Archive for February 1st, 2019

Who’s Afraid of Budget Deficits? How Washington Should End Its Debt Obsession?

February 1, 2019

Larry Summers and Jason Furman in this long article says the usual understanding is that high deficits lead to higher interest rates, crowding out private sector, high inflation and so on. However, we are hardly seeing any of these things despite high deficits and record debt levels:


How Germany lost its Einsteins?

February 1, 2019

Prof Dalia Marin of Technical University of Munich in this piece looks at this question: Why has Germany, the land of history-making innovators like Johannes Gutenberg and Albert Einstein, not produced high-tech giants like Google, Amazon, or Facebook?

Her answer is low social mobility in Germany:

Some blame the stigma associated with failure in Germany for discouraging innovative entrepreneurship. Others point to high bureaucratic hurdles to starting a business. But there is another, more worrying reason why Germany has lost its innovative momentum: its potential pioneers from disadvantaged households are not getting the chance to thrive.


In Germany, income inequality is lower than in the US, and Germany offers free education for all, including at the tertiary level – a powerful social equalizer. But Germany’s rate of social mobility remains lower than that of the US – and the country is paying the price.In one recent survey, German entrepreneurs cited a lack of relevant talent as a major hindrance to start-up activity.

Clearly, Germany must do a better job of fostering innovative talent in its young people of all socioeconomic backgrounds, races, and genders. Judging by the findings of The Opportunity Atlas, this can be achieved through, say, tailored mentoring and internship programs that increase children’s exposure to innovation.

As it stands, Germany’s efforts to boost innovation focus on new tax incentivesfor research and development. But shaving a few percentage points from the taxes paid by leading inventors – who earn more than $1 million per year, on average – is unlikely to have an appreciable impact on their behavior. If the talent pool remains limited, tax incentives to promote innovation are more likely simply to increase the earnings of those who are already innovating, rather than increase the overall number of innovations.

Compounding this effect is the fact that it becomes more challenging to reach new frontiers as the total amount of knowledge grows. According to one estimate, producing the same amount of new knowledge today as 80 years ago requires some 20 times the number of researchers.

This implies that if Germany – or any country – is to reach its innovative potential, it will need a people-focused strategy. And that strategy must emphasize equality of opportunity and exposure to innovation, especially among the highest-scoring children.


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