Paul Romer on what's wrong with economics [with coda on what he learned about post-scarcity society at Burning Man]

From a recent conversation with Tyler Cowen (Paul Romer on a Culture of Science and Working Hard):

ROMER:...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.

COWEN: 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?

ROMER: My sense is that we’d be better off if we had five Amazons instead of one.* And I don’t see why we couldn’t have five Amazons if we, as voters, say, “This is the kind of society we want to live in. Let’s just aim for that.” And same thing — the more worrisome positions are those of the tech firms that are so deeply connected now to many aspects of our lives and where there’s really very little competition and a lot of opacity about what these firms actually do.

COWEN: Let me try to defend the economics profession a bit more. If we look at climate policy, a lot of economists have recommended a carbon tax — not quite a consensus, but a very common view. Now, of course we haven’t done it, but it seems to me the profession, in some manner, is essentially correct there. So you would side with the profession on that?

ROMER: Yeah. Again, in some sense, the main point of the article that I’m making is that economists need to accept that our role is that of the technical adviser. We can say, “If you apply a carbon tax, carbon emissions will go down. Here’s what other effects we think they’ll have. But it’s up to you, the voters, to decide whether you want to follow that policy or not.”

So, if the voters don’t follow us, I think, to a first approximation, that’s not really our responsibility. And what I’m critical of is this tendency for economists to assume the responsibility of philosopher king and say to voters, “Well, we know better what a society should be like, what society should do. Listen to us. We’ll tell you the way things should be. We’ll tell you what you should do.”

And, in truth, I think we get into that mode a lot more than we realize. Certainly, some members of the profession get into that mode. And I think they’ve done, really, quite a bit of harm when they did that.

What Romer learned at Burning Man:

Another thing that really stood out, which is not exactly a surprise, but maybe it was the surprise in that group — if you ask, what do people do if you put them in a setting where there’s supposed to be no compensation, no quid pro quo, and you just give them a chance to be there for a week. What do they do?

They work. What people do at Burning Man is they go there and they work. They’ll do a different job, like they’ll work as part of the volunteer police force, or they’ll help maintain sanitation. They’ll work to set up something which offers a service to other people. But there’s enormous satisfaction that we draw from accomplishment and the provision of the output that we produce, making it available to others.

If somebody asked me, “What’s a post-scarcity society going to look like?” Somebody actually said this to me there. He was like, “What does post-scarcity society look like?” People work hard because they like it. They work on things that they care about and they think others will care about, and that’s an encouraging insight, I think, about people.

*See another post I did today:  Are we grappling with problems beyond our conceptual means? [counterfeit capitalism][#Progress_Studies, NOT].