Romer on Growth Theory and 'Work That is Scientifically Unjustifiable'
A small part of a much longer interview of Paul Romer (focused largely on charter cities):
... Q: So are you not going back to work on growth theory?
Romer: Actually I am writing something about growth theory right now, but it is mostly a commentary on what happened to growth theory. To be honest, I think that a substantial fraction of the work that people are now doing on growth has to be judged a failure from a scientific perspective.
In particular – and I apologize if this relies too much on the jargon of our field — monopolistic competition turns out to be just the tool for understanding the economic ideas. (It also turns out to be the tool for understanding international trade, economic geography, and macroeconomics.) But there has been a series of models that are associated with the University of Chicago – from what some people call the freshwater camp in macroeconomics – that are continuing a fight that George Stigler started in the 1930s to keep monopolistic competition from being used in economics. It is hard to explain to an outsider why a whole group of economists have ended up on the wrong side of scientific progress, resisting the direction that all of modern economic theory is taking, but they are.
In the economics of ideas, we have to be willing to at least consider the possibility that someone could have some control over an idea, hence some monopoly power associated with ideas. This could come from patent or a copyright. It could also come from secrecy.
Then we can ask if it is a good idea or a bad idea to have more intellectual property rights or more protection of ownership of ideas. We know that the answer here is mixed. Sometimes some amount of it can be good, but it can also be harmful if the property rights are too strong or are given to the wrong types of ideas. But if you don’t even allow for the possibility of ex post monopoly rents from the discovery of ideas, you can’t even ask the question.
So it is scientifically unacceptable to have people who say, “We will never, as a matter of principle, consider a model in which there are ever any monopolies. We will dogmatically stick only to models of price-taking competition.” I think this an untenable scientific stance.
I don’t think that this critique is going to reignite interest in growth theory. But like I said, when it’s time for interest to come back, somebody have a new take on growth theory, and work in this area will start again. But in the meantime, we have to stop tolerating work that is scientifically unjustifiable. ...
Posted by Mark Thoma on Thursday, April 30, 2015 at 01:36 PM in Economics |
You can follow this conversation by subscribing to the comment feed for this post.