Research

Advancing Policy for a Green and Digital Transition (APEX)

Prof. Perez’s Jean Monnet research agenda closely aligns with and supports the European Union’s strategic priorities in the areas of advancing the Green and Digital transitions as well as building the economic resilience of the EU. Specifically, Prof. Perez is looking for possible synergies in policies directed at the two transitions, as well as tensions (such as that created by the fact that the transition to the digital age, and particularly the use of AI, are particularly energy intensive (in the use of energy and of water). Climate change, the concentration of market power in large multinational platform firms, the abusive collection of user data, or the accelerated pace of technological change of AI are sources of uncertainty for current and future generations of students. This is a generation that has been exposed to the spread of AI generated content on major digital platforms and can relate to calls for regulation.

Climate change and the disruptive effects of AI represent new challenges for political leaders and policymakers on both sides of the Atlantic. In her research, Prof. Perez highlights how European values have contributed to the EU’s role as a standard setter in the climate policy and a frontrunner in seeking to regulate the uses of AI. Her aim is to contribute to our understanding of how large internet platform firms and the training of large language models impact natural resources and may create serious dilemmas for humanity. It is not clear that the current explosive rise in the use of AI is sustainable, nor whether there are unavoidable trade-offs between the technological race (digital transition) and effective climate action (European Green Deal). A separate question considered by Professor Perez’ research project involves the role that financial markets can play in addressing the digital and green transitions. The Draghi report, for example, advised that the Eu move more quickly toward a more robust capital markets union.

Prof. Perez’s underlying argument is that more liquid capital markets will create an impetus to the adoption of advanced digital technology by increasing the level of risk capital and entrepreneurship in the EU. Whether this is the effect that a closer capital union will have and whether this is compatible with European emission goals are empirical questions. And the very least, the impact of different policies to accelerate the technological transition in Europe on the goals of the Green transition should be studied. It remains to be seen if safe-guards could be put in place to reconcile an increased use of AI with the EU’s 2050 net zero goals.

Prof. Perez research record in the past has often focused on the way in which policy or regulation in one area affects the outcome of policy in another. Her work on the Eurozone debt crisis and on the EUs response to the Covid crisis showcase her attention to “narratives” among policymakers and how they may depart from reality. Her work on financial regulation give her a deep understanding of the consequences of
different modes of financial regulation and macro-economic governance, allowing her to address the debate on how capital markets union may improve the ability of EU firms to participate in the technological race, and how this might affect environmental goals. She also has ample knowledge of trends other policy areas, including labour market regulation and EU macroeconomic governance. Her work on EU governance allows her to draw insights from prior episodes of crisis, including how EU policies in the past contributed to social outcomes across EU countries, including different forms of inequality and employment creation patters, that were unintended.

While Professor Perez’ prior work has looked at how EU governance impacts financial flows, the Jean Monnet Chair would allow her to broaden her research to evaluate how capital market union may impact green transition goals (moving emissions to net zero) and technological adaptation to the new era of platform economies and AI. Contrary to some of the pessimism that often permeates media narratives on the ability of EU firms to compete in a world of accelerated technological change, Professor Perez starts from the observation that the EU also brings some important advantages to the table. Some of these may be the “advantages of the latecomer” that Thorsten Veblen theorized during another technological revolution. Others lie in the EU’s early recognition of the “flip-side” of the current technological transition: including the dangers of excessive market concentration among large platform firms which have access to enormous pools of user data, or the threats that AI generated content may create for democracies.

Professor Perez’ prior work has also drawn attention to the role of narratives in driving policy in the EU. For instance, it is often argued that EU regulations on the use of data hold back the digital transition of EU firms; a view that is heavily influenced by popular accounts of how big Tech came about in the US. Many observers attribute technological innovation in the US to the character of its financial system, specifically the role of venture capital in financing start-up firms. Yet other accounts of the rise of Big Tech in the US emphasize the US government’s key role in funding basic research, often for military purposes, through i Universities and research labs. Yet other
scholars emphasize the network effects inherent to the platform and data economy, as well as the agglomeration effects that draw technology firms to particular cities, where they have led to higher local income inequality. These narratives have different implications on the lessons that can and cannot be learned from the US experience. Professor Perez will bring this focus on dominant narratives, alternative explanations, and unintended consequences of the growth of the platform economy to her current research project.