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The New Bazaar

A weekly conversation on how the economy shapes our lives

The economy has a funny way of affecting everything we do and what we value. Through long-form interviews with economists, policymakers and other guests, The New Bazaar explores how the economy is constantly altering the
Latest EpisodeThursday, May 18, 2023

The economics of innovation

Within economics, there's a semi-famous quote from the economist Paul Krugman: “Productivity isn't everything, but in the long run, it's almost everything.” Krugman’s point is that ultimately, how much productivity climbs each year—roughly speaking, how much more efficient an economy’s workers become at producing goods and services—is also what determines how much our living standards also rise from year to year. And so in the long run, there really is almost nothing that matters more. Unfortunately, since about the early 1970s productivity has climbed much more slowly than in the earlier postwar decades. We have been stuck in a period that economists have labeled The Great Stagnation. And a big reason why is that the pace of innovation—the kind of scientific and technological innovation that leads to fast productivity growth—has also been slow. But now, there’s now a lot of people—including Cardiff!—who are optimistic that maybe the Great Stagnation is ending. That we’ll get back to the faster productivity growth of the past. Among other reasons why: The economy in the last few years has become more dynamic. There’s been a boom in the number of startups that entrepreneurs launch every month. There has been quite a bit of experimentation in the workplace for how to get things done, most obviously the rise of remote work. Incredible new technologies like mRNA vaccines have emerged. These also include things like GPT-4 and other language learning models, suggesting that artificial intelligence could soon have a noticeable effect on the economy. And finally, an intellectual shift, partly brought on by higher inflation, has compelled many people (including policymakers) all across the ideological spectrum to really emphasize the importance of expanding the economy’s capacity for growth, and to figure how best to do that. Which policies and institutional designs can best lead to new technologies and innovations? How do we reform public institutions like the National Institutes of Health, with its $47 billion budget, to fund the kind of science research and development that leads to transformative new technologies? What have we learned about the way science is actually done now?In other words, how do we get right the economics of innovation? That effort is where today’s two guests come in. Heidi Williams is an economist and the director of science policy at the Institute for Progress, a think tank. Caleb Watney is the co-founder and co-CEO of the Institute for Progress. They discussed with Cardiff not only the Great Stagnation, but also recent industrial policies passed by the US government, like the Chips and Science Act (which is aimed at developing a domestic semiconductor industry) and the Inflation Reduction Act (which will spend money to develop new clean technologies, among other things). And they discussed new ideas for how the country’s existing scientific institutions—its commercial labs, universities, and public bodies—should approach the process of scientific discovery.Related links: Heidi's page and work at the Institute for ProgressCaleb's page and work at the Institute for Progress
Thursday, May 18, 2023

The economics of innovation

Within economics, there's a semi-famous quote from the economist Paul Krugman: “Productivity isn't everything, but in the long run, it's almost everything.” Krugman’s point is that ultimately, how much productivity climbs each year—roughly speaking, how much more efficient an economy’s workers become at producing goods and services—is also what determines how much our living standards also rise from year to year. And so in the long run, there really is almost nothing that matters more. Unfortunately, since about the early 1970s productivity has climbed much more slowly than in the earlier postwar decades. We have been stuck in a period that economists have labeled The Great Stagnation. And a big reason why is that the pace of innovation—the kind of scientific and technological innovation that leads to fast productivity growth—has also been slow. But now, there’s now a lot of people—including Cardiff!—who are optimistic that maybe the Great Stagnation is ending. That we’ll get back to the faster productivity growth of the past. Among other reasons why: The economy in the last few years has become more dynamic. There’s been a boom in the number of startups that entrepreneurs launch every month. There has been quite a bit of experimentation in the workplace for how to get things done, most obviously the rise of remote work. Incredible new technologies like mRNA vaccines have emerged. These also include things like GPT-4 and other language learning models, suggesting that artificial intelligence could soon have a noticeable effect on the economy. And finally, an intellectual shift, partly brought on by higher inflation, has compelled many people (including policymakers) all across the ideological spectrum to really emphasize the importance of expanding the economy’s capacity for growth, and to figure how best to do that. Which policies and institutional designs can best lead to new technologies and innovations? How do we reform public institutions like the National Institutes of Health, with its $47 billion budget, to fund the kind of science research and development that leads to transformative new technologies? What have we learned about the way science is actually done now?In other words, how do we get right the economics of innovation? That effort is where today’s two guests come in. Heidi Williams is an economist and the director of science policy at the Institute for Progress, a think tank. Caleb Watney is the co-founder and co-CEO of the Institute for Progress. They discussed with Cardiff not only the Great Stagnation, but also recent industrial policies passed by the US government, like the Chips and Science Act (which is aimed at developing a domestic semiconductor industry) and the Inflation Reduction Act (which will spend money to develop new clean technologies, among other things). And they discussed new ideas for how the country’s existing scientific institutions—its commercial labs, universities, and public bodies—should approach the process of scientific discovery.Related links: Heidi's page and work at the Institute for ProgressCaleb's page and work at the Institute for Progress
Friday, February 3, 2023

How to save democratic capitalism

The combination of a markets-based capitalist economy and a liberal democracy with almost-universal suffrage is very young, having existed for barely more than a century. But what we’ve learned in that short time is that there has never been a more successful political and societal arrangement. None of the tyrannies and the plutocracies that have been the default for nearly all of human history has ever been nearly as good at raising people’s living standards, and at giving people the individual freedoms to choose how they live their lives. But that marriage between capitalism and democracy has always been a fragile one. And in the last decade or two, that system has been under threat from within the very liberal democracies where it exists, especially in the US and across parts of Europe. What happened?The guest for this episode is Martin Wolf, the chief economics commentator of the Financial Times and author of a new book called The Crisis of Democratic Capitalism. As Martin writes:The health of our societies depends on sustaining a delicate balance between the economic and the political, the individual and the collective, the national and the global. But that balance is broken. Our economy has destabilized our politics and vice versa… A big part of the reason for this is that the economy is not delivering the security and widely shared prosperity expected by large parts of our societies. One symptom of this disappointment is a widespread loss of confidence in elites. Another is rising populism and authoritarianism. Another is the rise of identity politics of both left and right. Yet another is loss of trust in the notion of truth. Once this last happens, the possibility of informed and rational debate among citizens, the very foundation of democracy, has evaporated.Martin discusses these themes with Cardiff, what should be done to confront this crisis of democratic capitalism, what a "New New Deal" can look like, the threat (and opportunity) of China as a global superpower, and how Martin's own personal history influenced his values and thinking.Related links: The Crisis of Democratic Capitalism Martin's columns at the Financial Times
Tuesday, December 20, 2022

Artificial intelligence and the economy of the future

Joining Cardiff for this episode is Avi Goldfarb, Rotman Chair In Artificial Intelligence and Healthcare At The Rotman School Of Management, University Of Toronto, and the co-author (with his fellow economists Ajay Agrawal and Joshua Gans) of an excellent new book, "Power and Prediction: The Disruptive Economics of Artificial Intelligence".In their chat, Avi and Cardiff discuss:Why AI is best understood as a "prediction technology"Examples of AI already in useWhich parts of the economy could be transformed by AI, and howHistorical analogies to previous eras of widespread technological disruptionHow AI will change the way people and companies make decisionsWhy this change will shift institutions away from blunt rules and towards individual discretionIn the labor market, who will gain and who will lose from the adoption of AIWhat the use of AI might teach us about what it means to be humanAnd all throughout the chat, they look at the fundamental question of whether artificial intelligence is about to make the economy—and the world—a whole lot weirder. And if so, just how far along that path to weirdness are we already?Related links: "Prediction and Power", by Ajay Agrawal, Joshua Gans, and Avi Goldfarb"The impact of AI on the future of workforces", The White House CEA and the European Commission“Before the Flood”, by Sam Hammond"The golden age of AI-generated art is here", by Tom Faber"Historical analogies for large language models", by Dynomight Internet Website
Friday, October 7, 2022

160 years of the racial wealth gap

This is a special, between-the-seasons episode of the New Bazaar.Right now, the white-to-black wealth ratio in the United States is roughly 6 to 1. Which means that when you add up all the wealth that someone can own—their cash, the value of their house, their investments in the stock market, and so on—the average White American has six times the wealth of the average Black American. That figure alone should be disturbing enough. But making it even worse is that this wealth ratio of 6 to 1 is about the same as it was back in the 1950s, seven decades ago. Some of the reasons for this long-term persistence of a big racial wealth gap are probably familiar to anyone who knows even just a little about American history. Not just the history of slavery, but also what came next: Jim Crow and segregation, the numerous racist laws and policies that were passed, and the history of racial violence—all of which made it impossible for Black Americans to accumulate as much wealth, and to get the same return on their wealth, as White Americans. Maybe less understood is another cause. If you consider the immediate aftermath of emancipation and the Civil War as a starting point, Black Americans simply began with much less wealth from which to build more wealth—and that initial difference has continued to have a big lingering effect even a century and a half later. These are just some of the conclusions in a new working paper from today’s guest, Ellora Derenoncourt, and from her co-authors Chi Hyun Kim, Moritz Kuhn, Moritz Schularick. Ellora is an economist at Princeton University, where she is also founder of the Program for Research on Inequality. On this episode of New Bazaar, Cardiff speaks with Ellora about this fascinating paper and about some of her other related work. Related links: Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020Can You Move to Opportunity? Evidence from the Great MigrationMinimum wages and racial inequality