“Our research is based on facts and data, not on value judgements”

Last year was marked by many geopolitical tensions such as the wars in Ukraine and the Middle East, while in Switzerland it was also characterised by the takeover of the big bank Credit Suisse (CS) and by issues such as labour shortages. How did all of this impact on the Swiss economy?

Jan-Egbert Sturm: At the beginning of the winter of 2022/23 there were serious fears that we might run out of gas and oil and that we could plunge into an energy crisis. That did not happen to the extent that we had expected – partly owing to the mild winter. 2023 therefore got off to a positive start compared with our forecasts. However, we had hoped for a slightly stronger recovery than the one that actually materialised. Then came UBS’s acquisition of Credit Suisse, and the headwinds from abroad increased over the course of the year. The second half of the year proved to be a real challenge for the export-driven manufacturing sector because of the weak international economy. And during the last winter half-year, at least, this industry found itself in recession.

What role or function does KOF perform when such events occur? Has this changed over the past 85 years? How has the institute as a whole evolved over the course of its history?

Jan-Egbert Sturm: KOF’s job is to monitor and analyse the Swiss economy and, on this basis, to work out where it might be heading. This mission has not changed over the years. However, the role of data has become more important and we have become more research-driven. KOF is evolving in line with society.

Hans Gersbach: KOF provides both analysis and information for decision-makers on all economic policy issues. I think that two questions in particular have now moved centre stage. The first is whether we need to thoroughly rethink the issue of banking regulation and the problem of institutions that are ‘too big to fail’. I believe we have contributed some valuable input on this matter. And the second is the question of resilience. We recognised the urgent need for us to focus on this issue much more and to investigate just how resilient the Swiss economy is to geopolitical and other risks and how we can use appropriate analysis tools to measure and evaluate this.

There were also encouraging developments in 2023. Advances in artificial intelligence (AI) gave a significant boost to the field of technology, which in turn drove up share prices. Will this also have a noticeable positive impact on the real economy over the next few years? Do you see this as a one-off phenomenon or is it a structural change?

Hans Gersbach: We have seen that artificial intelligence is a technology that impacts on the whole economy rather than just on one sector. This means that it will have a positive effect on productivity going forward. Although the key questions are already being defined, at present they remain unresolved. Will AI improve or simply replace workers’ productivity? And, in addition to productivity growth, to what extent might inequality phenomena such as wage differentials be exacerbated? Our education and training system needs to be overhauled in order to meet these challenges. These are among the findings of KOF’s research. Given our existing education system, we are concerned that structural change might happen very rapidly in some areas.

If we now look at 2023 in isolation, the introduction of rules of procedure and the new senior management structure consisting of two directors were among the most important changes for KOF. How do you now look back on last year, Hans Gersbach?

Hans Gersbach: I was very well received at KOF and was quickly able to start working effectively. We have found a good working arrangement in terms of how we coordinate, communicate and share tasks with each other. You can see that there are many projects and operations ongoing at KOF, and there is loads of expertise available there, which means that you can achieve quite a lot.
 

The KOF Lab has also been created in this context. What is its function?

Hans Gersbach: The KOF Lab is, in effect, intended to realise three ideas. First, we want to road-test new economic approaches and analysis to see whether they enable us to perform our nationally important tasks even better and more comprehensively. Second, young researchers will have the opportunity to raise their profile within their own section, to develop their careers and to contribute their own ideas. The Lab therefore acts like an incubator. And, third, if all goes well then it is designed to provide a springboard for for young researchers for a permanent position at KOF. The Lab is now fully operational with four sections, although this structure may change. It is a flexible incubator.

Today’s young generation is said to be highly political. Do you see that with young researchers in your field? Is that still consistent with your role as researchers, or should the two be kept separate?

Jan-Egbert Sturm: I think we should try, as far as possible, to separate the two. As researchers, we must not allow ourselves to be influenced by things that are subjective or on which opinions may simply differ. Our work must be driven by data and research. When KOF makes public statements, its academic neutrality is always guaranteed. Our research is based on facts and data, not on value judgements. That does not mean, however, that we are always neutral: researchers may – out of a certain desire to optimise a given situation – indicate what, in their ‘opinion’, is relevant or less relevant. In doing so, they must know what they wish to optimise and what their objective is. They can then say what the costs and consequences of plan A and plan B are. It is not the job of researchers to get involved in politics.

Hans Gersbach: Our ambition is to be an independent and honest academic intermediary for all decision-makers. And if value judgements are made occasionally, they must be clearly indicated as such. It goes without saying that individuals’ own interests play a role in selecting the topics that they would like to work on.