🚀 Faster, Please! Week in Review #38
Recession odds, billionaire taxes, solar power, Tyler Cowen, and more!
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Melior Mundus
In This Issue
Essay Highlights:
— Recession odds vs. the chances of a New Roaring '20s
— Imagine an America with steep billionaire taxes — and without Amazon, Pixar, SpaceX, and Tesla (essay repost)
— Don't listen to Noah Smith. I don't hate solar power.Best of 5QQ
— 5 Quick Questions for … tech policy analyst James Bessen on Big Tech, AI, and Big Data
— 5 Quick Questions for … Tyler Cowen on the state of the Great Stagnation, pro-progress policy, metascience, and more!
Essay Highlights
🎲 Recession odds vs. the chances of a New Roaring '20s
My aspirational New Roaring ‘20s thesis doesn’t depend on uninterrupted economic growth. (Though, of course, that would be awesome.) In last month’s Wall Street Journal survey of business and academic economists, the aggregate forecast put the probability of a recession in the next 12 months at 61 percent. There’s some reason to think the recession odds are declining. This from the econ team at Goldman Sachs: "We have cut our subjective probability that the US economy will enter a recession in the next 12 months from 35% to 25%." Both of the following can be true: Avoiding a recession would be great, but a brief downturn wouldn’t spoil my New Roaring ‘20s thesis. What’s most important is getting inflation under control to create a stable macroeconomic environment against which lots of businesses across industry sectors can productively exploit technological progress, such as AI-machine learning.
Might efforts to raise revenue and reduce inequality by "capturing" more of the income and wealth of America’s richest people, especially those who got that way by starting and building great companies, generate wholly undesirable trade-offs and numerous unintended consequences — especially when it comes to business innovation and economy-wide productivity growth? Would SpaceX and Tesla — combined value of an estimated $1.2 trillion — exist in a world of sharply higher investment taxes and a fat new levy on wealth? Maybe not. At least not both of them. The same might be said for Amazon and Pixar. And for my readers who might like to still sock it to the billionaires, one final point: According to estimates by Nobel laureate economist William Nordhaus, innovators captured only 2 percent of the value they created between 1948 and 2001
☀️ Don't listen to Noah Smith. I don't hate solar power.
The energy source of America's near future is plain old wind and solar. The recently passed Inflation Reduction Act includes $386 billion for clean energy subsidies — mostly in the form of expanded and new tax credits. Goldman Sachs thinks that spending could drive some $1.5 trillion in capital mobilization in clean energy, broadly, through 2023, including $675 billion in renewable investment. As far as additions to wind, solar, and storage, GS estimates the IRA will boost additions of new capacity to roughly 80 GW per year versus 30 GW over the past three years. So what we have is a classic “a bird in the hand is better than two in the bush” situation, where the two in the bush are the future energy sources I often write about: nuclear fission from small reactors, nuclear fusion, advanced geothermal, and even space-based solar. Solar and wind are being installed, while those others are still being developed and demonstrated rather than being plugged into the grid. That’s just the reality.
Best of 5QQ
💡 5 Quick Questions for … tech policy analyst James Bessen on Big Tech, AI, and Big Data
James Bessen is Executive Director of the Technology & Policy Research Initiative at Boston University.
If increasing firm dominance has "contributed to the slowdown in productivity growth," is antitrust an appropriate tool for boosting US productivity growth?
Judicious antitrust is an appropriate tool for boosting industry dynamism because large firms do occasionally abuse their power in ways that slow the growth of innovative rivals. In my book (The New Goliaths) I discuss how Google knee-capped Nuance, the leading voice recognition company, by effectively requiring Android manufacturers to preload Google’s full software suite. This later (too late) resulted in antitrust action in the EU but not in the US.
On the other hand, much of the tech-related focus on antitrust in both the US and EU recently has been targeted narrowly against online open platforms. While these platforms do create challenges for antitrust regulation, I also argue that they are key to increasing industry dynamism and, for this reason, antitrust regulators should be careful not to discourage or demonize online platforms. Moreover, the challenges posed by platforms, both internal and external, extend far beyond Big Tech to most sectors of the economy.
Tyler Cowen is the Holbert L. Harris Chair of Economics at George Mason University and serves as chairman and faculty director of the Mercatus Center.
Do you think boosting federal science funding to the sorts of levels that we had during the space race, I think like 2 percent of FDP — does that sound like a good idea?
You need to use it as a lever to enforce reforms. So I could imagine that doing it flat out would pass a cost-benefit test, but that's the lever you have. And if you spend that lever and you don't get improvement on procedures, in the longer run, you're coming out much worse. So I say make it contingent on real reforms, new institutions. It's such a deeply rooted problem. It's very hard to unpack all of the obstacles facing clinical trials, which probably are the number one issue, but all the different levels of delay and veto points to fix those all are very, very difficult. So this is our chance to do it.