The Great Debate UK

from Chrystia Freeland:

The winner-take-all economy

Cornell University economist Robert H. Frank sat down with Chrystia at the Aspen Ideas Festival to chat about the earnings potential of superstar dentists and world-class sopranos, the unlikelihood of an Atlas Shrugged-esque strike of the elites and Charles Darwin's contributions to economic thought. Here's a transcript of some of the highlights of their conversation.

On the upsides and downsides of the winner-take-all phenomenon

CHRYSTIA FREELAND: If the super-talented are getting super rewards, maybe in the past they were not getting the appropriate rewards. I mean, maybe this is really American capitalism working the way most Americans want it to work.

ROBERT H. FRANK: Well there are two things in your question. One is the upside of the whole phenomenon is that we now get to listen to the best soprano rather than the hundredth best.  In 1890 there were 1,300 opera houses in the state of Iowa alone. You had to listen to music live and in-person. You couldn't hear the best soprano because she couldn't be everywhere at once. Now there's a contest to see who the best soprano is.  That winner then records the master disc and get's stamped out onto CD's at virtually no cost so we could all listen to the best soprano.

[...]

That's the upside.  The downside is that there's been a huge concentration of wealth and income that's occurred because of this.  If you thought you needed those concentrated rewards to get people to put forth effort in these domains, that would be one thing.  But there's absolutely no evidence of that. People just want to be the best performer whether or not--

from Chrystia Freeland:

The future of power

 

At the Aspen Ideas Festival last week, Chrystia's discussion of war, economics and America's role in the world featured a who's who of leading voices: Robert Hormats, the Undersecretary of State for Economic, Business, and Agricultural Affairs; Joseph Nye, a professor at Harvard's Kennedy School of Government; and Liaquat Ahamed, the Pulitzer-prize winning author of Lords of Finance: The Bankers Who Broke the World. Here’s a transcript of some of the highlights of their conversation.

How the deficit debate affects U.S. diplomacy:

JOSEPH NYE: In congressional discussions we get the short-, the medium-, and long-term mixed up. Here we have a problem often estimated as a $2 trillion problem about getting the debt under control, or the deficit under control, related to the debt. And what did Congress do in April when they were trying to balance the budget? They cut $8 billion out of the State Department budget and thought that that was doing something about the deficit. That is absolute nonsense. It's like a drop in the wind that's gone immediately. But from the point of view of the State Department where you have a $50 billion budget, that's a huge hit.

from Chrystia Freeland:

Ending poverty via urban planning

NYU economist Paul Romer is what Chrystia calls an "ideas entrepreneur." He revolutionized the study of economic growth with his research on the power of ideas. He shook up the field of higher education with his company that offered online homework problems that were graded by computer. Now Romer has set out to alleviate world poverty. For his new project, Romer set up a nonprofit organization dedicated to convincing governments across the developing world that they should cede a portion of their territory to an external authority in order to create a "charter city" in which new rules would make it attractive for skilled immigrants, unskilled migrants and businesses to come and settle.

This radical idea is slowly catching on. Honduras is poised to be the first country in the world to host a charter city after its Congress approved a constitutional amendment enabling such a plan in January.

from Chrystia Freeland:

The super-wealthy bounce back

Keith Banks is the president of U.S. Trust, the private wealth management arm of Bank of America. He stopped by the Reuters studio in Aspen to chat with Chrystia about the resurgent risk appetite among the world's super-wealthy investors, his tripartite outlook for the global economy and the alternative asset classes that are currently in vogue. Here is a transcript of some of the highlights of their discussion:

The super-wealthy have gotten their groove back:

KEITH BANKS: The thing that was very interesting to me was even the super wealthy, people with hundreds of millions of dollars, how impacted they were psychologically by the crisis. So even though arguably their standard of living didn't change, yeah their net worth was down, but it was not down to a point where they had to change their lifestyle. But psychologically, they were very impacted by it. If they happened to be business owners on top of that, they were really feeling pretty beaten up, because not only were they dealing with the personal aspects of that, but they were running businesses that were looking at higher taxes, more regulation, higher health care costs, and a lot of uncertainty and generals. They were getting kind of a double whammy. So I would say our clients came out of the crisis really hunkered down, were really impacted psychologically. And what it really changed was their thinking about what they wanted to do from an investment standpoint... I'd say about six, nine months ago, we slowly began to see that shift where clients began to engage. We're able to engage clients more in a discussion about areas they should be thinking about moving their assets into to get somewhat higher returns, still managing the risk. So I think the psyche has improved. They're doing more and they're more willing to move money around, whereas 12 months ago, not interested.

from Felix Salmon:

Will the world ever have open borders?

My favorite bit in this video comes towards the end, when I ask Charles about the wonderful tweet he sent out last Friday, after the gay marriage bill passed the New York senate.

One day we'll see legal discrimination by *place* of birth as evil as discrim. by other features of birth --gender, orientation, color.less than a minute ago via web Favorite Retweet ReplyCharles Kenny
charlesjkenny

I wanted to know, was this just a lovely sentiment, or does Charles really think this is going to happen? The answer is the latter, and Charles gives two strong reasons why that might be the case.

from Felix Salmon:

Getting enthused about Aspen

On the strength of one opening afternoon at the Aspen Ideas Festival, I think I like it a lot. And that's a surprise to me: I was expecting that Alpine gabfests would tend to have more similarities than differences. But this is a world away from Davos, and not just in terms of longitude or season. At Davos, everybody is self-importantly "committed to improving the state of the world"; in Aspen, the stakes are much lower, and the emphasis is on what you're saying rather than who you are.

The economics of conferences dictate, of course, that there be a smattering of bold-faced names who will do their bit in attracting the paying public and large corporate sponsors. But it's surprisingly easy to avoid the politicians and the blowhards, and to find sessions on subjects about which you know very little and therefore can learn a lot.

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