new strate- nals. to bedside is as smooth as possible. gic plan. MRC Technology (MRCT) has been One of many changes within the After consulting over 500 stakeholders very successful in commercialising MRC has been the development of a we set as one of our goals the creation of the discoveries made by our scientists. Strategy Board to allow us to look at a non-prescriptive agenda. We are trying Revenue from licensing receipts for 2005- large-scale funding and new opportu- to ensure that we can lead and influence 6 was £141 million including an £85 mil- nities without recourse to interminable major sectors of activity while ensuring lion buy-out, bringing our total income debate. The Strategy Board will facili- that the formation of national and inter- from MRCT to £384 million. tate rapid decision-making and provide national partnerships is enshrined in the Our foundation lies in basic science. a forum where strategic funding can be process. Among our alumni are 28 Nobel Prize considered. It is made up of the chairs winners in physiology, medicine or chem- of four boards – Molecular and Cellular Strategic aims istry. This attests to our success, but also Medicine, Population and Systems We have four strategic aims. The first is to something else which is inherent in the Medicine, Infections and Immunity, to pick research that delivers. We want to MRC strategy – taking basic science from and Neurosciences and Mental Health – set research priorities that are most likely the bench and moving it forward. together with the chairs of four groups – to deliver step changes in the potential The MRC will continue to support Population Health Sciences, Translational for improved health outcomes. The two basic science through all of its phases. However, we are also expected to translate di scuss ion discoveries into clinical benefits. To do A new lifesciences model for the UK this we must follow an artificial and often Because the NHS is slow to adopt new drugs or procedures, the willingness of tortuous pathway, beginning with basic investors to fund new developments in the UK is constrained. Expenditure on medical research and moving on through the stages of prototype development, pre- research and development in the USA is much greater, and also represents by far clinical development, early clinical trials the larger market for UK-researched drugs. The USA also constructively engages and, finally, late clinical trials. engineers in the lifesciences. However, this is not a model for the UK with its smaller economy and very strong research base. As a result of OSCHR and the Translating research MRC, there is the opportunity to focus on crucial sectors and develop strategical- This translational journey requires a ly. Lifesciences now form one of the largest sectors of the UK economy and more number of milestones to be reached. needs to be done to ensure that disciplines other than medicine are involved. We need to ensure that research and fst journal >> december 2009 >> vol. 20 (2) 17 medical research themes we have chosen are ‘resilience, the entire population. To achieve this we of datasets and we must engage in the repair and replacement’ and ‘living a long will need to become involved in regula- current debates about data privacy in the and healthy life’. What builds in resilience tion, ethics and governance, and work context of medical research. to infection or to tissue degeneration? with decision makers as well. How will we measure our success in How do we determine what these mecha- Our third aim is to secure progress in achieving these four strategic aims? Our nisms are and what might we learn about international medical research. The UK criteria for success include: a demon- preventing and mitigating disease? These is in an enviable position in relation to strable advancement in the national and themes will also address the biology of the problems of global illness. We want international knowledge base resulting in aging and tissue degeneration, as well as to secure international partnerships that a positive economic output; a measurable the translation of stem cell research into will enhance the competitiveness of the impact on the development of policy and new treatment strategies. Last, but by no UK knowledge base, and support global practice; participation in global health means least – and I say that because it so research to address health inequalities. research policy and implementation; and often has been ‘least’ – they will include Finally, none of this will happen if a measurable increase in the number mental health and wellbeing. This is an we do not support our scientists, so our of skilled people working in health and area where we have failed to make the sort fourth aim is to sustain a robust and medical research and development. of ground-breaking discoveries that have flourishing environment for world-class The MRC will remain driven by the occurred in other fields. In some ways it medical research. We intend to do this quality of the science being produced. is one of the most challenging agendas, by strengthening our capacity for training The development of capacity is absolutely but it is one that we must not shirk. and development. Making population- key and will be crucial in enabling scien- The second strategic aim is to bring based data accessible to a wider com- tists to look into the future and maintain the benefits of excellent research to all munity of scientists is absolutely key. the UK’s pre-eminent position in bio- sections of society, making it relevant to We need a framework to allow linkage medical research. ☐ Supporting and coordinating medical research John Bell

he Office for Strategic explain our role. Our engagement with Coordination of Health industry is much better, but can still be Sir John Bell FRS Research (OSCHR) coordi- improved. PMedSci is President of the Academy of Medical nates the work of the two major Capacity building is another area we Sciences and Chairman health research agencies in the UK – the need to work on. In addition, the public T and Regius Professor Medical Research Council (MRC) and health agenda needs boosting and we face of Medicine at Oxford the National Institute for Health Research challenges in that area. E-health is pro- University. He is Chair of the (NIHR). We are charged with eliminating gressing but we need to ensure that the Office for Strategic Coordination duplication and ensuring support for the NHS is aligned with the overall e-health of Health Research (OSCHR). Sir translational pipeline. To help achieve mission. John has been extensively involved this we have developed the ‘lead organi- The MRC’s strategic plan highlights in the development of research pro- sation model’ in which one organisation some central issues. One is the ability of grammes in genetics and genomics takes the lead on a piece of research, with other funding agencies to work with the and a UK-wide clinical research resources being shared. MRC. I think they are doing this remark- programme. We focus on UK-wide working, with ably well, given the fact that for many particular emphasis on translational years the MRC was the only public sector medicine, e-health and public health. research funding agency in the UK and a basic science agenda. This has been the The increase in the research budget has must now share that role with several oth- fundamental ground on which enormous accommodated a great deal of this but, ers (including the NIHR, the Wellcome success has been achieved. However, importantly, it has also served to protect Institute, charities and others). there are challenges and the reality can the basic science base. So, we also moni- be more complicated than we may imag- tor and protect the ‘ring-fence’ around the Basic science ine. An example is research into aging, health research budget – a notional con- Maintaining excellence in basic science which has been the leading cross-council cept that I think is increasingly fragile. is central, particularly for translation. I research priority for many years. Despite In our business progress report last think we all support excellence, but align- this, our biomedical research in this field year we described a number of items of ing it with improved translational capac- has not had the same impact as simi- unfinished business. We still have work ity will produce a double win. The MRC lar work undertaken in America and to do to improve our communication has always had, and will continue to have, Germany for example. with the academic community and other global reach. One of the challenges is the emphasis stakeholder communities, in particular to The MRC maintains a commitment to on multi-disciplinary work in the field

18 fst journal >> december 2009 >> vol. 20 (2) medical research

the MRC have longstanding global pro- Recruitment of 100,000 participants in first 12 months grammes. The NIHR and the NHS are 100,000 increasingly interested in global research. This work requires partnerships and the ability of UK agencies to participate in 80,000 shaping the agenda. Infections and chronic diseases are e two examples of areas of global health

ndanc 60,000 research that are very well covered by UK agencies. The funds directed to the study atte

ve of infectious disease in the developing

lati 40,000 world are impressive by any standard.

mu However, there are limitations as to what Cu we can do and important decisions have 20,000 to be made about the funding of global programmes. We need to ensure we support sci- 0 entists through capacity-building pro- 01 April 2007 01 July 2007 01 October 2007 01 January 2008 01 April 2008 grammes, provision of population-based data and improvements in the research environment. Biobank, which was sup- Figure 1. Recruitment to UK biobank. ported by the MRC, the Wellcome Trust and the Department of Health, is a very of aging. Although this is well accepted, up to $2 billion be put into a scheme that impressive example of collecting popula- there is still a role for a single-discipline looks very much like that of the MRC. tion-based data. Between April 2007 and approach to advance the basic science. Other exciting developments at April 2008 around 100,000 participants For example, research suggests that die- the MRC are the new Centre for Drug were recruited; the total number now tary restriction may improve longevity. Discovery and interactions with the stands at around 250,000. This makes it This has been shown in every species Technology Strategy Board, which I think the world’s largest data bank for genetic in which it has been tested. Wisconsin are going to be central elements in the epidemiology. monkeys were the subjects of the most important area of stratified medicine. Public health issues require further recent experiment, which found that Communication is crucial to the suc- debate. Funding for public health research nutritionally-deprived monkeys lived cess of these developments. When I talk is limited and difficult to secure since it longer. (Having said that, the monkeys to people in industry they tell me that the requires input from different sectors and that were deprived of food became very improved interface with the NIHR and various Government departments. It is a cranky!) Clearly, there are advantages the MRC has transformed their approach diverse field with a wide range of areas of and disadvantages to dietary restriction, to working with researchers in the UK. interest (infectious disease, chronic dis- but the data from this study have revealed There is now good alignment with both ease, mental health and so on). The MRC some fundamental biology that should large and small companies. We are slight- has a spectacular record of discovery in not be ignored. The lesson to take from ly constrained by academic capabilities, public health, but the question remains: this is that although there is an important which are not always as broad as they are can we go further? role for interdisciplinary work, it should believed to be. There is also the lack of a A number of other issues are also open not prevent very focused research into a unanimous view from industry regarding to question. Should we focus mainly on single subject. its priorities. large science, or on small science? Is the Another challenge is taking ‘research ‘ring-fence’ secure? I do not think it is, to people’, which involves translation, Working globally and if it were to be breached there would regulation, ethics, governance and com- Working globally is very important and be a major impact on health research. munication. The activities of the MRC is at the heart of UK biomedical research. What partnerships should the MRC forge? and the NIHR have improved translation, We monitor healthcare requirements How can we balance multi-disciplinary but there are outstanding issues with around the globe and spend resources with single-discipline science? There are regulation. We welcome the continued accordingly. The Wellcome Trust and many challenges ahead. ☐ involvement of the MRC in dealing with the complexities of ethics and governance di scuss ion within a highly regulated environment. Why is the NHS such a poor customer? A further major challenge is posed by Why is the NHS failing to be an effective customer for new products and treat- the economy. I am glad that improving ments? Is it because the NHS is risk-averse and fails to get rid of out-of-date economic competitiveness is in the MRC practices? The driving force in the NHS is service delivery, which does not always charter. They have developed a number align with academic or industrial aims. Some research developments will not of new programmes for translation. One such is their developmental pathway be capable of being delivered because NHS priorities have not been understood. funding scheme, which the Americans Universities must take the lead in developing new partnerships and devising new now appear to be pursuing as well. There ways of working with the Health Service. is a bill before Congress proposing that fst journal >> december 2009 >> vol. 20 (2) 19 medical research Economic challenges in drug discovery David Cooksey ifesciences have become the big- between $1 billion and $1.5 billion now. gest industrial sector in the UK, Sir David Cooksey GBE Therefore the cost of drugs will be driven overtaking financial services. is Chair, Review and up, not down, over time. There will soon We were therefore very sur- Refresh of Bioscience come a time when it will be so expensive to 2015 and also of prised when the Review and Refresh of develop new drugs that it may not be worth L the UK Centre for Bioscience 2015 (BIGTR2) revealed that bringing them to the market, since NICE Medical Research and British participation in global clinical tri- will argue that the quality threshold can- Innovation. In 2006 he published the als had dropped from 6 per cent in 2002 Cooksey Review of UK Healthcare not be met at the price the manufacturer to 2 per cent in 2007. The reason for this Research Funding, which was is prepared to sell the drug for. We need was partly cost: competitive economies adopted as Government policy. Sir to look at the way in which we authorise around the world (such as Singapore and David was one of the founders of the new drugs. many others) made strenuous efforts to private equity and venture capital Part of the problem is that we tend to capture development work for the phar- industry in Europe and has also par- have a single gateway; we have to get every maceutical industry in a way that the UK ticipated widely in public life. aspect of a drug approved and its safety could not. This will be a major challenge profile completely established before the for the new Office of Life Sciences. regulators will allow the drug to go through. In BIGTR2 we concentrated on five move from basic to applied research and The US Food and Drug Administration areas. The first two were: finance and the delay in the uptake of new drugs when (FDA) is the worst offender, and for a very taxation; and regulation. Over the past they are developed. good reason – to avoid litigation through 15 years, the pharmaceutical industry has large class actions in the USA. We need evolved from in-house working to a mix Changing the development process to approach liability in a different way and of in-house and collaborative working with In economic terms there is a case for look at bringing drugs to a larger propor- the biotechnology sector. As a former changing the drug development process. tion of the population earlier. We can use venture capitalist, I know this raises prob- The old, small-molecule blockbusters have stratified medicine techniques to do this. lems. For example, an investor in a digital largely been discovered and it is unlikely This would change the economics out of media company will see a product produce that we will find many more low-cost all recognition and do ten times as much a positive cash flow after two or three years drugs that are highly effective and make to control the cost of drugs in this country and profits after three or four. By contrast, important differences to the health of indi- as NICE ever will. in the biotechnology industry the develop- vidual patients. It is very encouraging to That is the major challenge and I think ment of a product can take 13 or 14 years. learn that the Technology Strategy Board is this country is very well situated to take the NICE (the National Institute for Health and going to work on ‘stratified medicine’ and lead in making these changes. We can do Clinical Excellence) can then add a delay of regenerative medicine, as we move towards this by creating a new drug development 31 months on average, although I am told a ‘personalised medicine’ agenda. This pathway that gets the balance of risk and this is improving. This timescale makes it calls for us to identify patients who will reward right – and drives prices down. We extremely difficult to finance early-stage benefit from a particular drug, which may need to make NICE a much more effective biotechnology companies. be an expensive one. This means that the tool for improving innovation in the deliv- The third area we examined was how drugs that we develop are going to serve ery of healthcare. to ensure the availability of a trained increasingly smaller patient populations. We must have the right incentives to workforce to carry out research and clini- If a drug takes 13 or 14 years to come ensure that we have people of the right cal development. Researchers and devel- to the market, there may be only five or six calibre working to translate our fantastic opers also need to know how to take their years left on the patent in which to recover capability in drug discovery into drugs products out into the marketplace; this is the cost of its development. The cost of and therapies that people want to use very important. developing a drug has risen from $500 mil- and for which the NHS will be a better Fourth, we reviewed the bio-processing lion some 10 or 15 years ago to somewhere customer. ☐ capability of the UK. It is vital that we have the capacity in terms of both physical assets di scuss ion and trained staff to manufacture the drugs The role of NICE that are developed. Finally, we asked the question: is the The existing remit of NICE (the National Institute for Health and Clinical Excellence) NHS an asset or a liability in terms of requires it to focus on whether new treatments provide value for money in the research and development? The NHS NHS. Such judgements are made in far too narrow a context. They ignore other should be a wonderful base on which to considerations such as export potential and societal benefit. Innovation is inhibited. develop new drugs, and in some ways it Failure to get NICE approval means that many drugs that could have global potential is. It should also be the prime customer or societal benefit never come to market. However, it is important to recognise for these new products. However, Britain that there are overall public expenditure constraints that cannot be ignored, and has the lowest uptake of new cancer drugs the money that NICE has saved the NHS over the years is considerable. The prob- of any country in Europe, despite all of the lem of delays in approval is being tackled but the major difficulty is that many new efforts of the NHS to do better. products are brought before NICE too late in the day. There are two gaps in translation – the

20 fst journal >> december 2009 >> vol. 20 (2) cities and science

How does science advice reach the decision makers and the politicians in large cities – and how should it be used? This was the subject of meeting of the Foundation held at the Royal Society on 3 June 2009. Can city managers make better use of science? Boris Johnson

hese are extraordinary politi- London on a scale not seen for 50 years, Boris Johnson is cal times. The expenses row and it is vital that those investments Mayor of London. has left Westminster enveloped go ahead. Next year the Underground His career in jour- in a miasma of guilt with a will be 150 years old, and for the first nalism has included Tlevel of pollution rising off the House of 12 years at the The time in its history we will be putting Commons of a kind we have not seen Daily Telegraph and air conditioning on the sub-surface lines since the Great Stink of 1858, when the editorship of the The Spectator. His (Metropolitan, District and Circle), but whole place had to be evacuated. And books include Lend Me Your Ears, you still risk an armpit-sniffing hell on who sorted that out? Not a politician Friends, Voters and Countrymen and the deep lines. When people notice the but one of the greatest engineers of the The Dream of Rome, the latter on difference there will be overwhelming Victorian age, Joseph Bazalgette, whose Roman history which also became a passenger pressure for a miniaturised air- magnificent sewers still carry the effluent series for television. In 2001 he was conditioning system that can fit the deep of London along the embankment. It is elected MP for Henley on Thames tunnels too. not just because I am Mayor of London and in 2008 Mayor of London. We will be going ahead with Crossrail, that I am proud to say that at the root the biggest infrastructure project in of every great scientific breakthrough of cent decline in engineering and technical Europe, adding 10 per cent to London’s the modern era you will find a London graduates in the past few years, together rail capacity, generating 13,000 jobs and scientist. with the closure of 80 science and engi- necessitating the creation of a tunnelling Electricity? London. Michael neering departments at universities and academy. Take that together with the Faraday was born in Southwark and died colleges – and this at a time of massive Thames Tideway tunnel — a gigantic at Hampton Court. Computers are all expansion in higher education. To cure ‘Cloaca Maxima’ that will prevent sew- descended from the invention of Alan this malaise we must do several things. age overflowing into the River Thames Turing, born in Maida Vale. The theory We must stop the absurd pretence that all — and the Olympics. These engineering of evolution — the single most influential subjects are academically equal; indeed, projects will deliver jobs and growth now, scientific teaching in the world in the we should consider a funding premium enabling us to boast that we are the new past 200 years — was first propounded in for the ‘crunchy’ subjects, especially sci- Victorians and to say to our sons and Bromley, now a London borough. When ences. We must get the message across daughters for the first time in a genera- you consider the historic dominance of that a science graduate will earn, on aver- tion that they have a future as engineers. this city in scientific and technological age, 30 per cent more than a humanities But I want to go further. I want endeavour, when you think how penicil- graduate; and we should demonstrate London to lead the world in the develop- lin was discovered on Praed Street and the huge opportunities for those who are ment of the low-carbon economy. We are how Brunel built Paddington Station, it skilled in science and technology to help kick-starting a £100 million programme breaks your heart to see how little value transform our city and improve the lives aimed at averting climate change — not schools seem to attach to the study of of Londoners. just because we want to save the planet, science. We are making investments now in but also because we want to save people Last year in the London borough of

Islington, not one school entered any dis c ussion pupils for a separate science GCSE. In The systems approach Southwark, the birthplace of Faraday, only 13 pupils did physics A level, and only 3.5 While the systems engineering approach is a powerful tool, the inability of local per cent of those who did GCSEs in 2006 authorities to spend resources in accordance with their own perception of needs were entered for physics A level two years and priorities may make it less effective. Central Government makes it very later. With figures like that it is no won- clear how Government money (over 80% of local government revenue) should be der that, if this country goes ahead — as spent. A local authority may, for example, find it difficult to shift resources to I believe it should — with a programme the prevention of health problems, partly because of institutional problems with to build nuclear power stations, we will the National Health Service, but also because there would be vested interests almost certainly have to recruit nuclear opposed to limiting hospital services in order to allow expansion of preventative scientists from France or Korea. medicine. In addition, there are, perhaps, too many authorities and agencies With so little interest in schools it is involved in taking decisions. no wonder that we have seen a 26 per fst journal >> december 2009 >> vol. 20 (2) 21 cities and science money on their fuel bills and create jobs. after only eight years. That is the kind projects that do away with the railings, a The low-carbon economy is one of the of model that we want to spread across bike lane scheme and electric cars and, by few sectors showing growth in spite of Whitehall. I want London to be the elec- 2011, there will be a new prototype bus the downturn. We estimate that there are tric capital of Europe with 100,000 elec- for London. It will be lighter, greener, 10-15,000 jobs and three to four billion tric vehicles on the streets by 2020, some cleaner and will help to solve our emis- pounds of turnover that could be added 25,000 charging posts by 2015 and 1,000 sions problems and the insanity of using to London’s economy, with hard-headed GLA vehicles to go electric by 2015. diesel. practical programmes such as retrofitting I have a simple vision for London — a We need British scientists to solve – that is, lagging. Britain may be lagging cleaner, greener, safer city, with happy these problems and as a technological in science but we will never be lagging in pelotons of cyclists scudding through optimist I believe the opportunities are lagging! We have started on 42 Greater streets dappled with sunlight passing huge. I will always be open to your sug- London Authority (GLA) buildings, with through the canopy of leaves of some gestions and I will encourage you by an estimated saving of £1million a year in of the thousands of trees we plant. We any means that is open to the Mayor of fuel and other costs, meaning a payback also have our wonderful urban realm London ☐ Social sciences in the city: think big Alan Wilson

irst, I would like to add my back- chronically poor towns (these days often ing to the Mayor’s drive for more Sir Alan Wilson FRS seaside towns). Also, how to respond scientists in London. I chair FBA is Professor of to climate change, poor quality housing an organisation, the Science Urban and Regional stock, homelessness, ill-health, crime Community Supporting Education Systems at the Centre and prisons, long-term unemployment, F for Advanced Spatial (SCORE) partnership, that represents ‘failing’ schools and combinations of various learned societies and has exactly Analysis, UCL, and is these problems in what we normally call Chairman of Arts and Humanities the objectives that the Mayor mentioned ‘multiple deprivation’. Research Council. Formerly a theo- at the beginning of his speech. For an example that illustrates these retical physicist, he switched to the My theme here is the role that social kinds of problems, I turn to an Economic social sciences in the 1960s through scientists can play in tackling some of research on the mathematical model- and Social Research Council (ESRC) the big issues facing London — and ling of cities. He became Professor of sponsored study being carried out at other major cities — today. Urban & Regional Geography at the UCL, looking at the students going to Cities obviously need well-informed University of Leeds in 1970 and was universities from different areas. If we plans and evidence-based policies, and Vice-Chancellor of the University feed in the postcodes of students’ homes this is achievable if central government of Leeds from 1991 to 2004. From and their universities, our maps show policies are related to an urban scale. 2004-2006, he was Director-General that the destination universities for stu- My work involves building computer for Higher Education at the (then) dents from Outer London boroughs are models of cities that we can use as a kind Department for Education and Skills. well scattered around the UK. Take the of ‘flight simulator’ for testing different data from inner London and there is a kinds of urban policies. That way we can much less broad geographical spread. understand the basis of the hard prob- The country can only support a certain The same information can be sorted lems and what they are about, and then I number of such hubs which raises the differently using two geo-demographic believe we can make a lot of progress. question: how do we manage that kind categories — one of a prospering popula- Before setting out to try to improve of competition? We would need to tion in London and one characterised as things, it is as well to establish a baseline. identify those cities best suited to the blue-collar workers in London. Looking City leaders should ask themselves some role: those less likely to succeed would at the blue-collar population across the basic questions. What is the city’s role need to identify alternative models more whole of London, we see a dramatically in the national or regional economy? suited to their strengths. different picture, with a notably lower Is it competitive with other cities? Is it proportion of homes sending students prosperous and sustainable? What is its ‘Wicked problems’ to university and a concentration within skills base? Is the population stable or These are all issues on which we can that reduced number on institutions shifting? Is there an adequate housing make a great deal of progress. But closer to home, in the London area. supply? How are we coping with health, we also face what social planners call Of course many of these problems education, policing, telecoms and trans- ‘wicked problems’. These are more dif- are linked. Housing problems are often port issues? ficult to solve because we have only treated simply as a shortage of houses Different cities will have different incomplete, contradictory or inconsist- but there is more to it than that: low- strengths and they need to make the ent information about them. These income problems can become housing most of them. There was a time a intractable problems, which have faced problems. And low income can be the few years ago when it was fashion- cities for decades, include the challenge result of education and skills problems. able to develop IT or biotech clusters. of how to regenerate inner cities and Clearly we need to break the cycle of

22 fst journal >> december 2009 >> vol. 20 (2) cities and science

multiple deprivation. Having more stu- dis c ussion dents in inner city areas taking physics Scientific skills A-levels could — in a roundabout way The public sector badly needs a more systematic approach to policy and to the — be a practical response to the inner design of major projects. Understanding complexity and interrelationships — the city problem. I mentioned earlier as a ‘wicked prob- wider picture — is essential, but there is always the danger of losing the focus lem’ the prisons: this is a mixture of a and concentration necessary to implement a project successfully. The answer cycle of deprivation and the fact that, in lies in seeking, first, to define the problem and only then designing solutions. A prisons, we do not have the scale of men- modelling analysis should illustrate the wider picture; the policy choice based tal health and education facilities needed on it requires the politician to be able to communicate effectively to the public; to tackle the problem from the inside, by implementation requires focus. It is also important to recognise the importance helping offenders change their lives. of media specialists. But in all three stages — definition, policy choice and There are paradoxes in all this. implementation — scientific (whether pure or applied or social) skills are needed. Speaking as Chair of the Arts and There should be more academic input into the public sector, but a significant Humanities Research Council, I would problem is the failure of academics to realise the time scale in which politicians certainly support the development of a need to take action. With this in mind, it is up to academics and city managers cultural environment that might, at first to identify emerging problems and work on them before they become acute. sight, seem to support the better-off population in the cities. But as well as making us more ‘cultured’ and improv- ing our quality of life, cultural develop- new centres like Westfield. You can add sity hospitals), secondary (general hos- ment can, for example, attract inward Stratford to Westfield and then do ‘what pitals) and primary (GP-run) clinics in investment into cities like London rel- if” simulations. You can do that for terms of accessibility and ability to deal ative to competing cities around the different types of consumers, different with emergencies and elective surgery. world. And that can contribute towards types of store, different kinds of goods – solving problems throughout society. and you can break that down into a very, Performance indicators very fine level of detail. We live in a performance-indicator cul- Science With that sort of detailed informa- ture. We publish league tables relating So let me then say something about tion available, the major supermarkets to schools, universities, hospitals and the science. Whatever decision-support and stores can make decisions on multi- so on. What we normally do with these systems, analysis systems and planning million-pound investments with rea- indicators is to focus on an institution systems we use, they have to be under- sonable certainty. The same approach and ask ‘is it really working?’ But you pinned by good intelligence systems. can be used in the public sector to tackle can actually, with the analytical capa- I am a geographer so, obviously, I am the kinds of problems that modern cit- bility that I have been talking about, interested in the development of GIS, ies face. turn that round: ‘Is the service being geographical information systems. Education is one area that throws delivered to the residents of a particular There is much more to GIS than map- up a broad range of issues which can ward?’ It is perfectly possible to have ping. We need to add an analytical capa- be analysed with analogues of the retail a system with a very efficient institu- bility to make GIS intelligent. We need model. A rich database is now poten- tional set up, but one does still does an intelligent GIS — call it a city intel- tially available with detailed informa- not deliver to pockets of the popula- ligence system or a Government intel- tion on the performance of each school. tion. I suspect that dental services ligence system — that integrates the kind Using this data it is possible to address is one example where a ward-by-ward of information available and enhances policy questions such as how to com- analysis might reveal gaps in coverage, it by the use of computer modelling bine secondary schools into ‘federa- though performance for each individual and other such techniques. That is my tions’, sharing resources and talents to practice might appear satisfactory. That dream, a system that could deliver the embrace ‘failing’ schools. Simulations area-based rather than institution-based analytical capability for tackling urban would point to the optimum ways of analysis is typically not done, but it development problems in general, but doing that. could tell us a great deal. particularly those ‘wicked problems’ that Other questions amenable to this Of the other problem areas facing cit- have proved so hard to tackle. sort of number crunching are work- ies, housing is perhaps a difficult one to As an example of the kind of thing ing out what widening the remit of the tackle with these types of analysis. We that can be achieved, take retail. Here higher education sector would mean for can measure the balance between home the private sector has been using sophis- schools, and should all small towns have ownership, private rental market and ticated computer modelling for decades. universities. social housing market, but do we under- A GIS-based model covering London’s Health is also a fertile ground for the stand the balance between these sectors 620-plus wards and 220 retail centres, scientific approach. It is a sector that and the relationship to other issues like intelligently programmed and with the is data-rich, but the data are rather dis- employment? And where does home- right data input, can tell you just about all organised. GIS approaches, combined lessness fit in? you could want to know about the flow of with patient data, are clearly well suited I have argued the case for a scien- money and people from any one of those to revealing more about the geography tific approach to the analysis of a city’s wards to any one of those retail centres. of general practice delivery, as well as problems. Yet at the moment I do You can look at the detailed flows related topics such as the value of poly- not see any city intelligence system or into any one centre, factoring in major clinics, the hierarchy of tertiary (univer- Government intelligence system that fst journal >> december 2009 >> vol. 20 (2) 23 cities and science

dis c ussion in quantitative social science that would A Victorian legacy actually drive such a programme across the country. Not only are the built structures in London predominantly Victorian, but so are How can we develop a good city the institutional structures of local and central Government. Does the structure intelligence system? Ultimately, it is not of Government departments recognise the cross-cutting problems of modern soci- simply a resources issue. A tremendous ety? Is it necessary to have 150-plus local authorities and innumerable quangos amount of Government resources go and agencies all working to different remits and failing to share data? In many into this already, but we should not try cases, it is not the scientific resources that are lacking, but the failure to use to solve one problem 160 times in 160- them efficiently while repeating the same exercise in different contexts. plus local authorities: one overarching ‘national government net’, rather than many local ones, would be the answer. can actually handle the kind of informa- local government of course. But as Finally, back to the costs. We are tion in the way that I have been talking Boris Johnson pointed out, it can be used to the idea of ‘big science’ — main- about: nothing that combines data on expensive. And it can take time which ly elementary particle physics accelera- each problem area with GIS information is a serious problem when, typically, tors like CERN – as something that we and other relevant databases. Government wants answers quickly. I should support. Yet I have argued for There are some very good computer believe we need to investment in city decades that the sort of social science model applications available; I mentioned intelligence systems throughout the I have been discussing ought to be the way that the private sector has applied country, and only then can responses treated as ‘big science’. The investment these in the retail sector. This technology come quickly: with these resources in could be done almost at once and then has been extensively applied in the public place we would not be starting from there would be a national capability sector in transport planning. scratch when tackling individual prob- for delivering into different city areas. There are examples of successful lems as they arise. What I think is needed is a ‘CERN for application of scientific principles in Yet we simply do not have the capacity cities’. ☐ Science and technology in local government Tim Allen

he challenges facing local plan- – with increasingly different values and ners and local government Professor Tim Allen is expectations – for such ‘top-down’ poli- today are complex, and we need Director for Analysis cies to be viable. to make the most of scientific and Research for the For example, a rapidly aging popula- methods if we are to overcome them. My Local Government tion profile will place huge demands on T Association. He was definition of ‘science’ for this purpose is our resources. Despite the fact that peo- a broad one that embraces pure scien- previously at the ple are living for longer more healthily, tific endeavour, but focuses mainly on Department for Environment, Food the number of people aged 85 and over and Rural Affairs (Defra) work- ‘usable’ science and technology — and is projected to double in less than 20 ing on strategy and research and social science too. Overall, more Joseph years. We therefore need technological headed Corporate Strategy, Research Chamberlain than Albert Einstein: the and Corporate Governance for the solutions that might enable our elderly former, as mayor of Birmingham dur- former Countryside Agency He has people to live longer in their own homes ing the late nineteenth century, applied also been Regional Director East and rather than in care. This could include the science and technology of the day to West Midlands for the Countryside more pervasive use of diagnostics that improve living conditions and health for Commission, leading work on envi- link homes to the GP’s surgery in order the city’s population. ronmental regeneration. to give an early warning of problems such It is worth reflecting on the con- as high blood pressure: in this way we text within which city managers, and can pre-empt problems rather than just local government more widely, operates. working on farms to foster radically new respond to them. We are incrementally dismantling the practices. It worked and food produc- Not only do we have an aging popula- State as designed during the 1930s and tion boomed even if the policy failed to tion profile but also a fertility rate higher 1940s. And it certainly was a ‘designed’ respond to the environmental considera- than at any time since 1972, but with State. The agriculture programme intro- tions that emerged subsequently. the additional school-age population duced after the Second World War is a We do not seem able to adopt this unevenly distributed across the country good example. It set out to industrialise approach in the 21st century and perhaps and even within cities. How do public our agriculture with food production as lack the confidence to do so. Perhaps it services respond after years of reducing the priority. It took a comprehensive would not be workable. We cannot turn school places in response to an expecta- approach that embraced technology and the clock back: society is now too com- tion of fewer school-aged children? science (both pure and applied) at its plex and changes too rapidly, it is genera- So, societal change challenges those core and took them directly to the people tionally and geographically too diverse responsible for local public services: they

24 fst journal >> december 2009 >> vol. 20 (2) cities and science need a sophisticated understanding of the is with flooding. Following Tewkesbury, need to devise a sophisticated model of current and expected nature of change, Hull and other recent flooding incidents, sustainable development by developing and the best that science and technol- there is an expectation that new legisla- ‘green’ business models, energy efficien- ogy can offer, to help them respond. In tion will place a duty on councils to cy, carbon dioxide and waste, reducing short, this extends the debate beyond deal with surface water flooding risk. pollution, and sustainable housing. areas such as climate change where the Realistically, it seems unlikely that suf- Yet, a ‘scientific’ approach can still scientific dimension is more obviously ficient funding will be available to tackle involve the simplest of technologies. important. the problem everywhere, so how do peo- Some years ago, one of our member coun- ple make responsible decisions about cils became a unitary authority. They Resource issues where to invest, and where not? inherited, amongst other things, respon- The economic context for this is really Part of the answer is to understand sibilities for running transport services. important, and is certainly exercising the how technology can point us to the One problem they identified was that Local Government Association, which is cheapest and best solutions. And we disabled people could be empowered if a cross-party organisation. Nationally, need the best and most sophisticated pre- bus services were made readily acces- we face major problems over resourc- dictive science to help us understand and sible. They realised that Greenwich had es – repaying debt, balancing capital assess the risk, and to facilitate decisions already made progress in that area: what investment against revenue demands and about where to deploy available funds to Greenwich had done was to consult a ensuring that investment and lifestyles best effect. German academic who was, believe it or remain sustainable. Increasingly, local In tackling such complex problems not, an expert in kerbstones. A simple authorities need to frame policies in the we may be able to learn from, and trans- piece of technology transfer, using the light of local conditions and aspirations, late, approaches used by scientists when right kind of kerbstones, freed people in enabling and helping citizens to make tackling complexity. If we cannot create wheelchairs to get from their homes to their own choices about risk, cost and national ‘master’ designs that parallel the the services they needed. That was bril- access to social and other services. 20th century approach, then maybe a liant: not fancy technology but simple This means that the public sector is ‘systems’ approach to tackling complex- and appropriate. becoming more of a facilitator than pro- ity offers a way of approaching problems vider of many services – outside a core like flooding. A coordinated approach of remaining universal entitlements and The point is that a solution had already those that are offered to specific groups The systems approach been found to a problem, and rather in particular need. This increasingly A systems approach to handling waste, than having to solve the problem again means that authorities need a sophisti- for instance, would involve more than – perhaps using much more elaborate cated understanding of conditions local- dumping waste into holes in the ground, and expensive methods – a coordinated ly, and need to be able to provide much getting taxed for it and doing a little approach enabled access to the already more accurate and real-time information recycling. It would encompass reuse available technology. so that individuals can make informed with new approaches to reusing materials In conclusion, the public services sec- decisions for themselves and anticipate, and sustaining products in use for longer tor, which is already under pressure, will avoid or mitigate the consequences. before they become waste. now be even more challenged in resource Clearly to achieve this shift involves Waste and recycling feature in the terms. As we seek new solutions, there good communications between the State, Government’s environmental targets for is a huge opportunity for science and in whatever guise, and the public. In local government. Other targets cover technology to come up with some of this context, today’s politicians (certainly disparate topics such as: carbon dioxide the answers – helping us do things more those that I work with in local gov- reduction from local authority opera- cheaply, more effectively, or in different ernment) are increasingly concerned to tions; per capita carbon dioxide emis- ways. We must build new partnerships reach out to their electorates and com- sions in the local authority area; tackling between the public services and science munities, and to exploit 21st century fuel poverty; adapting to climate change; and technology: the Local Authorities communications — Facebook, Twitter reducing nitrogen oxides and primary Research Council Initiative is one forum and the rest. There is plenty of potential PM10 particulate emissions through where we are taking tentative steps to re- for science and technology to enable bet- local authority’s estate and operations; building that relationship. ter communication. improving street and environmental It is time to take the Joseph There are certain dimensions of tech- cleanliness; and improving local biodi- Chamberlain approach, and to rebuild nology – geographic information sys- versity through active management of the confidence in science and technology tems for instance – that can be key to local sites. that our Victorian forebears exemplified. people accessing services more easily For some of these targets to be We need to apply the latest advances in and at lower cost, without going through achieved, a major scientific input is technology to everyday problems. So traditional channels into a council or a required – in matters of carbon dioxide it is interesting that Chamberlain’s city public service. There are huge opportu- reduction and biodiversity, for instance. is now interested in establishing a cen- nities here. The best councils are doing And in others, the more general benefits tre of excellence in fuel cell technology, this already, and doing it in an exem- of a systems approach would be consid- drawing upon their tradition in manu- plary fashion, but again uptake is not erable. facturing and the motor industry. Fuel consistent and there are opportunities And we need direct scientific input cell technology may or may not be the to make much better use of the available into one of the major challenges we future, but it is one possible future with technologies. face: how to grow green economies with- the potential to generate a 21st century One area where technologies can help out compromising their ‘greenness’. We version of past glories. ☐ fst journal >> december 2009 >> vol. 20 (2) 25 financial models

What was the role of mathematical modelling in creating the circumstances leading to the credit crunch – and are there lessons to be learned? This was the subject of a dinner/discussion at the Royal Society on 10 June 2009. The role of models in directing economic activity John Kay he principal risk management used to assess the security of these pack- tools used by the world’s major Professor John Kay ages and to attach ratings to them were banks and, crucially, imposed on FBA is one of Britain’s fundamentally the same type as those them by the regulatory machine, leading economists, has used by the banks in terms of ‘value at Tare based on a structure called ‘Value at held chairs at Oxford, risk’. As banks sold ever-more complicat- Risk Modelling’. It was developed in the London Business School ed versions of these packages, they hired early 1990s in JP Morgan, the American and the London School people who were familiar with the models bank. The basis of this modelling was that of Economics, and writes a weekly the rating agencies used. One result was a number of discrete asset classes (which column in the Financial Times. He that banks were able to ‘reverse-engineer’ is the author of The Truth about might be loans, securities or mortgages) the packages, designing them to meet Markets, which anticipated the were defined and then a matrix construct- the rating agencies’ criteria. This was present crisis, and The Long and the ed, based on historical estimates of the Short of It, which describes it. all part of the extraordinary process by variance of returns on each kind of asset which bundles of rather ropey mortgages and the covariance between them. This could receive the same security grading as variance/covariance matrix was used to times would hold when markets were bonds issued by the US Treasury! calculate the ‘value at risk’: it gave a value subject to extreme strain and turbulence. So there are two important areas in for the amount you might lose, let us say, Rating agencies also used financial which financial modelling contributed to on one day in a thousand. models. These agencies grade securities, what we recognise in the current crisis. The models depended on two groups particularly bonds; they examine the cred- Models gave banks and regulators false of assumptions. One was that the data itworthiness of governments and compa- reassurance about the effectiveness of were essentially normally distributed. The nies and assign their bonds a rating. The their internal risk management processes: second was that the data, and particularly first four categories for the security of and through rating agencies they under- the covariances between them, were sta- bonds are known as ‘investment grade’, the pinned the processes of securitisation ble over time. These twin assumptions lower ones are commonly called ‘junk’. and regulatory arbitrage, which allowed are still described as the ‘centre piece’ of Rating agencies expanded their role the appearance of profits generated by this technique. from the late 1980s. First, the assets held complex balance sheets. by banks and other institutions attract- This all came unstuck in the ‘cred- Problems with the model ed different risk ratings depending on it crunch’ starting in July/August 2007. On an everyday basis, these models worked the grading they received from the rat- There was suddenly increased uncertain- pretty well. They described the normal ing agencies. Second, through a process ty about the value of assets that banks experience of banks over a period of years. called ‘securitisation’, banks would take held on their books. Uncertainty spread There were, however, a couple of problems packages of loans and sell these off, or sell to the value of the banks holding these which were really evident from an early them in tranches. Rating agencies found assets and thence to a whole variety of stage. One concerned the normality of the a new job in terms of rating the synthetic other assets around the world. distribution. Although speculative market securities that were created by the activi- So that is how financial modelling is price changes do very often follow a nor- ties of banks. associated with our current crisis and our mal distribution, these distributions have The models which rating agencies current problems. Now this is not the what people describe as ‘fat tails’ – there are many more extreme events (and par- discussion ticularly extreme downward events) than Problems with the models the normal distribution would predict. The academic financial mathematics community has consistently and over a long The other issue was the stability of the period warned of problems, in particular the assumption of normality. Indeed, underlying variance/covariance matrix. Almost necessarily, the matrix was the FSA had been well aware of the academic debates over the appropriateness derived from a period of relative stabil- of the models being used, and had at times raised these issues in regulatory dis- ity – because that was characteristic of cussion with the sector. But what were these institutions to do with this knowl- the period from which the data were edge that the modelling might be problematical? The hard fact is that, in spite collected. The Asian crisis of 1997 which of such theoretical arguments, there has been a powerful business judgment spread across the world’s financial mar- overlay: the approach was generating very substantial profits and there was no kets raised the question whether covari- incentive to change it. ance assumptions which held in ordinary

26 fst journal >> december 2009 >> vol. 20 (2) financial models first time that people have talked about about the relation of the elements of the a purchaser to recognise that he was get- deficiencies in these models. Should model to the particular world in question. ting one. we then elaborate these models to make In almost all of the situations we confront Now if a proportion of the car stock them, in a obvious sense, more realistic? – in business, economics, finance and were lemons, the second-hand price of I am sceptical about that. Take a simple, politics – our judgements about how we cars should reflect that. However, it but very different problem: you wait for should use models are a combination of would not then be attractive for people a bus at the bus stop, you know that they the ‘in-model’ risk determined by the with good cars to put them on the mar- are due to arrive every 10 minutes, you mathematical structures we have created ket, although it would be very attractive know the frequency, but you do not know and the ‘off-model’ risk that is created by for people who owned lemons. Thus, the exact schedule. A simple model for our uncertainties to how well the model the proportion of lemons on the used- this kind of situation, is to assume that actually applies to the world it seeks to car forecourt would be higher than in buses arrive at a fixed 10 minute interval, describe. the population as a whole – so the price and the longer you wait for a bus, the of used cars would fall still further and higher the probability that the bus would Metaphors that would accelerate the process. Once arrive in the next minute. That leads us, I think, to a fundamental people start to recognise this, the prices Unfortunately, we do not fully believe observation about the way in which one fall until one gets to the point where the that kind of model. There comes a time can use models: we are looking for mod- market simply dries up. That is, indeed, when we abandon the wait for the bus els that are useful and are illuminating what happened to the market for complex and decide to make the journey in some rather than models which are true. The securities after 2007. other way – abandoning the model as well model of the arrival of buses is neither a The Akerlof model has nothing to do because it does not seem to work on this true model nor a false one; it is useful in with the used car market; it is a metaphor occasion. certain situations but sometimes we adopt and one you can apply quite effectively to We could build in all manner of other other models to complete our journey. situations like the market in toxic assets. factors, possible events, etc, to make the An economist called George Akerlof This is, I believe, the role of models in model reflect the real world better. I do illustrated a particular process by refer- economics. They are metaphors; some of not have to spell out that such a model is ence to what a ‘market for lemons’. A them are mathematical metaphors, some not imaginable and indeed that there will ‘lemon’ was a car that had been made of them are literary metaphors. Some still be factors which you cannot conceiv- on a Friday afternoon, when people are more powerful than others. It is not, ably know about. had come back from the pub, so it was however, meaningful to ask whether they There are two different sources of regularly developed unexplained faults. are true or not. We should have a mental uncertainty about the probabilities in Akerlof suggested that the characteristics toolkit of these and it is a matter of judge- models. One is the stochastic element of a lemon were that it was relatively easy ment and skill to decide which particular built into the model you are computing, for the owner to recognise that he had tools to take from the toolkit at any par- the other is the underlying uncertainty bought one, but it was quite difficult for ticular time. ☐ The problems of mathematical modelling Paul Sharma

hy is the use of math- There is no way of avoiding decision- Paul Sharma is Director, ematical models within making, despite the presence of uncer- Wholesale Prudential the financial services sec- tainty. The question is, how does one Policy, at the Financial tor particularly problem- arrive at those decisions? In today’s world Services Authority. Watical compared to, for example, the use of finance, the answer cannot be purely Prior to his appoint- of mathematical models in the study of intuitive: it cannot be purely a matter of ment, he was the Head of Risk physical phenomena (floods, or earth- judgement. In fact, there is a significant Review at the FSA. He joined quakes, etc)? The first remark I want to body of evidence to suggest that the the FSA at its inception from the make, though, is that there is probably no widespread use of ‘naked’ judgement is Insurance Directorate, where he alternative. There is probably no realistic itself deeply problematical. If you were to was Deputy Director of Insurance alternative to the widespread use of math- resolve questions such as how much capi- Supervision. He is an Honorary ematical models, of mathematical analy- tal does a bank need purely by unaided Fellow of the Faculty of Actuaries sis, or if you prefer ‘quantitative’ analysis judgement there would be questions of and a chartered accountant. for financial services. At some point, the competitive fairness and of due process more subtle forms of knowledge need to of law. The first reason is what I call a ‘self- be rendered into what are quite often yes/ There is no realistic alternative to referential’ problem. With mathemati- no decisions or decisions whose outcome a significant reliance being placed on cal modelling of, say, the frequency of must be a specific number. A bank must mathematical models in regulatory and hurricanes or the frequency or severity decide how much capital it needs to hold management decision-making within the of earthquakes, no matter how good my and that requires a decision that is a sin- financial services sector. But these mod- model gets it is not going to change the gle number. A trader must decide ‘do I els themselves are very problematical, for thing I am seeking to measure. A math- buy or sell this security?’ a number of reasons. ematical model assessing credit risk, on fst journal >> december 2009 >> vol. 20 (2) 27 financial models

the other hand, may affect my behaviour discussion in the granting of credit. My change of Models of real life? behaviour affects the behaviour of the peo- Any ambition to add further refinement and complexity to mathematical models ple who are seeking credit. In other words, of financial systems is misguided since they can never fully reflect reality. There the very presence of my model affects the thing that I am seeking to measure. is a difference between modelling the natural world and modelling human behav- Traders adopt and apply new model- iour in the social and economic sciences. The question remains, though: if not ling approaches, but so does everybody modelling, then what? The most appropriate answer seems to be, a combination else as word spreads around the market. of: better understanding of complex systems behaviour and behaviourally-based In other words, I have the problem of models; simplification and abstraction to the essentials; with the addition of the modelling the behaviour of people who essential element of practical experience and judgement. are using models. So as soon as you begin to model the financial services world, you change the thing you are modelling. tional risk. Banks and insurance compa- problem of data – and also the problem of Another reason why applying math- nies tend to take one of two approaches. the preferences of the individuals who are ematical models to financial services is dif- There is the approach which says that creating the models. Research shows that ficult, is the extreme event problem. Now an extreme operational risk loss is the it is really the comparative lack of data modelling extreme events in financial serv- consequence of the simultaneous failure that is the main limiting factor prevent- ices does not make us unique. People who of a number of different controls. The ing models from being better than they study floods model extreme events, peo- failure of any one is an ‘ordinary’ problem are. So, therefore, this is where resources ple who study hurricanes model extreme event and therefore the ‘extreme’ problem should be directed. events. However, in the financial services event is the simultaneity of a number of world the extreme event is not simply a ‘ordinary’ rare failures. People who take The attraction of mathematics larger version of the normal event. that point of view of course consider However, the people creating the models themselves to be ‘data-rich’ because they did not get their PhD in mathematics The physical world have data about these ‘ordinary’ semi- and join this particular financial services There are instances in the physical world rare control failures: they can infer from company in order to engage in laborious where the same problem arises. Suppose I these semi-rare ordinary control failures data mining; they enjoy the mathematics were doing mathematical modelling of wave what the probabilities and severities are of and making more and more sophisti- heights and the frequency of large waves, their coincidence leading to a much more cated models. Therefore the resources and I collected a large amount of informa- severe control failure. came to be disproportionately channelled tion. No amount of data, or data analysis, Then there are people who say ‘no, the into increasing the sophistication of the would give me any real help in modelling causal mechanism for my medium and model, often where the benefit (given tsunamis because the causal process for small size failures (in terms of operational the data limitations) is marginal. The ordinary tidal waves is quite different from risk) is quite different from the causal data limitations are partly simple data that of a tsunami. Likewise one suspects mechanism for the extreme failures’. No cleanliness problems and they are partly (one does not fully know) that while we amount of looking at market to market inherent because the data needed is the have a lot of data about normal behav- mis-pricing data would tell me my ‘Nick kind that informs you about these rare, iour, including ‘large’ normal behaviour, Leeson risk’. extreme events. the ‘killer’ events represent a different kind Now while one can discuss who is cor- There are ways of proxying the rare, of occurrence and have a different causal rect in calculating operational risk, I think extreme events, though, and there are process behind them. That makes access- the more one looks at extreme market creative ways of looking for proxy data, ing that kind of event, by a mathematical dislocations, the more one sees that this is but that is a relatively neglected subject model, particularly problematical. not simply an extreme event of the ordi- compared with ways of making mod- One can see this illustrated in the nary way in which the markets behave. els more mathematically sophisticated. models that a number of people use in The third reason spans beyond the There remains a certain lack of interest in the financial services world for opera- financial services sector and that is the addressing the data problem. ☐ Did over-reliance on mathematics create the financial crisis? David Hand

he Turner Review1 enumerates been much greater mathematical complex- mistakes in the deductive process but here, the events leading up to the crisis. ity in the tools for modelling and pricing since so many people were using and had These produced an environment financial risk. checked the deductions, it is essentially stimulating financial innovation Was the mathematics wrong? The short inconceivable that the mathematics was Tand a huge growth in securitised credit answer is ‘no’. Mathematics is concerned wrong. Yet, while the deductive mathemat- instruments and derivatives. And this is with deducing the consequences of a given ics underlying a measure may be fine, the where the mathematics comes in: there has set of initial premises. It is possible to make assumptions on which the mathematics is

28 fst journal >> december 2009 >> vol. 20 (2) financial models built may not be so robust. higher echelons of management. Perhaps The notion that sophisticated securitised Professor David Hand the phrase ‘naive belief’ might be better credit instruments improve financial stabil- FBA is President of than over-reliance. The only defence I can ity appears to have been a fundamental the Royal Statistical think of, and poor one at that, is that the Society, as well as premise, a core belief, but with little or no mathematical models were developed after Head of the Statistics supporting empirical evidence. Similarly, the senior bankers had begun their careers Section, Department of there appears to have been an assump- Mathematics at Imperial College, and were already in senior posts. This at tion that natural selection in the financial and Head of the Mathematics in least explains, though it does not justify, markets would mean that innovations, and Banking and Finance Programme, why they did not understand what they in particular mathematical innovations, Institute for Mathematical Sciences, were doing. would be beneficial, since those that did Imperial College. He has broad One might ask, were managers in fact not work would be selected out. research interests, including multi- given warnings on which they failed to act? In fact, anyone familiar with evolution- variate statistics, classification meth- Well, if a given strategy appears to be earn- ary processes knows that evolution can ods, pattern detection, the interface ing large sums of money, and in particular lead in unpredictable directions, especially between statistics and computing, large sums of money for you, then you in complex environments. In any case, and the foundations of statistics might not be inclined to look too rigor- when we use the term ‘beneficial’ we mean ously at criticisms of it. This is, perhaps, a beneficial to the economy, and the people natural human trait: along with greed, an in it. Yet evolution does not tend towards here is that we are really trying to model unwillingness to believe bad news, and a a pre-set goal. human behaviour. And humans can be tendency to follow the herd. A familiar premise of the mathematical unpredictable. They can even be perverse. There have been many financial crises models was that assets could be sold rap- When dealing with human beings we in the past. One has to ask whether the idly and easily if necessary. But, as we saw are not merely dealing with intrinsic ran- causes of this one are different in kind. It some years ago, with the collapse of Long domness – as we might in quantum phys- is certainly true that mathematical financial Term Capital Management, this is not true ics. When we study human beings, we innovations played a role. It is also true if everyone tries to do it simultaneously. certainly have intrinsic randomness but that, had people been more aggressively At a lower level, there are also criticisms we have other factors too – human moti- warned about their limitations, had they lis- of things such as assumed distributional vations, intransigence, greed, and so on. tened and taken those warnings on board, forms, and the independence of events and Electrons may have their uncertainties, but then things might well have turned out dif- players. As statisticians know very well, nor- they are not greedy. ferently. But for that to happen, many other mal distributions do not occur in nature. That brings me to another question. things needed to be done differently too. Was it in fact inappropriate mathematics? At bottom, can I really argue that one Useful tools Models such as pricing models are fine, cannot blame the mathematicians? They The eminent statistician George Box said in isolation, and at a low level. Yet difficul- built and applied the tools, so surely they that ‘all models are wrong, but some are ties can arise when they are put together should share the responsibility? This is, useful’. This means that one should always and embedded in a larger system. In such of course, well-worn ethical ground, hav- have a healthy scepticism about models. a situation a model of the entire complex ing been covered in other contexts, such Furthermore this scepticism should be system, and not of merely a tiny part of it, is as the relation between nuclear physicists greater for some usages: consideration of needed – an econometric model, in fact. and the atomic bomb. I believe that it is tail areas of distributions should engender A concrete example of this sort of limi- nonsensical to say that everyone should more scepticism than results based on the tation is in automated trading systems, share the blame. In a mugging, who bears central limit theorem. To put it bluntly, one which all react the same way to given mar- the responsibility: the man who wields should avoid the hubris of assuming that ket conditions, as we discovered in 1987. the knife, the owner of the cutlery factory one’s models are correct. The correlation between their behaviour which made it, the factory’s receptionist? The late Leo Breiman said “when a induces a massive swing in one direction I think it would be a terribly retrograde model is fit to data to draw quantitative or another – a run on a stock or a drying step if we stepped back from the use of conclusions ... the conclusions are about up of liquidity. quantitative tools. These kinds of tools the model’s mechanism, and not about have revolutionised so many aspects of nature’s mechanism ... It follows that if the Over-reliance? life in general and have had an immense model is a poor emulation of nature, the If there was an over-reliance on mathemat- impact for good. However, the mathemati- conclusions may be wrong.” My own view ical models it was placed on them by the cal tools have to be used in a proper con- text. Putting the ‘quants’ in a back room,

discussion instructing them to work their mathemati- Mathematics and statistics cal magic, and then blindly applying the results to the outside world without consid- There may be additional problems with the use of continuous variables to repre- ering the wider implications is a recipe for sent discrete price movements. It is essential to gather data of extreme events, disaster. And we now have the product of otherwise the modelling of risk premiums will be based on periods of time that that recipe. ☐ do not reflect what is happening today, an example being the modelling of risk 1. The Turner Review: www.fsa.gov.uk/Pages/ premiums based on mortgage history that only went back to the 1990s, a period Library/Corporate/turner/index.shtml of growth not decline in prices. Many such issues are more in the domain of the The full version of this talk can be found on statistician than the mathematician, though. the Foundation website at: www.foundation.org.uk fst journal >> december 2009 >> vol. 20 (2) 29 Lord Lloyd of Kilgerran Lecture

The Lord Lloyd of Kilgerran Lecture was given by Professor David Delpy, the Chief Executive of the Engineering and Physical Sciences Research Council (EPSRC), at a meeting on 10 December 2008. Lighting up the brain

elivering the Lord Lloyd of be used for muscle exercise studies, which broadly around and outside one’s own nar- Kilgerran Lecture – through could be valuable, for example, in Olympic row discipline. The teams he had worked which the Foundation recog- training. Professor Delpy noted that Duke with were interdisciplinary and, although nises individuals who have University in the USA, where some of the focussed and led, had been given the oppor- Dapplied science and technology for the original research had taken place, had tunity and discretion to develop their own benefit of society – Professor David Delpy patented work done there but these pat- ideas. Reading outside a subject was the outlined the 25 year path that had led from ents had not been exploited. This meant best way of discovering insights which oth- an initial understanding of the transparen- that development had been hindered in ers had and which could have benefit for cy of human tissue and the way it respond- the USA, where the patents applied, to the one’s own project. It was, he said, always ed to light, to the development of medical benefit of EU and other countries where the journal ‘next door to the one that you instrumentation which enabled doctors to the patents did not apply. ought to be reading’ that contained the measure the patterns of oxygenation in the ideas which might be of real value. brains of new-born babies. Reacting to stimuli He showed the differential effects of Further developments had led to the Long term commitment the absorption of light by oxygenated and ability to show activity in the brain In the discussion that followed, a number deoxygenated haemoglobin. With infra- which enabled researchers and prac- of speakers expressed their apprecia- red light it was possible to see the pattern titioners to better understand the tion of the willingness of Hamamatsu of blood vessels beneath the surface skin brain’s reaction to stimulus or pain in a to undertake long term funding for the so that there could for example be accu- patient who would not keep still or be project, compared with the short term rate insertion of a needle into veins. restrained. Professor Delpy described perspective of some UK companies. This technique was extended by the how the light followed random paths Was this the result of differing cultural development of infrared spectroscopy as it passed through brain tissue. perspectives, they wondered? It was machines which enabled oxygen levels in Sophisticated analysis of the detected noted that in the USA, the UK and other the blood of baby brains to be observed in signal enabled brain features to be EU countries there was an emphasis on real time. After initial funding through observed. The techniques had value not returns within a shorter time period Research Councils and Vickers Medical, only in the brain, but in other parts of than in Japan, where there was a social long-term funding had been secured the body such as the breast, where the and corporate tradition of building up through a Japanese company, Hamamatsu results of treatment of tumours could be new industries over the long term. Yet Photonics. observed over time without invasive sur- Japanese practice seems now to be com- Infrared spectroscopy could now gery or high doses of X-rays. ing closer to the Western norm. show changes in oxygenation and indeed He drew two important lessons from Concern was also expressed about the diminishing oxygenation in relation to the development process – first, the impor- impact of over-zealous protection of intel- breathing and heart beats. It could also tance of team working, and second, reading lectual property (IP). Professor Delpy felt that there was a real danger in universi- ties being too keen on protecting their 5 Laser absorption and tissue penetration research through IP; if they did, product 10 development could be impeded. There 4 10 was no need to worry about whether a good idea would be picked up if not 3 Melanin 10 protected, nor that the prizes would go to 2 others than the originator of the research. 10 Commercial success came through prod- 1 Water 10 Haemoglobin uct development and the application of 0 know-how. That is what academics must 10 understand and if they wish to share in –1 Protein 10 the results they must themselves under- –2 stand how commercial products were 10 –3 developed. Absorption coefficient (1/cm) 10 Scatter The Lord Lloyd of Kilgerran Lecture –4 is given annually and nominations 10 are welcomed by the Foundation. For –1 110 more information, please contact the Wavelength (microns) Foundation for Science and Technology via email at [email protected], or The absorption of light by major tissue chromophores. by telephone on 020 7321 2220. ☐

30 fst journal >> december 2009 >> vol. 20 (2) comment Reasoned advice for policy makers Archimedes

principal aim of the Foundation tant than the 50 per cent who do? Within through the market for graduates, rather dinner/discussions is to debate, tertiary education, should higher educa- than through some decisions about social and perhaps influence, issues tion (universities) be the priority and need, was not challenged. Yes, tuition where major policy decisions further education (colleges) be cut? If so fees should be raised, but on what princi- Aare in the offing. The choice of subject for how are we going to enhance the tech- ple, and how and where, was left in limbo. the 27 June meeting ‘The Future of Higher nical and vocational skills we so badly Yet, overall, too many speakers thought Education’ (see pages 5-8) was, therefore need? If universities are to suffer, should that reference to the excellence of the UK well chosen. We all know that Government research be preserved at all costs, and the science achievement, the poor standard spending is going to be savagely curtailed; savings fall on teaching? Should certain of schools, and the importance of univer- it is inconceivable that the education budg- forms of teaching or research suffer in sities’ independence was enough. But it et will not suffer; and popular pressure will order to preserve spending on others? does not help policy makers to choose. want to see politicians preserve spend- It is not the fault of the presenters if Perhaps this audience has an excuse. If ing on primary and secondary education such issues are not discussed. Inevitably the Prime Minister will not acknowledge rather than on the tertiary sector. So what they will be constrained by official cau- that severe cuts will be needed in public messages would policy makers take away tion, or the need to press on one particu- services, including education, why should for the 27 June discussion that would help lar issue. If one of them does put forward they consider seriously policies for such them frame policies? a contentious proposal, it needs to be cuts? However, I believe the audience at Disappointingly few. If I had been a challenged. It is for the audience in the Foundation events is too sophisticated to policy adviser wondering how to cope hall, who are invited for their knowledge accept such fantasies. They should look with a severe restriction on educational and wide range of interests, to make the harder at the policies which fiscal and tax spending, I would have hoped to have running. To some extent it did; there pressures will force to be considered, and gained some insights into both priorities were different views on how many insti- help policy makers to understand how and sacrifices. For example, the standard tutions should do research if excellence such policies can be implemented with of students leaving schools is appalling; was to be achieved; or on whether the least damage. ☐ is it therefore a priority to preserve or balance between access and excellence enhance school spending, at the possible was right. Archimedes is an experienced observer of expense of tertiary education? Are the Yes, institutions should be more the evolution of public policy who needs of the 50 per cent who do not have diverse; but Sir John Chisholm’s view contributes occasional comments on tertiary education more, or less, impor- that the diversity should come about topical issues.

events

Recent dinner/discussions organised by the Foundation for Science and Technology are listed below. Summaries of these and other events – as well as the presentations of the speakers – can be found on the Foundation website at: www.foundation.org.uk

Christmas Reception Systems Engineering, Department The Wellcome Trust and member of the 9 December 2009 of Bioengineering, Senior Dean and Prime Ministe’s Council for Science and Director of the Graduate School of Technology Speaker — David Willetts MP for Engineering and Physical Science, Professor Brian Collins FREng FIET, Havant and Shadow Minister for Imperial College London Chief Scientific Adviser, Department Universities and Skills Professor Pamela A Silver, Director, for Business, Innovation and Skills and Respondents — Professor Alan Thorpe, Harvard University Graduate Program in Department for Transport Chair Research Councils UK and Systems Biology, Department of Systems Professor Tim Broyd FREng, Group Chief Executive, Natural Environment Biology, Harvard University Technology Director, Halcrow Group Research Council Professor Nikolas Rose, Director, and Chair, Policy Panel, Institution of Sir Anthony Cleaver, Chairman, BIOS Research Centre for the study of Civil Engineers EngineeringUK Bioscience, Biomedicine, Biotechnology and Society, London School of The impact of climate change Economics and Politics on Scotland Synthetic Biology — a threat 29 October 2009 or an opportunity? A national infrastructure for 18 November 2009 the 21st Century Professor Geoffrey Boulton OBE FRS 11 November 2009 FRSE, General Secretary, The Royal Professor Richard Kitney OBE Society of Edinburgh, and Member PM’s FREng, Professor of Biomedical Sir Mark Walport FMedSci, Director, Council for Science and Technology fst journal >> december 2009 >> vol. 20 (2) 31 events

Professor John Mitchell OBE FRS, Executive, Higher Education Funding How fast can the rate of Director Climate Science, The Met Council for England change of technology be Office Professor Michael Arthur FMedSci, Vice accelerated to reduce carbon Dr Andrew Dlugolecki, Visiting Fellow, Chancellor, University of Leeds emissions from transport? Tyndall Centre, University of East Anglia Sir John Chisholm FREng, Chairman, 29 April 2009 and Chartered Insurance Institute QinetiQ and Chair, Medical Research Council Professor Brian Collins FIET, Chief The Digital Britain Report Scientific Adviser, Department for - keeping up with the Financial models — key tools Transport and Department for Business, competition from other for risk analysis or the vector Enterprise and Regulatory Reform nations of global financial collapse? Professor Dan Sperling, Director, 14 October 2009 10 June 2009 Institute for Transportation Studies, University of California, Davis Dominic Morris CBE, Strategic Professor John Kay FBA, Writer and Professor Neville Jackson, Group Director, Digital Britain, Departments Columnist for the Financial Times Technical Director, Ricardo for Business, Innovation and Skills, and Paul Sharma, Director, Wholesale Professor Julia King CBE FREng, Chair, Culture, Media and Sport Prudential Policy, Financial Services King Report on Low Carbon Cars, Vice- Professor Dame Wendy Hall DBE Authority Chancellor, Aston University FRS FREng, President, Association of Professor David J. Hand FBA, Computer Machinery (ACM), School President, The Royal Statistical Society Raising skills in the UK of Electronics and Computer Science, and Head of Statistics, Imperial College workforce — mental capital, Southampton University London skills and wellbeing Dr Alfred Spector, Vice President, 1 April 2009 Research and Special Initiatives, Google Erik Huggers, Director, Future Media Can city managers make Professor Tom Kirkwood CBE, Institute and Technology, BBC better use of science? for Ageing and Health, Newcastle University 3 June 2009 Lord Layard FBA, Centre for Economic Beyond the recession - what Performance, London School of can science and innovation Boris Johnson, Mayor of London Economics and Political Science partnerships do for you? Sir Alan Wilson FRS FBA, Centre for The Rt Hon John Denham MP, 7 October 2009 Spatial Analysis, UCL and Chairman, Secretary of State, Department for Arts and Humanities Research Coun Innovation, Universities and Skills Professor Peter Gregson FREng, Professor Tim Allen, Director President and Vice-Chancellor, Queen’s for Analysis and Research, Local To what extent should UK University Belfast Government Association funding for science and Eoin O’Driscoll, Chairman, Forfás, innovation be focussed? Ireland’s National Policy Advisory Board, What should be the priorities 4 February 2009 and Managing Director, Aderra for medical research in the UK? Dr Iain Gray FREng, Chief Executive, 20 May 2009 A lecture by Lord Drayson of Technology Strategy Board Kensington, Minister of State for Science Sir Leszek Borysiewicz FRS FRCP and Innovation at the Department for Engineering: turning ideas into FMedSci, Chief Executive, Medical Innovation, Universities and Skills. reality — the House of Commons Research Council Responses by: Select Committee Inquiry Sir John Bell FRS PMedSci, President, Lord Rees of Ludlow OM Kt PRS, 7 July 2009 The Academy of Medical Sciences President of The Royal Society and Chairman, Office for Strategic Sir Peter Gershon CBE FREng, speak- Phil Willis MP, Chair, House of Coordination of Health Research ing on behalf of The Royal Academy of Commons Select Committee on Sir David Cooksey GBE, Chair, Engineering Innovation, Universities, Science and Skills Bioscience Innovation and Growth Team Dr Peter Ringrose, Chairman of the The Lord Browne of Madingley FRS Biotechnology and Biological Sciences FREng, President, The Royal Academy Research Council and Member of the of Engineering Can a value be put on Technology Strategy Board Richard Olver FREng, Chairman, BAE biodiversity? Trudy Norris-Grey, Chair, Innovation Systems 6 May 2009 and Science Committee of the The Rt Hon the Lord Drayson, Minister Confederation of British Industry (CBI) for Science and Innovation, Department Professor Bob Watson CMG, Chief for Business, Innovation and Skills (note Scientific Adviser, Department for Lighting up the brain — a 25 responding to the debate) Environment, Food and Rural Affairs year journey from basic science Pavan Sukhdev, Study Leader for TEEB to commercial instrument The Future of Higher and Project Leader Green Economy, UN 10 December 2008 Education in England Environment Programme 17 June 2009 The Lord May of Oxford OM AC Kt Professor David Delpy FRS FREng FRS, Department of Zoology, Oxford FMedSci, Chief Executive, Engineering Sir Alan Langlands FRSE, Chief University and Physical Sciences Research Council

32 fst journal >> december 2009 >> vol. 20 (2) The Foundation is grateful to the following companies, departments, research bodies and charities for their support for the dinner/discussion programme.

AEA Technology Higher Education Funding Council for Rolls Royce ALSTOM England Royal Botanic Gardens, Kew ARM Home Office Royal Statistical Society Arts and Humanities Research Council Hospital Saturday Fund Science & Technology Facilities Council Arup House of Commons Select Committee Sharp Laboratories of Europe Ltd Association for Science Education on Science and Technology Shell UK Ltd Association of the British House of Lords Select Committee on Sir William Francis Pharmaceutical Industry Science and Technology Smith Institute BAE Systems IBM(UK) Society of Biology Biotechnology and Biological Sciences Imperial College Society of Maritime Industries Research Council Institution of Chemical Engineers South East England Development BP Institution of Civil Engineers Agency British Antarctic Survey (NERC) Institute of Marine Engineering, Science STEMNET British Computer Society and Technology Technology Strategy Board British Council, Science Section Institution of Railway Signal Engineers The British Academy BSI Institute of Physics The Institute for Statecraft and Business Innovation Group LLP Institution of Mechanical Engineers Governance Calderwood Han Limited InterTradeIreland The Institution of Engineering and Cancer Research UK Ipsos MORI Technology Carbon Trust Japan Society for the Promotion of The Learning Grid Chartered Institution of Building Science The Leverhulme Trust Services Engineers John Wiley and Sons The Open University Chartered Insurance Institute (CII) King’s College London The Royal Academy of Engineering City & Guilds of London Institute Kohn Foundation The Royal Commission for the Comino Foundation Lloyd’s of London Exhibition of 1851 Council for Industry & Higher Lloyd’s Register The Royal Commission on Education Lloyd’s Register Educational Trust Environmental Pollution Council of Heads of Medical Schools London School of Hygiene & Tropical The Royal Society Department for Business, Innovation Medicine The Royal Society of Edinburgh and Skills London South Bank University The Smallpeice Trust Department for Communities and Medical Research Council The Training Gateway, University of York Local Government Michael John Trust The Wellcome Trust Department for Environment, Food and Middlesex University UK Trade and Investment Rural Affairs Napier University University College London Department for International National Endowment for Science, University of Aberdeen Development Technology and the Arts University of Cambridge Department for Transport National Grid Transco University of Cardiff Department of Health National Oceanography Centre, University of Durham Economic and Social Research Council Southampton University of East Anglia E.ON UK National Physical Laboratory University of Edinburgh Engineering & Physical Sciences National Police Improvement Agency University of Exeter Research Council Natural Environment Research Council University of Glasgow Energy Institute Natural History Museum University of Kent Engineering Council (UK) Newcastle University University of Leeds EngineeringUK Nottingham Trent University University of Leicester EURIM Parliamentary & Scientific Committee University of Liverpool Faber Maunsell Peter Brett Associates University of Nottingham Garfield Weston Foundation Pitchill Consulting University of Reading GlaxoSmithKline Premmit Associates Limited University of Southampton Halcrow Group QinetiQ University of Warwick Harley Street Holdings Queen’s University Belfast University of Westminster Heads of University Biological Sciences Red Gate Software Wiley-Blackwell Health and Safety Executive Research Councils UK Winsafe Health Protection Agency Risk Management Solutions Heidrick and Struggles Risk Solutions The Foundation for Science and Technology 10 Carlton House Terrace London SW1Y 5AH Telephone: 020 7321 2220 Fax: 020 7321 2221 Email: [email protected] www.foundation.org.uk

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