In the fall of 2007, when the U.S. economy first seemed in peril, I began answering reader queries here on the Business Desk. I still do so, but this page has expanded to include posts from eminent economists, "far-flung correspondents," and a variety of voices that have intriguing and/or useful things to say about economics, broadly defined. Please feel encouraged to respond to any and all of them.
The q-and-a is much appreciated. Especially this paragraph on economic growth: "It is the combination of atoms, electrons and thoughts in ways that help supply us with what we need and I see no theoretical limit to the number of ways we can do this (I owe this idea to Paul Romer)."
Paul Romer once spelled out this idea for us in an interview, the relevant excerpt from which is reproduced below.
While I share much of Matt's general optimism, as I wrote here in May, I think his -- or rather the Pinkovskiy/Sala-i-Martin -- assessment of world inequality trends may be overly sanguine. The poorest of the poor have been Prof. Sala-i-Martin's subject for years. The data, however, are often sketchy. Assuming the world's poorest have dramatically improved their lot, that would almost surely tend to reduce inequality. On the other hand, the rising inequality in the world's richer countries -- for decades now -- prompts the worry that wealth past a certain point triggers a reversal of leveling trends.
Finally, an apology to Matt. The bank for which he served as non-executive chairman, Northern Rock [not Rocks], was nationalized by the British government not due to "bad loans," as I narrated in our story with him, but because the bank's substantial mortgage business dried up all of a sudden. As investor appetite for mortgages waned, so did the income stream on which Northern Rock depended, which in turn spooked depositors, who lined up to withdraw their money. "Market jitters," or perhaps "market panic," would be more accurate than "bad loans" in describing the cause of the bank's crisis.
Paul Romer Interview Excerpt:
Imagine you start with about 100 elements in the periodic table and you ask: How many valuable things can we make by mixing together different elements from that table? So, you might start with copper, which is valuable as a metal all its own, or you might start with tin, but if you try mixing copper and tin together, you get bronze, which is a much stronger material and has all kinds of uses that weren't available to you when you just had the tin and the copper in their separate forms. So, historically, the entire Bronze Age came from the idea of mixing two things together and getting something that's more valuable than they were before you mixed them.
So, if you take 100 different elements and ask: How many mixtures can we make out of those elements? Well, starting at two a time. Two at a time would be 100 times 99, so that's already a big, relatively big number. But then suppose we have three things we can pick, so then there's 100 you could pick first, then 99, then 98, and then we consider mixtures of 4 and 5...when you start to consider all the possible mixtures, the number of things we could make out of the periodic table is bigger than the total number of seconds since the Big Bang created the universe. So we know there's things out of the periodic table that no human has ever investigated, has ever even tried. And scientists keep finding new things out of those mixtures that turn out to be very surprising.
About ten years ago, scientists working for a private firm, IBM in Switzerland, found that if you mixed together Barium, Yttrium, Oxygen, and Copper, they created something that scientists now call a high-temperature superconductor. It's a super conducting substance, it conducts electricity with no resistance at temperatures which are much higher than any known superconductor up until that time. They are still pretty low temperatures but yet temperatures which were able to generate in commercial and industrial uses. So there are now cables under the streets of Detroit that are made out of this super conducting substance and conduct electricity without any losses from resistance. So that- there are still things out there to discovered like that, out of just mixing things from the periodic table, we'll never run out of- between now and the time 5 or 10 billion years from now when the sun explodes and incinerates the whole solar system, we'll never run out of important new things to discover.
[MY INTERJECTION: Maybe we'll even figure out how to keep the sun from exploding.]
Or we'll figure out a way to- we'll find a new solar system. [Moreover,] the calculation I just did was a crude underestimate because, not only can you mix different things together, but you can mix them in different proportions or you can combine them in structured ways. So if you take something like carbon and hydrogen and oxygen, there are various different structures that you can use to combine those elements together, instead of just mixing them up in a big ceramic, you can make molecules like carbohydrates and proteins and the number of possible interesting molecules you can make is incomprehensibly large compared to the mixtures that we're describing, and some of those molecules turn out to be extraordinarily important for the quality of life. That's what you and I are made out of...People are built out of carbon and hydrogen and oxygen atoms assembled into interesting molecules. And if you do that with just the right structure, you end up with these amazing creatures that can walk, talk, think, and smile.
So let me give you this illustration of what will be possible for us to discover in the future. I'm absolutely certain that scientists will be able to create a small factory which is mobile, it will go out and find its own renewable input, it will convert that renewable input into some chemical that humans like, this factory will be self-healing, it will, if anything goes wrong, it will fix itself. And when that factory wears out, it will actually build a replica of itself so that the new factory can do for us what the old factory did. Now, how can I be so sure that we can make such a thing by sticking together carbon and hydrogen and oxygen atoms? Well, I know it can be done because it already exists. It's the milk cow. And that particular kind of structure arrangement of atoms happened to be made by nature. But if you can create something as remarkable as a milk cow just by assembling raw materials in the right way, think of what else remains out there for us to discover.