Paul Romer: evaluation

Transcript context

…So if I ask myself, “What do I think has been the biggest negative?” I suppose I would say around 2000 date, economists for the most part did not understand the importance of the shadow banking system. What seemed to be a kind of ordinary real estate bubble, like the early 1990s, was far, far worse, and we totally missed that. That seems to be a defect of institutional knowledge, but you tell me what you think the greatest problem has been. I think this problem is an interesting one. I put a slightly different spin on it, but I think it’s in the class of things of a failure to understand or incomplete understanding. I don’t think that’s a sign of a science that’s failed. That’s a sign of a science which is just making progress. There’s some things it knows and things it doesn’t know. So I don’t view this one as a sign of a systemic problem that we’re not doing it right, in a sense. For what it’s worth, we can come back and talk about this, but I think the lesson from the financial crisis, which we’re learning again now, is one about the fragility of extensive interconnection. We’ve paid attention to optimize efficiency with massive reliance on specialization and these complicated supply chains. But the growth, the proliferation of connection means that our system is more fragile than we realize. A shock comes, and things happen that we didn’t anticipate. But again, that’s part of learning about a very new type of economy which is changing in real time. The ones that struck me as being particularly worrisome were, first, I think the negative effect that economists have had in terms of protecting competition. Through the law and economics movement, we ratified this notion that big is okay as long as you can make some case that it’s efficient. The upshot is, is that I think because of technical economics and the arguments of economists, antitrust is much more tolerant now of dominant firms, and if we believe that competition’s good in a whole bunch of ways, this could actually be very, very harmful. So that’s one. Doesn’t Amazon look pretty good right now in the midst of the pandemic? Do you wish we had split it up into different parts?…

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