America has an innovation and incumbency problem
Interesting comments from Gillian Tett on US productivity suggest that the consolidation of innovation spending in larger corporates as they hire innovators and pay them more has not translated into the kinds of improvements in productivity economists expect.
Either these inventors are being sidelined by the incumbents who hire them so that the startups they might have worked for don’t disrupt the status quo (as Lina Khan suggests), or they might be stifled by the comfort and bureaucracy of working for Big Moo.
Occam’s Razor tells us that, given two competing theories, we should prefer the simpler one. Hanlon’s Razor tells us to “never attribute to malice that which is adequately explained by stupidity.”
I lean on bureaucracy and comfort as the easier, stupider explanations.
When you go have an executive chef make you a gourmet meal that you can eat while being massaged as you sit on a deck overlooking the Hudson River, even as you have to fill out countless forms for the bureaucracy that emerged when your big company started printing cash (I’m looking at you Google), why would you innovate? Why would you do anything? You just won the lottery.
It's likely worse. There is an adverse selection problem. The real innovators won’t go to Big Moo because they know they’ll be infected with the Dutch Disease of a sudden rush of corporate comfort, so they stay outside like lean and hungry wolves. The ones who do succumb to the Faustian bargain … well they look good on LinkedIn.
Actually, why would you hire someone who worked for Google or one of these companies?
‘On the one hand, American R&D has risen in recent decades, from 2.2 per cent of GDP in the 1980s to 3.4 per cent in 2021. That reflects a doubling of private sector R&D to 2.5 per cent of GDP. Meanwhile, the proportion of the population involved in patent production nearly doubled
‘in this period. But there is a big catch. Although “conventional economic models” imply that increases in R&D spending on this scale “should have led to accelerated economic growth”, this has not occurred.
‘Michael Peters, a Yale economist, lays out the grim news: while labour productivity rose on average by 2.3 per cent between 1947 and 2005, between 2005 and 2018 it fell to 1.3 per cent. This cost America a putative $11tn of output, he calculates.’
Rent Controls: A Well-Intentioned Disaster?
Normally, in markets, the best cure for high prices is high prices, as they say.
High prices attract supply. Supply clears the market. Prices fall to a new level.
But bureaucrats and interventionists are impatient. They don’t want to wait for new supply. New supply takes time. They want it now!
So, even though they know with scientific rigor that price controls and rent controls don’t work, they want to be seen doing something. By the time, the problem metastasizes it will be someone else’s to fix.
Hanlon’s Razor, dude.
‘Economists rarely agree on much. The fact that rent controls have disastrous economic consequences is a unique area of consensus. Rent controls may have well-intentioned aims that are politically desirable—making rents affordable—but they have significant economic consequences. Across the literature on rent controls there is a strong academic consensus that they produce harmful consequences.
‘They distort the market by capping the possible revenue a landlord could obtain, reducing incentives for landlords to improve their rental properties, and reducing the supply of housing on the rental market over time. This artificial suppression of the price of rents simply exacerbates housing shortages, and reduces the overall quality of housing.’
Trump Defends Debate Performance and Calls for Ending Tax on Overtime
It’s interesting that for a country in which the public sector constitutes roughly a quarter of the economy, nobody likes paying taxes.
Put another way, it’s a cheap and easy trick to promise to eliminate this tax and that tax, especially if they are seen as falling disproportionately on the working class and the middle class.
Nobody wants to pay their fair share, in part because they may not see government as being productive. Instead, they see it as bloated. Bureaucracy is self-propelling mediocrity, like a Rube Goldberg machine attached to a nuclear reactor.
Who would want to pay for the DMV if they didn’t have to?
‘But when he eventually did turn to the section on economic issues, Mr. Trump made a new proposal as he sought to win the votes of working- and middle-class Americans: He called for eliminating taxes on overtime pay.’
Department of Education’s selective regulation hurts our military
Micromanaging veterans benefits doesn’t help the veterans, but it is a way for the bureaucrats to weaponize spending against institutions they don’t like.
Veterans and their families benefit disproportionately from distance learning programs, many of them offered by non-traditional institutions. These come at the expense of traditional public institutions.
So, of course, they need to be excluded.
‘Instead, the Biden-Harris Departments of Education and Veterans Affairs want to pigeonhole veteran students into traditional public and state-run universities — where enrollment has dropped by more than 12% since 2010 — by instead targeting career-education institutions and distance learning programs with these selective regulations. This forces military and veteran students to choose only traditional public and private nonprofit schools, whether or not they’re a good fit for those students.
‘The 90/10 Rule and Gainful Employment Rule are two examples of such regulatory cherry-picking, applying them only to career, technical, and trade schools. The 90/10 Rule, which expanded under the Biden-Harris Department of Education in 2022 to include GI Bill benefits, requires at least 10% of a school’s revenue come from a source other than federally sourced aid such as Pell Grants or federal student loans. But it also specifically excludes distance learning programs from such calculations, because unless the bureaucrats do so, they can’t punish the nontraditional schools. And these online programs are the fastest growing sector of higher education, growing 900% since 2000, and expected to grow another 20% by 2030.’
Hope for bureaucratic reform in PA?
‘According to the report and subsequent orders issued by IRRC on Wednesday, numerous regulations it was required to review were outdated and no longer in the public interest because of agencies failing to update regulations based upon state and/or federal statutory changes, changes to other regulations or technological advancements.’
House GOP Policy Committee to Hold Hearing on Bureaucracy’s Battle Against Fracking
To bring fracking to a halt, you don’t need to kill it with a quick blow to the head. You can make it stop with the death of a thousand cuts, instead.
This is the way the world ends, not with a bang, but with a whimper.
‘House Republican Policy Committee Chairman Joshua D. Kail (R-Beaver/Washington), Rep. Eric Nelson (R-Hempfield) and other lawmakers will host a hearing titled “Opportunity Lost: Bureaucracy’s Battle Against Fracking” to address the impact of policies that threaten to eliminate thousands of jobs, leave families without sustainable incomes and push our energy grid to the brink of failure. This hearing will spotlight bureaucratic hurdles Pennsylvania companies face and the urgent need to defend our energy independence and protect the livelihoods of hard-working Pennsylvanians.’