EconTalk — Paul Romer

On: Growth, Cities, and the State of Economics.

Episode: N/A

Date: April 2019

Background: Nobel Laureate, professor at New York University.

Key Subjects:

  • The difference between objects and ideas:
    • Objects:
      • External world in economics usually characterized by objects, endowments.
      • People compete for scarce objects, using their natural endowments.
      • More people = fewer goods per person (zero sum game).
    • Ideas:
      • Ideas are insights about how to rearrange the objects in the world.
      • How to transform them to turn them from things that are less valuable to us into things that are more valuable to us.
      • Ideas let us get more value out of a fixed set of objects.
      • If there are more people, even though there may be less total objects per person, these additional people might discover something valuable.
      • And this is where the difference between objects and ideas surely matters.
  • Tendency of economics to pay more attention to things that are more easily measurable:
    • Difficult to capture aspects of human well-being in economic theories.
    • Difficult to deal with things that emerge from social interactions, such as norms and values.
  • Substantial numbers of people are unhappy with society they live in:
    • Charter cities: create society with norms and rules that people would rather live in.
    • Very difficult to achieve, unlikely to succeed.
  • Proper data collection and data summary is increasingly overlooked in (economic) science.
    • Data manipulation and theorization get more rewarded.
  • Limited role of World Bank in current economic landscape.
    • Modest financial cloud (USD 200 billion in lending power).
    • Generates USD 2 billion in profits, which is used to support its bureaucracy (staff salaries).
    • Probably better ways to use USD 2 billion to provide global public goods.
  • People tend to be more productive in cities:
    • An individual’s income grows faster in cities than in rural areas.
    • Rent is correlated with income (income higher, rent can be higher).
    • Inevitable that affordability gap increases between cities and rural areas (unless cities expand vastly).

Key Takeaways:

  • Ideas are insights about how to rearrange the objects in the world; more people = more insights = opportunity for more value/person.
  • Economics has difficulties capturing individual well-being and emergent cultural norms.

Worth Listening:


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