I attended a conference here in New York yesterday about how to restore America’s economy dynamism. It included a lot of folks including former Bank of England Governor Lord Mervyn King and Nobel Prize winning economist Edmund Phelps.
There were some interesting remarks and I need to dive into some of the actual papers. After doing so I might write more at a future time. But a few things caught my attention at first glance.
The first is how willing multiple of the presenters were to forthrightly say economic concentration, including corporate mergers, was a factor in suppressing growth.
Anton Korinek of Johns Hopkins gave an interesting presentation on the economics of superstars (his paper is here). In his view “information” (digital technology) leads to increasing returns to scale as it is inherently non-rival. Add excludability (provided by IP laws) and you have the makings of natural monopolies. These see significant “superstar” returns reaped, though in theory they will level off once the price reaches the monopolistically optimum level. In his view, in the mid-term we are going to increasingly see an economy geared towards superstar winners.
Thomas Philippon argues that the US has been underinvesting, and declining competition is a big reason why. (This paper appears to be relevant). He notes that, for example, that according to OECD research, the US had less product regulation than Europe during the 1990s, but today it has more product regulation. Interesting stuff here.
Jaana Remes of McKinsey talked about the demographic headwinds making growth tougher. (Quite a bit of our previous economic growth came from population growth and urbanization, two factors now largely played out in the US). I recorded a podcast with her I’ll be posting in the near future.
I also recorded another podcast with Dane Stangler from Startup Genome, who talked about the startup deficit (was well as those who argue that we have plenty of the kind of startups that matter).
There were a couple of popular ideas for improving things. The two big ones focused on missing institutions. In particular, a comparative lack of German style apprenticeship programs and a lack of innovation intermediaries like Germany’s Fraunhofer Institutes.
Again, I may give some of the papers various speakers wrote a read. I thought it was interesting to see economists more or less admitting there are problems.