productivity growth

In the last few weeks, markets have hit highs in the US, Europe, and Japan. Today on the show, we try to understand what has powered the results. We talk about chip company Nvidia, but also renewed optimism in Japan and the arrival of a new acronym describing the leaders in Europe: ‘Granolas’. Also we go long Berkshire Hathaway, and short gilets, or as Americans call them, “vests”.

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Follow Ethan Wu (@ethanywu) and Katie Martin (@katie_martin_fx) on X. You can email Ethan at ethan.wu@ft.com.

Read a transcript of this episode on FT.com

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There have been a number of news stories lately that seem straight out of science fiction. We've heard claims before Congress that the government is suppressing information regarding the existence of UFOs or aliens. There are computers that seem to think. And scientists in Korea claimed to have made an extraordinary breakthrough in the hunt for room temperature superconductivity. So how should we think about these things in terms of their potential impact on the economy? In addition to being a Nobel Prize winner and a columnist for the New York Times, economist Paul Krugman is also an avid science fiction fan. In fact, he has credited science fiction for his original interest in economics, even once writing a paper on interstellar trade. He joined us to discuss all of these things, and how to view them through the economics lens.

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Does it pay to be an optimist?

Volatile financial markets and flaws in human psychology can cause many investors to be unduly pessimistic.

Yet, remaining an optimist - and remaining invested - is the surest way to achieve the unrivalled long-term returns of the stock market.

Today, we discuss why optimism about investing is not only desirable but rational. And how to spot biases and alarmist thinking that can lead to destructive behaviour.

And in today’s Dumb Question of the Week, we ask: Why hold any bonds at all?

Selected links

• Gapminder
• Our World in Data
• A Long Bet: Brynjolfsson vs Gordon

Alex Tabarrok is a professor of economics at George Mason University and with Tyler Cowen a founder of the online education platform http://MRU.org.

I ask Alex Tabarrok about the Grand Innovation Prize, the Baumol effect, and Dominant Assurance Contracts.

Watch on YouTube, or listen on Spotify, Apple Podcasts, or any other podcast platform.

Episode website here.
Follow Alex on Twitter. Follow me on Twitter for updates on future episodes.

Alex Tabarrok's and Tyler Cowen's excellent blog: https://marginalrevolution.com/ 

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Timestamps:

(00:00) - Intro 

(00:34) - Grand Innovation Prize 

(08:45) - Prizes vs grants 

(14:10) -Baumol effect 

(27:50) - On Bryan Caplan's case against education 

(31:35) - Scaling education online 

(48:50) - Declining research productivity 

(52:15) - Dominant Assurance Contracts 

(58:40) - Future of governance

(1:04:05) - On Robin Hanson's Futarchy

(1:06:02) - Beating Adam Smith

(1:08:35) - Our Warfare-Welfare State 

(1:19:30) - The Great Stagnation vs The Innovation Renaissance 

(1:21:40) - Advice to 20 year olds

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Economists preach the gospel of "creative destruction," whereby new industries -- and jobs -- replace the old ones. But has creative destruction become too destructive?