The Nobel Prize in Economic Science
Suggested by Sam Dumitriu, research director at The Entrepreneurs Network
My first port of call when the Nobel Prize in Economics is announced is the Marginal Revolution blog. Within moments of the announcement, Tyler Cowen and Alexander Tabarrok provide an essential summary of the winners’ work. They’re good at picking out papers that might be missed by others.
Banerjee, Duflo, and Kremer won the award for using randomised controlled trials to solve tricky problems in development economics. Duflo and Banerjee have a very readable book called Poor Economics, that summarises the research project and highlights some of the more surprising findings. But in Tabarrok’s post, Kremer gets the attention. In particular, the concept of patent buyouts, a nifty idea to incentivise research without the monopoly costs of patents. The idea had a real world impact. The Advance Market Commitment for Vaccines was used to guarantee a market for the pneumococcal vaccine which has now been given to some 143 million children.
Fixing the Fed’s framework with paychecks, not prices
Suggested by Ant Breach, analyst at Centre for Cities.
A new thinktank in the US, Employ America, is pushing for a reform to how central banks and especially the Federal Reserve work. Their big idea is that the Fed should shift away from targeting 2% consumer price inflation to targeting growth in gross labour income.
They have two good reasons to do so. The first is that it will allow for more responsive monetary policy. It takes time for changes in supply and demand at the macroeconomic level to cascade their way down to consumer prices, especially to the degree which triggers a response by the Fed. But data on gross labour income can be collected much more rapidly, allowing for finer-tuned monetary policy.
The second reason is it would rewire the Fed to pursue policy which supports growing living standards. Targeting consumer prices means that monetary policy is structurally more hawkish than it is designed to be. In practice, a target of 2% average inflation functions as a cap which inflation has rarely risen above. Targeting gross labour income would connect the lever of monetary policy to aggregate demand and the purchasing power of paychecks, more effectively improving the standard of living and growth than consumer price targeting has done.
Scott Kupor on venture capital
Suggested by Philip Salter, founder of The Entrepreneurs Network
This time tomorrow evening I'll be having a fireside chat with Andreessen Horowitz’s Scott Kupor about his book Secrets of Sand Hill Road: Venture Capital and How to Get It. He wrote the book to demystify and democratise venture capital funding: “Eliminating the information asymmetry barriers between entrepreneurs and VCs.”
James Pethokoukis of the AEI interviewed Kupor earlier this year. With the growing regulatory backlash against Silicon Valley companies, Kupor offers a note of caution: “Part of what I try to talk to the regulators about is just how well we’ve done from a policy perspective in enabling entrepreneurship in this country. One of the wisest decisions the US government ever made, in the early 1990s, was to enable the internet to be released into the wild and to not regulate it. Notwithstanding some of the challenges we have today, a lot of the last twenty-plus years of economic growth and development that we’ve seen has been a function of that.”
In an increasingly flat world, Kupor is concerned that regulations could knock the US off the top spot as the best place in the world to start a company.
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