Is Entrepreneurialism Bad?

By David R. Henderson. Excerpts:

"Imagine a product that costs $1.80 to make and sells for $2. Imagine also that the average household in America buys one of these items per week. There are approximately 134 million households in America. That means that in a given year, US households will buy 6.968 billion units and will spend $13.936 billion on this product.

Then along comes an innovator who has figured out how to produce the item at a cost of only $1.50 per unit. The innovator would ideally like to have a patent and might well get a patent. But even if he doesn’t, it will take time for competitors to notice his innovation, figure out how it works, and implement it. Let’s say it takes a year. For products with a complicated production method, that could well be an underestimate.

What will the innovator do during that year? Cut price? Maybe a little but not much. For one year, all his competitors are using a method that costs $1.80 per unit and are charging $2.00. What the innovator could do is cut the price to, say, $1.90 per unit and take a large share of the market. Let’s say he takes half the market. Then 67 million households will buy 3.484 billion of his units and will spend $6.62 billion on his product.

On each unit, the innovator makes 40 cents, the difference between the price of $1.90 and the cost of $1.50 per unit. For that year, therefore, he will make $1.394 billion. Voila! He’s a billionaire."

"Starting a successful startup is the most common way to become a billionaire"

a 2004 study he (Nobel prize winner William D. Nordhaus) wrote for the National Bureau of Economic Research, Nordhaus wrote:

Only a minuscule fraction of the social returns from technological advances over the 1948–2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

How minuscule? 2.2 percent. The remaining 97.8 percent of the gains from innovation go to consumers."

"Once other competitors imitate the innovator, the price falls and the unusual gains to the innovator go away. Consumers then get the benefits from the innovation year after year." 

Ozempic Sat Unused for Decades Because Invention Is Not Enough

Pfizer knew GLP-1s worked in 1990, but didn’t see their potential. The 30-year detour shows entrepreneurship matters as much as raw invention.

By Per Bylund. 

"Led by Ozempic and Wegovy, glucagon-like peptides (GLP-1s) have become a global phenomenon, with one in eight US adults currently taking one. Those two branded compounds, both made by Novo Nordisk, emerged from attempts to develop a diabetes drug. It effectively lowers blood glucose, slows gastric emptying, and reduces hunger, leading many patients to experience profound weight loss. In a world plagued by increasing obesity, the drugs’ utility extends far beyond diabetes treatment. So why did the formula sit untouched for 30 years after it was licensed?

Ozempic is a story of pharmacological success, but also of entrepreneurial failure. The tale provides a strong reminder that inventions and discoveries mean little unless they are combined with sound entrepreneurial judgment.

According to a paper published in the Perspectives in Biology and Medicine, a startup produced a GLP compound in the late 1980s, and pharma giant Pfizer sponsored human trials that confirmed the drug’s efficacy in reducing blood glucose levels and slowing gastric emptying. One member of the startup team, Jeffrey Flier of Harvard, explained what happened next:

I was shocked when told that senior Pfizer leadership had concluded that there would never be another injectable therapy for diabetes other than insulin. What led them to this conclusion was never explained….I had been deeply impressed by their rapid decision to invest in our company, and I was equally dumbfounded by their decision to end their investment despite convincing early evidence of the program’s success.

Confident in its own conclusions, Pfizer pulled the plug on the drug in 1991. The startup folded.

Under the terms of Pfizer’s agreement, the license remained with the Boston hospital where researchers discovered GLP-1’s mechanism and conducted the human trials. It was then acquired by Novo Nordisk in 1992, where scientists used it to develop what eventually became semaglutide, the pharmaceutical sold as Ozempic and Wegovy. While it is unclear whether, as Max Marchione put it on Twitter, the GLP-1 agonist data simply “sat in a filing cabinet for 30+ years,” Pfizer’s decision to abandon the project likely delayed its development.

While it is unclear whether, as Max Marchione put it on Twitter, the GLP-1 agonist data simply “sat in a filing cabinet for 30+ years,” Pfizer’s decision to abandon the project certainly delayed its development. Had the company continued investing in the research, it might have brought the drug to patients years earlier—and captured a significant share of what has become a $190 billion market.

Clearly, mistakes were made in the development of Ozempic, but what’s notable is that the product’s success required far more than the idea. Even a great idea is not a product and may never become one — much less a successful one. Business history is filled with cases in which inventors appear to have been deprived of the rewards of their discoveries. Many great inventions were, in some sense, stolen ideas commercialized by someone other than their inventors. George Westinghouse bought patents from Nikola Tesla, and undertook illuminating the nation while Tesla, the lone genius, struggled with poverty. Elias Howe invented the sewing machine but lost most of the revenue to Isaac Singer, who was only later compelled to pay the inventor royalties. Antonio Meucci invented the telephone but couldn’t afford to secure or defend patents from Alexander Graham Bell’s enthusiastic dissemination of the device. 

Inventors frequently failed to recognize the full market potential of their ideas. Entrepreneurial outsiders notice the discovery, develop it into a desirable technology or product, and implement strategies for manufacturing, distributing, and marketing the invention. 

Some unethical behavior, fraud, exploitation, and outright stealing certainly does exist in these stories. But it would be a mistake to reduce this entrepreneurial instinct to taking advantage of or free-riding on a mistreated genius who would otherwise have realized the great benefit, himself. In a very real sense (as GLP-1 development demonstrates), what actualizes the value of an idea is the execution: operationalizing a discovery into a product or service that people find valuable. The idea has relatively little value, compared to the scalable solution built upon it. 

We typically do not learn about it much in school, but there is such a thing as second-mover advantage. This phenomenon (that the first mover is not profitable but the second mover is) is often explained in terms of avoiding the costly mistakes that the first mover makes. But cost is not the true story. Second movers recognize — imagine — a new idea’s utility to some market segment. Like Novo Nordisk and George Westinghouse, they strive to make the implementation of the idea as valuable as possible, positioning it as valuable to potential customers. The creation may be every bit as valuable as the idea, and often more so. 

Henry Ford, for another historical example, was not the inventor of the automobile, but the innovator of the affordable car. Existing manufacturers of automobiles did not recognize the potential appeal of their horseless vehicles. Henry Ford did — and made it happen. Far from the first mover, or even the second mover, he was the first to recognize what a mass market of ordinary people wanted from a car. The other producers did not. Ford transformed a toy for the wealthy into practical transport for the ordinary.

The same type of story can be told about many successful innovations. The invention (the new thing) might have limited value, until its utility is captured, marketed, and made available to people. Entrepreneurs and investors look for the value proposition in new ventures: what would make buyers want this new thing? They ask not “is this a new thing?” but “is this new thing generating value someone is willing to pay for?” The questions may have the same answer but often do not.

The story of Ozempic is one of failed entrepreneurship, but also of its eventual success. Pfizer, judging from how the story has been told, did not recognize the value of the drug. Viewing GLP-1s as a treatment for diabetes, and nothing else, Pfizer execs failed to imagine how other consumers might value these clinical effects. 

Perhaps they were right — from the perspective of treating diabetes, another injectable may not be necessary. But they were wrong regarding the value of the drug, which arises from a different use by a different market segment. 

The Ozempic craze of today is not driven by diabetics seeking to manage their disease, which Pfizer viewed as its only potential application. Millions of non-diabetics now choose the compound for other reasons. Pfizer completely missed that value proposition."

Jeff Bezos Earned His Fortune

The Amazon founder’s innovations save customers 22 hours a year on average, giving them the gift of time

By Marian L. Tupy. Excerpts:

"Amazon didn’t become valuable by force. It became valuable because hundreds of millions of people chose to use it."

"Amazon saved them [consumers] time, money, effort or uncertainty. Sellers weren’t forced to use Amazon’s marketplace. They did so because it gave them access to demand."

"The value Amazon created is harder to see because it is dispersed. A mother who doesn’t drive to a store to buy diapers doesn’t appear in an economic headline. A small business that reorders supplies in two minutes doesn’t make the evening news."

"Suppose an hour of labor is worth about $64, roughly the average gross domestic product per hour worked in the countries in which Amazon operates. If Mr. Bezos’ fortune corresponded to the total value that Amazon created, his $275 billion would represent about 4.3 billion hours of saved time. Divided among Amazon’s more than 300 million active customers, the saving comes to about 14 hours per customer over Amazon’s life."

"entrepreneurs don’t capture all the value they create. The Nobel Prize-winning economist William Nordhaus estimated that innovators keep only a small share of the social value—roughly 2%—produced by their innovations."

"A single avoided trip to a store can save 30 minutes. Finding a product online instead of driving to three retailers can save an hour. Reading reviews can reduce the chance of buying the wrong product."

"Amazon Web Services lowered the cost of starting and scaling companies. It gave firms computing capacity without the old capital expense."

"Amazon also forced competitors to improve." 

DATA CENTER MYTH V. REALITY

From Taxpayers Protection Alliance. They used 0.06 percent of water in 2025 in Maryland and 2.5 percent of electricity.

 

The compound interest of innovation: Wi-Fi and the power of unlicensed spectrum

By Brian A. Rankin of CEI.

"Investors understand the power of compound interest. Over time, small gains accumulate into exponential growth.

Innovation often works the same way. One breakthrough creates the foundation for the next, which enables another. Over time, innovation compounds, producing transformative economic and technological change.

Few technologies better demonstrate the compound interest of innovation than Wi-Fi.

In 1985, the Federal Communications Commission (FCC) took a novel and consequential step. It opened three spectrum bands for unlicensed use. At the time, these spectrum bands were dismissed as “junk bands.” Yet those supposedly worthless bands were put to many productive uses, including Wi-Fi.

While exclusive-use licensed spectrum forms the core of modern mobile networks, Wi-Fi relies on portions of unlicensed spectrum that anyone can use on a nonexclusive basis. This spectrum is also decentralized: there are no license payments or centralized control for users, though Wi-Fi devices remain subject to FCC certification and certain technical requirements.

This openness allowed Wi-Fi to proliferate and drive affordability. Coffee shops, hotels, airports, hospitals, libraries, and countless other locations routinely offer Wi-Fi at no cost. And a single residential broadband subscription can serve an entire household with many connected devices. The average home now has more than 21 connected devices, each connected at no incremental cost.

The result is extraordinary consumer value and affordability.

In 2020, when the FCC opened an additional 1,200 MHz of spectrum within the 6 GHz band for unlicensed use, the agency found that unlicensed devices relying on Wi-Fi and other technical standards had “become indispensable for providing low-cost wireless connectivity in countless products used by American consumers.”

The educational benefits alone are substantial. In a survey of more than 16,000 undergraduate students across 71 US institutions, 96 percent said that Wi-Fi was the most important technological feature for studying. Wi-Fi has transformed how teachers and students communicate, allowing them to safely share homework, documents, and files over a school’s network.

Business applications are also significant. A recent report by ABI Research shows an increase in Wi-Fi usage across business and enterprise environments. The report found that “virtually all business, from sprawling multinational enterprises to independent mom and pop shops, depend on Wi-Fi for daily communications and commerce.” It concluded that Wi-Fi serves as a “key enabler” of the disruptive innovations that will define tomorrow’s economy.

Health care is another example. Wi-Fi-enabled telehealth services allow medical professionals and patients to communicate more efficiently and conveniently, saving both money and time. A recent study found that 71 percent of Americans are comfortable receiving virtual care for the treatment of common mild illnesses, while that 66 percent are comfortable using it for chronic disease management.

These innovations emerged because policymakers created an environment where entrepreneurs and technologists could experiment freely. One innovation led to another, and then to another – compounding over time into a communications ecosystem that has transformed modern life.

The lesson for policymakers is straightforward.

Innovation flourishes when government creates space for experimentation. The success of Wi-Fi and unlicensed spectrum demonstrates the extraordinary economic and consumer benefits that openness, flexibility, and light-touch regulation can produce.

That is the compound interest of innovation."

The Hidden Cost of Hard-to-Fire Labor Laws: Why European Firms Don’t Take Risks

By Alex Tabarrok.

"In our textbook, Modern Principles, Tyler and I write:

Imagine how difficult it would be to get a date if every date required marriage? In the same way, it’s more difficult to find a job when every job requires a long-term commitment from the employer.

In two new excellent pieces, Brian Albrecht and Pieter Garicano extend this partial equilibrium aphorism with some general equilibrium reasoning. Here’s Albrecht:

[I]magine there is a surge for Siemens products. Do you hire a ton of workers to fill that demand? No, you’re worried about having to fire them in the future but being stuck until they retire.

But it’s even worse than that…..[suppose Siemens does want to hire] where is Siemens getting those workers from?…Not only is it a problem for Siemens that they won’t be able to fire people down the road, the fact that BMW doesn’t fire anyone means you can’t hire people. 

Garicano has an excellent piece, Why Europe doesn’t have a Tesla, with lots of detail on European labor law:

Under the [German] Protection Against Dismissal Act, the Kündigungsschutzgesetz, redundancies over ten employees must pass a social selection test (Sozialauswahl). Employers cannot choose who leaves: they must rank employees by age, years of service, family maintenance obligations, and degree of disability, and then prioritize dismissing those with the weakest social claim to the job. If someone is dismissed for operational reasons but the company posts a similar job elsewhere, the dismissal is usually invalid.

Disabled employees can be dismissed only with the approval of the Integration Office (Integrationsamt), a public body. The office will weigh the employer’s reasons, whether they have taken sufficient steps to integrate the employee, and whether they could be redeployed elsewhere in the organization. Workers who also become caregivers cannot be dismissed at all for up to two full years after they tell their bosses they fulfill that role.

As a company becomes larger and tries to let more workers go at once these difficulties increase. In many European countries, companies with more than a certain number of workers – 50 in the Netherlands, 5 in Germany – are obliged to create a works council, which represents employees and, in some countries, must give its approval to decisions the employer wants to make regarding its employees, including layoffs or pay rises or cuts.

…Companies that are allowed to fire someone and can afford to pay the severance costs have to wait and pay additional fees. Collective dismissal procedures in Germany start after 30 departures within a month; once triggered they require further negotiations with the works council, a waiting period, and the creation of a ‘social plan’ with more compensation for departing workers. When Opel shut down its Bochum factory in Germany, it reached a deal with the works council to spend €552 million on severance for the 3,300 affected employees. This included individual payments of up to €250,000 and a €60 million plan to help workers find new jobs.

Now what is the effect of regulations like this? Well obviously the partial equilibrium effect is to reduce hiring but in addition Garicano notes that it changes what sorts of firms are created in the first place. If you are worried about being burdened by expensive dismissal procedures, build a regulated utility with captive government contracts, not a radical startup with a high probability of failure.

Rather than reduce hiring in response to more expensive firing, companies in Europe have shifted activity away from areas where layoffs are likely. European workers are for sure, solid work only. This works well in periods of little innovation, or when innovation is gradual. The continent, however, is poorly equipped for moments of great experimentation.

…Europe’s companies have immense, specialized knowledge [due to retained workforces, AT]. The problems happen when radical innovation is needed, as in the shift from gasoline to electric vehicles. The great makers of electric cars have either been new entrants, like Tesla and BYD, or old ones who have had their insides stripped, like MG.

..If Europe wants a Tesla, or whatever the Tesla of the next decade will turn out to be, it will need a new approach to hiring and firing."

Small Businesses Can’t Escape Price Controls

The Biden administration’s legacy is choking off tomorrow’s small-business breakthroughs before they leave the lab, writes Casey Mulligan.

Letter to The WSJ. 

"Tomas Philipson ably details how “Biden’s IRA Is Harming Cancer Patients” (op-ed, Dec. 1). Those who had a bit of economics training would have seen that coming. It doesn’t matter whether it’s rent control, groceries or healthcare—government-imposed price ceilings curtail investment in maintaining and improving the quality of consumer products. In the pharmaceutical industry, that means fewer new drugs to improve health and longevity, and fewer discoveries of how to use existing medicines better.

Small businesses drive innovation because they are less bureaucratic and have fewer worries about protecting existing products. They are the least able to survive a policy that shortens effective patent lives and caps prices as their discoveries approach the market. According to the 2023 Business Enterprise Research and Development survey, about 2,970 small firms are engaged in U.S. biotechnology research and development. Their business models depend on a handful of potential “home run” projects. When price caps truncate the payoff window, many of their projects never get financed or are abandoned.

The Biden administration’s legacy not only harms cancer patients; it’s choking off tomorrow’s small-business breakthroughs before they leave the lab.

Casey B. Mulligan

Washington

Mr. Mulligan is chief counsel for advocacy at the Small Business Administration." 

Europe Aimed to Set Standards for Tech Rules, Now It Wants to Roll Them Back: Backed by France and Germany, the EU thinks easing back on legislation will make the bloc less dependent on U.S. tech

By Bertrand Benoit, Kim Mackrael and Sam Schechner of The WSJ. Excerpts:

"Europe is moving to relax some of the world’s tightest digital regulations in a bid to boost growth and reduce its reliance on U.S. tech."

"The European Commission . . . introduced a proposal to pare back some elements of its sweeping digital laws."

"measures that aim to make it easier for companies to use data to train AI models and delays to the enforcement of certain provisions in the EU’s new AI law."

"German Chancellor Friedrich Merz [said] . . .“Unnecessary regulation…must not inhibit Europe’s innovative strength.”"

"France and Germany would push for . . . EU’s AI rules to be postponed by a year and for Europe’s stringent data-privacy rules, known as the General Data Protection Regulation, or GDPR, to be relaxed."

"business leaders across Europe have grown frustrated at the torrent of legislation that has been gushing from Brussels"

"the resulting red tape a bigger obstacle to growth than President Trump’s tariffs."

"the simplest client question—does this rule affect me?—can take several lawyers two days to answer."

"the EU is now pushing to make the bloc more attractive for investment, seeking to ease the regulatory burden"

"European leaders also think a regulatory rollback will help the region’s economy reduce its dependence on" [the U.S. and China]

"“We have to innovate before regulating . . . said Macron."

"onerous regulations, especially on the handling of data, and political disagreements within Europe have hobbled the emergence of European players on a scale to rival their U.S. competitors."

"the top French and German business organizations wrote  . . . Europe . . . should focus on “creating a supportive investment climate" 

The Constitution of Innovation: A New European Renaissance

"The regulatory bicycle is pedaling at full speed. But it is pedaling towards a wall of bureaucracy created by its own policies." 

 "To face the great transformation ahead, Europe needs both an innovation system and creative destruction." 

By Luis Garicano, Bengt Holmström & Nicolas Petit. Holmström is a Nobel Prize winning economist. Excerpts:

"While the United States maintained a remarkably constant 2 percent growth rate in average income, the European core economies decelerated, slowly and then sharply. Since 1995, Europe’s average annual growth has been just 1.1 percent; since 2004, it has been a mere 0.7 percent – all while the United States has continued on its steady track. By 2022 the relative gap in output per head has returned to where it was in 1970. Decades of convergence were surprisingly wiped out" 

 

"Last year, Enrico Letta found the European market critically fragmented, while Mario Draghi concluded that Europe’s competitiveness had fallen so far it now required ‘radical change’ just to survive."

"The European Union does not need a new treaty or powers. It just needs a single-minded focus on one goal: economic prosperity."

"The European Union currently pursues a long list of goals, including (as given by the Commissioner titles): promoting the ‘European way of life,’ ‘health and animal welfare’, ‘environment, water resilience and a competitive circular economy’, ‘intergenerational fairness, youth, culture and sport’ or ‘social rights and skills, quality jobs and preparedness’. Meanwhile, the internal market has become so fragmented that, according to recent IMF analysis, internal trade barriers are equivalent to a 44 percent tariff on goods and 110 percent on services."

"With peace secured, the European institutions began to look for new problems to solve."

"From the 1980s Europe began legislating on topics with little to no connection to economic integration or peace – the amount of fruit in marmalade, the conditions under which a piece of clothing could be considered sustainable, or what constitutes appropriate political advertisement. What started as functional integration – removing barriers to trade – morphed into the superstition of regulation for the sake of integration. Each new regulatory text justified the next"

"This regulatory overkill has culminated with the response to the digital and environmental challenge, which led to an avalanche of rules"

"the General Data Protection Regulation (GDPR), favors US tech giants which can shoulder the burden of massive compliance costs but undermines European startups. A recent study shows that GDPR reduced European Union technology venture investment by 26 percent relative to the US."

"These rules raise the cost of innovation and slow the dissemination of digital technology across the European Union."

"it must work with the Member States to complete the internal market.

The internal market has only one definition: the free movement of goods, services, capital, and workers. It is against these standards that it should be judged, exclusively and fully."

"The European Union needs to stop wading into new policy areas like housing or animal welfare and get serious about enforcing basic internal market rules."

"To face the great transformation ahead, Europe needs both an innovation system and creative destruction. We lack in both areas, but we are particularly weak in creative destruction. The ECB has pointed out repeatedly that Europe’s failure to kill zombie firms crowds out credit for healthy firms.¹⁵ We must stop defending legacy assets and build a system that accepts both market entry and exit as the basic conditions for innovation."

"we must actively seek and eliminate barriers to entry that favor incumbents, such as special rights, subsidies, or skewed regulations from banking to telcos, from energy to agriculture. We must support market exit through streamlined bankruptcy laws and flexible labor rules. Market exit is not failure; it is how we reallocate assets, people, and resources from old businesses to new ideas."

"supported by secure property rights"

"If a product is safe enough to be sold in Lisbon, it should be safe enough for Berlin. We should not burden traders with the task of removing local barriers to trade through judicial remedies in the target country"

"European Union law in reality allows Member States freedom to restrict imports of goods and services and only forces them to demonstrate why imports are not good enough for the home market under a specific procedure. Traders are therefore subject to ‘an unstable litigation-driven trading environment of inter-State regulatory diversity’.¹⁷ The business of business is business, not litigation."

"We must create simple and clear rules that free competition instead of centrally planning our economy by regulatory fiat."

"Europe’s frenzy of regulation has been predicated on the existence of free lunches. For instance, climate laws have been sold as leading to job creation and innovation (the ‘green deal for jobs’) not just as the solution to climate change. Citizens were asked to swallow make-believe propositions, like the idea that fighting global warming would be free of economic cost.

Similar Nirvana fallacies have been observed in other domains, like migration, trade policy or digital regulation."

Legal reforms

1.  Eliminate the usage of directives

[A court in 1979 ruled that] "goods lawfully produced and marketed in one Member State must flow freely to all others."

"Member States cannot enforce their own domestic laws to bar imported goods."

 "businesses must still comply with a maze of national barriers. France imposes unique carbon tests on imported diesel. German Länder require separate fire safety certifications for construction materials already approved elsewhere in the European Union."

"The solution is to abandon directives entirely"

"Businesses end up facing 27 different versions of supposedly ‘common’ rules."

2. Specialized Commercial Courts

"The internal market’s main weakness is enforcement. When Italian regulations illegally block a French trader, that company faces only bad options. It can file a complaint with the Commission and wait years for action that may never come; sue before Italian courts only slightly familiar with European Union law; operate illegally and hope to reach the European Court of Justice through proceedings brought against it; or simply give up."

"We propose that the European Union create Specialized Commercial Courts with exclusive jurisdiction over internal market violations by Member States."

3. Federal field preemption

"traders face a regulatory thicket, which only gets denser as more national, regional, and local regulations are introduced. Right now, banks answer to European supervisors, national central banks, and local regulators simultaneously. According to the Draghi report, there are over 270 digital regulators in the European Union, each interpreting “common” rules individually."

"The solution is that when the European Union regulates in areas of exclusive competence and internal market legislation, all national, regional, or local rules in that specific area cease to apply."

4. A 28th regime that is appealing to businesses

"give up on harmonizing 27 different corporate systems"

"In practice, Portugal would not need to adopt German corporate law or vice versa, as there would be a European alternative that companies can embrace if it serves them better."

"statutory conditions for the formation of SEs require businesses to incur high set-up costs and follow time-consuming and complex procedures for incorporation. This has tended to favor large firms.²⁸ Moreover, the law embodied a high number of referrals to national law and burdens in terms of employee participation.²⁹ This forced companies and investors to navigate a complex web of rules"

"This self-inflicted flaw stripped the SE of its core utility: giving small and medium-sized firms scale through simple and swift pan-European incorporation."

The US demonstrated the power of this solution when it allowed companies to bypass state securities laws by being regulated at the federal level – late-stage firms became four times more likely to attract out-of-state investors.³¹ The European Union could achieve similar results by letting businesses opt into European rules rather than forcing all Member States to abandon their national systems. This would also go some way towards unifying capital markets.

Countries that wish to maintain their legal traditions can keep them. Businesses seeking European scale can bypass them.

5. Rely on existing institutions when possible

"much of the European Union’s expansion has taken place in areas where existing institutions already operate."

"a worthwhile policy would consist of systematically determining which other existing institutions the European Union could use to discharge some of its core missions." 

6. Reform legislative practice

"Many temporary law and policy programs have become permanent. New regulatory structures entrench interests and are hard to dismantle. National regulatory authorities (NRAs) in network industries like telecoms illustrate this problem. Created to open monopolistic markets, they were supposed to hand over their powers to national competition authorities (NCAs) following liberalization. Decades later, the European Union has both NRAs and NCAs, adding compliance costs to industries no longer in need of market opening reforms."

"review clauses should be replaced with sunset clauses. Unless evidence shows a persistent market failure requiring maintenance or reform of a regulation or directive, the presumption should be that once a set period has elapsed, the instrument is no longer useful."

"the European Union fails at submitting new rules to a rigorous analysis of their costs and benefits. The Commission does have the duty to run an initial cost and benefits analysis of draft legislation. However, the Parliament and the Council, when they rewrite the law, often in private meetings (called ‘Trilogues’), are not required to check the costs and benefits of their own changes." 

"Whenever a change is proposed to a law that alters its purpose, key terms, or costs, the team must produce a short, public report on the effects."

"Whenever a change is proposed to a law that alters its purpose, key terms, or costs, the team must produce a short, public report on the effects."

[there were] "13,000 legal acts between 2019 and 2024"

"Poland entered the millennium at 47 percent of the European Union average income and today stands at 93 percent."

[that was not] "achieved through the competencies that have been layered on in the last twenty five years." 

[it was because of] "economic integration and solid European institutions."

Schumpeterian Profits in the American Economy: Theory and Measurement

By William D. Nordhaus.

"The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers."

Creative Destruction in a Nutshell

From Alex Tabarrok of Marginal Revolution. 

"A good figure from the Nobel Prize Foundation’s Scientific Background to the Mokyr, Aghion and Howitt Nobel. The figure shows that firm exit rates and job destruction rates are positively correlated with growth in labor productivity; creative destruction in a nutshell."

 

Creative Destruction

See Creative Destruction by Richard Alm and W. Michael Cox. Excerpt:

"Joseph Schumpeter
(1883–1950) coined the seemingly paradoxical term “creative destruction,” and generations of economists have adopted it as a shorthand description of the free market’s messy way of delivering progress. In Capitalism, Socialism, and Democracy (1942), the Austrian economist wrote:

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. (p. 83)

Although Schumpeter devoted a mere six-page chapter to “The Process of Creative Destruction,” in which he described capitalism as “the perennial gale of creative destruction,” it has become the centerpiece for modern thinking on how economies evolve."

But also see this link which suggests that the idea goes back even before Schumpeter to other scholars: Creative Destruction in Economics: Nietzsche, Sombart, Schumpeter by Hugo Reinert and Erik S. Reinert.

"Abstract

This paper argues that the idea of ‘creative destruction’ enters the social sciences by way of Friedrich Nietzsche. The term itself is first used by German economist Werner Sombart, who openly acknowledges the influence of Nietzsche on his own economic theory. The roots of creative destruction are traced back to Indian philosophy, from where the idea entered the German literary and philosophical tradition. Understanding the origins and evolution of this key concept in evolutionary economics helps clarifying the contrasts between today’s standard mainstream economics and the Schumpeterian and evolutionary alternative."

Related posts:

The Power of Creative Destruction (That is the title of a book co-authored by Philippe Aghion, one of this this year's winners of the Nobel Prize in economics) (2025)

Marginal Revolution has great posts on this year's winners of the Nobel Prize in economics (Philippe Aghion, Peter Howitt and Joel Mokyr): This is a prize for economic growth & creative destruction (2025)

A Nobel for human progress

By Ryan Young of CEI.

"This year’s economics Nobel Prize went to three students of the two most important questions in economics: Why have living standards in rich countries improved 30-fold since the 19^th century? And how can that process continue and expand to developing countries?

One half of the prize was awarded to the economic historian Joel Mokyr, whose work emphasizes the role of both technology and culture in the Great Enrichment.

The other half of this year’s prize was split between Philippe Aghion and Peter Howitt, whose work focuses on CEI favorite Joseph Schumpeter’s idea of creative destruction.

Mokyr, the economic historian, has written several books on the early Industrial Revolution that, on the surface, appear to be about technology. But technology alone is not enough to create mass prosperity.

Mokyr argues technology must be paired with pro-innovation cultural values. Even the greatest inventions cannot improve lives unless people are open to using them. If innovators are social pariahs, they may not have any incentive to invent in the first place. Their inventions may also be repressed, or risk Luddite-style revolts.

This was the argument in his first book, 1990’s The Gifts of Athena. In more refined form, it is also the thesis of Mokyr’s most recent book, 2017’s A Culture of Growth, which I reviewed here.

In 1992, Aghion and Howitt created a mathematical model of creative destruction. This is the idea that progress happens when new technologies displace old ones or when new businesses supplant unprofitable ones. In with the computer; out with the typewriter, for example.

For 30 years, theirs has been the workhorse model for researchers interested in how progress happens. Not only have Aghion and Howitt done their own research using their model, but their prize is also in part for enabling other scholars’ work. This sort of meta-contribution deserves more frequent recognition.

In an average year in America, between one-seventh and one-sixth of all jobs are destroyed. But in most years, more jobs are created and the number of total jobs grows. New technologies create at least as many jobs as they destroy, year after year, and generation after generation. This churning process, or creative destruction, is why people today are richer than their grandparents were. Otherwise we’d all still be farmers.

The unemployment rate in 1776’s agricultural economy wasn’t that different from our modern high-tech economy. But the living standards have increased at least 30-fold. It’s not the number of jobs that matters for living standards, so much as what value those jobs create.

The labor market’s biggest threats are from bad policy choices – trade protectionism, industrial policy, and inflationary monetary policy – not from innovation.

The creative destruction process that Aghion and Howitt have modeled ensures that people are continually improving how they use their human, physical, and financial capital.

Zombie companies use up labor and resources that could be put to better use. The price of creating a car industry is the destruction of the horse-and-buggy industry, for example. It’s a tradeoff, but the creation is well worth the destruction. Slowing down that process in the name of tradition or stability means slowing or even stopping the Great Enrichment.

Mokyr, Aghion, and Howitt ask big questions and get big answers. They are the worthiest Nobel recipients in years. They differ from 2019’s laureates, who also work in the development economics subfield, but with a different approach: ask small questions and get small answers.

Theirs is the approach of middle managers telling other people how to do their jobs, or of management consultants writing people-pleasing reports. Too much of development economics today is social desirability bias masquerading as a research program.

One of the papers cited in the 2019 Nobel prize was the finding that having students in Kenya spend more days in school, and spending more money on their textbooks, does not improve their test scores. That is useful information, but it is also the sort of thing that educators on the ground can figure out on their own.

The problem with education in developing countries is not a lack of advice from outside experts. It is that educators in many countries are not allowed to figure out those sorts of things on their own, let alone act on them. It is a problem of permission and dignity, not just resources.

Development is an ongoing process, not an end result. Mokyr, Aghion, and Howitt get that. Many other laureates do not. Nor do leaders at the World Bank and the IMF, many economists at top-five departments, and in many years, the Nobel prize committee.

People in developing countries don’t need better test scores so much as they need ongoing, market-tested improvement processes that are always adapting, changing, and experimenting. That is how you get better school test scores. It is also how poor countries become rich. Enable the process, and the results will follow.

Enabling the process is also the hardest part. It is a cultural issue, not a question of this or that micro-policy, such as students spending enough days in school or spending a certain amount on their textbooks. The origin of human progress is a bigger question than economists from the Harvard-Princeton-MIT mold are typically trained to ask. But it’s right up Mokyr, Aghion, and Howitt’s alley.

When people value openness, cooperation, and innovation, they work to enrich themselves and others. When people fear change and over-value tradition, the result is stagnation and decline.

If you want better results, you need better institutions. And if you want better institutions, you need cultural values that allow those institutions to operate.

Mokyr, Aghion, and Howitt are part of a long mainline tradition in economics that includes deserving would-be laureates such as Deirdre McCloskey, Peter Boettke, and William Easterly. It includes fellow laureates Elinor Ostrom, Douglass North, and Vernon Smith. And it goes back through F.A. Hayek, Frederic Bastiat, and all the way back to Adam Smith.

A well-chosen award ennobles both the recipient and the award itself. The more Nobels awarded in this mainline humanist tradition, and the fewer in the Paul Samuelson economist-as-technician tradition, the better for the prize’s prestige.

Postscript: Mokyr in particular has influenced the work we do at CEI. CEI founder Fred Smith cited him in a piece about the intersection of science, technology, and environmental policy. Iain Murray and I cited him in our Traders of the Lost Ark paper about trade policy in the first Trump administration. My review of A Culture of Progress is here."

Free Trade and Dynamic Efficiency

By Arnold Kling. 

"…for the economy to function well, you don’t just need good property rights, you also need what we could call, somewhat vaguely, “economic freedoms.” You need labor mobility; you need to get rid of guilds; you need to get rid of monopolies, both local and global; you need to get rid of all kinds of regulations; and above all, you need free trade.  And if you don’t have that, you’re going to end up in a society that will not be able to grow. —Joel Mokyr¹

The usual case for free trade is not the best case for free trade.  The usual case is based on static efficiency, meaning making better use of a fixed set of resources.  Economists use the term comparative advantage to describe how, if humans choose to specialize and trade with one another, each can end up better off than if they produce everything for themselves.

But trade has an even more important role to play in what economists have come to call dynamic efficiency, which is the ability of an economy to exploit innovation and increase living standards over time.  This dynamic efficiency is a central concern of the economists who shared the 2025 Nobel Prize:  Philippe Aghion, Peter Howitt, and Joel Mokyr.

Aghion and Howitt explored the process that Joseph Schumpeter famously labeled creative destruction.  One hundred years after Schumpeter, we see that process all the time in the realm of computers, communications technology, and software.  Mainframe computers were displaced by personal computers and the Internet, landline phones were displaced by smartphones and cellular communication, and artificial intelligence now threatens to upend many industries.

Mokyr was recognized for his study of economic history, particularly the Industrial Revolution.  He pointed out that technology improves through a virtuous cycle in which practical inventions inspire curiosity, leading to scientific discovery, enabling improvements to practical inventions.  

Mokyr also emphasized how the process of innovation and growth can be stifled by protectionism. It is dynamic efficiency that is stymied when barriers to trade are erected.  That is an important lesson that today’s policy makers seem reluctant to learn.

For our  2011 book, Invisible Wealth,² Nick Schulz and I were fortunate to be able to include an interview by Nick with Mokyr, as well as interviews with other proponents of dynamic efficiency, including Douglass North, Robert Fogel, and Paul Romer.  Given his recent recognition with the Nobel Prize, the themes from that interview are worth revisiting.

Mokyr argues that the Enlightenment included a rebellion against economic protectionism.  

I argue in my book that one of the things that happens in eighteenth-century Europe is a reaction against what we today would call, in economic jargon, “rent-seeking,” and that this, to a great extent, is what the Enlightenment was all about…It was about freedom of religion, tolerance, human rights—it was about all of those things. But it was also a reaction against mercantilism…

Adam Smith isn’t, you know, as original as people sometimes give him credit for…All these people were saying essentially the same thing: we need to get rid of guilds, monopolies, all kinds of restricted regulatory legislation.  And above all, you need free trade, both internal—which Britain had but the Continent did not—and international….

…when you look at the few places in Europe where the Enlightenment either didn’t penetrate or was fought back by existing interests, those are exactly the countries that failed economically.  You think of Spain and Russia, above all.  (p. 119–120)

Mokyr argued that ideas spread through the circulation of people.

Much of the communication about technology is in fact through personal transmission…You can only learn so much from books, even now.  (p. 122)

Tacit knowledge is acquired in person.

Mokyr warned that protectionist interests always lurk within a prosperous society.

Looking back at the record, it is quite clear that nobody has held technological leadership for a very long time. The reason for that is primarily that technology creates vested interests, and these vested interests have a stake in trying to stop new technologies from kicking them out in the same way that they kicked out the previous generation…And they have all kinds of mechanisms.  One is regulation, in the name of safety or in the name of the environment or in the name of protection of jobs.  They will try to fend off the new to protect the human and physical capital embedded in the old technology.  (p. 123)

Without the pressure of international trade, an industry can stagnate.

Let’s look at the American automobile industry in the 1950s.  Absolutely zero technological change…in the late 1960s they were still making things like the Vega and the Pinto, which were the worst cars ever made…

But then something happened: the Japanese showed up…the Japanese made better cars from better materials.  They made them cheaper.  The cars lasted longer. And guess what? Today’s American cars are far, far better than they were in the late 1950s to early 1970s—not because Americans couldn’t have done it earlier, but because openness forced them to do it. (p. 126)

Today in America, many politicians are listening to the siren song of the restrictionists.  Industrial policy, which means protectionism, is popular.  Globalization and neoliberalism are bad words.  

But if the past is any guide, anti-globalization is going to degenerate into crude special-interest politics.  Instead of dynamic efficiency, we will end up with economic stagnation.  The 2025 Nobel Laureates can remind us of that."

Lutnick Wants a Tax That Would Kill Innovation

All of us benefit when universities earn royalties on inventions resulting from subsidized research

By Joseph P. Allen.  He is executive director of the Bayh-Dole Coalition. He was a staffer to Sen. Birch Bayh, 1977-81. Excerpts:

"until recent decades, if that research resulted in an invention, Washington seized all patent rights."

"As a result, few of those lab discoveries ever turned into commercial products. Universities and private companies lacked the incentives to find partnerships and invest the huge sums needed to turn these initial discoveries into useful products."

"The Bayh-Dole Act of 1980 allows academic institutions and small companies to own the patents on discoveries made with federal support so they can be turned into useful products. The Economist Technology Quarterly in 2002 called the law “possibly the most inspired piece of legislation to be enacted in America over the past half-century” and credited with helping “reverse America’s precipitous slide into industrial irrelevance.”"

"Academic institutions can keep any royalties from licensing their patents"

"Mr. Lutnick’s idea would cost the government more revenue than it would generate."

"Academic patent licensing income totaled about $2.7 billion in 2024. Assuming Mr. Lutnick snags 50%, as he calls for, the government gets $1.35 billion. While no one has calculated precisely what the government receives through taxes created from products and companies stemming from the Bayh-Dole Act, the figure clearly is more than $1.35 billion. Academic patent licensing contributed $1 trillion to the U.S. gross domestic product between 1996 and 2020—$40 billion a year. Additionally, the law supported 6.5 million jobs."

"a new study by the Association of University Research Parks estimated that university research parks and other innovators created $33 billion in annual federal tax revenue." 

We owe our modern standard of living to innovations enabled by free-market capitalism

That is from the Amazon summary of The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations by Philippe Aghion, Céline Antonin & Simon Bunel (Philippe Aghion is one of this this year's winners of the Nobel Prize in economics).

"Inequality is on the rise, growth stagnant, the environment in crisis. Covid seems to have exposed every crack in the system. We hear calls for radical change, but the answer is not to junk our economic system but to create a better form of capitalism.

An ambitious reappraisal of the foundations of economic success that shows a fair and prosperous future is ours to make, The Power of Creative Destruction draws on cutting-edge theory and hard evidence to examine today’s most fundamental economic questions: what powers growth, competition, globalization, and middle-income traps; the roots of inequality and climate change; the impact of technology; and how to recover from economic shocks. We owe our modern standard of living to innovations enabled by free-market capitalism, it argues, but we also need state intervention―with checks and balances―to foster economic creativity, manage social disruption, and ensure that yesterday’s superstar innovators don’t pull the ladder up after them." 

Is regulation killing American innovation?

Christine Hall.

"The federal government micromanages American businesses and citizens through excessive and costly regulations. These rules stifle innovation, limit competitiveness, and hinder job creation, while also making it harder for ordinary people to build financial security and improve their quality of life. CEI President Kent Lassman and Neil Bradley of the US Chamber of Commerce discussed problems and solutions in a September 22 online event titled Free Enterprise Exchange: Is regulation killing American innovation?

Key takeaways include…

Regulation goes too far. Instead of setting standards for the private sector to meet (such as health, safety, and the environment), too many regulations are aimed at coercive control, dictating how resources are used.

Regulation costs too much. Regulations cost over $2 trillion annually–about a third the size of federal taxation, spending, and borrowing combined.

Regulation is a hidden tax on homeowners–as are tariffs. Red tape, mandates, and now tariffs needlessly add thousands of dollars to the cost of buying or building a home, buying or replacing appliances, and re-roofing a house, for example. These burdens accumulate during everyday life.

Regulations are hardest on small businesses. Compliance costs fall disproportionately on small firms and new entrants. Big firms can spread costs across many operations, but regulations can shut out startups before they begin.

Regulations undermine our global competitiveness. US businesses now face regulatory environments so burdensome that some companies report it is faster to get permits in Europe than in the US.

Government ownership of businesses is a problem. Business leaders will start making decisions not in the best interests of the customer or their business but in the best interests of the government ahead of the next election. Control of private enterprises by the state is the death knell of dynamism.

Congress has regressed. It’s become less effective at its core mission of developing and adapting our legal code to the way Americans live, which is another way of saying ‘they can’t do anything up there.’

Congress must hear from the business community. Lawmakers need to hear from business leaders, such as members of the US Chamber of Commerce, in favor of bills to deregulate, increase regulatory transparency, and eliminate burdensome, unneeded commissions, bureaus, and boards.

1970s era deregulation was an example of success we can emulate. Deregulation of airlines, trucking, and rail in the 1970s (led by bipartisan figures like Ted Kennedy, Alfred Kahn, and Steve Breyer) showed that lifting heavy regulation produced cheaper prices, better service, and more safety.

View the full discussion with Neil Bradley and Kent Lassman on YouTube."

The Simple Mathematics of Chinese Innovation

By Alex Tabarrok.

"The NYTimes has a good data-driven piece on How China Went From Clean Energy Copycat to Global Innovator, the upshot of which is that the old view of China as simply copying (“stealing” in some eyes) no longer describes reality. In some fields, including solar, batteries and hydrogen, China is now the leading innovator as measured by high-quality patents and scientific citations.

None of this should surprise anyone. China employs roughly 2.6 million full-time equivalent (FTE) researchers versus about 1.7 million in the United States. On a per-capita basis the U.S. is ahead—about 4,500 researchers per million people versus China’s 1,700—but population scale tips the balance. China simply has more researchers in absolute terms. If you frame it in terms of rare cognitive talent, as in my post on The Extreme Shortage of High IQ Workers—the arithmetic is even more striking: 1-in-1,000 workers (≈IQ 145) ~170,000 in the U.S. labor force and ~770,000 in China. Scale matters.

In the 20th century the world’s most populous countries were poor but that was neither the case historically nor will it be true in the 21st century. The standard of living in China remains well below that in the United States and China may never catch U.S. GDP per capita, but quantity is a quality of its own. More people means more ideas.

To be clear, the rise of China and India as scientific superpowers is not per se a threat. Whiners complain about US pharmaceutical R&D “subsidizing” the world. Well, Chinese pharmaceutical innovation is now saving American lives. Terrific. Ideas don’t stop at borders, and their spread raises living standards everywhere. It would be wonderful if an American cured cancer. It would be 99% as wonderful if a Chinese scientist did. What matters is that when more scientists attack the problem, the odds of a cure rise so we should look favorably on a world with more scientists. That is progress.

The danger is not China’s rise but America’s mindset. Treat science as zero-sum and every Chinese patent looks like a loss. But ideas are nonrival: a Chinese breakthrough doesn’t make Americans poorer, it makes the world richer. A multi-polar scientific world means faster growth, greater wealth, and accelerating technology—even if America wins a smaller share of the Nobels."

Europe Is Losing

European nations have fallen far behind in economic dynamism and military clout. Will the continent that once ruled the world become a bystander to history?

By David Luhnow and Tom Fairless of The WSJ. Excerpts:

"The continent’s economies have been largely stagnant for about 15 years, likely the longest such streak since the Industrial Revolution, according to calculations by Deutsche Bank. Germany’s economy is 1% bigger than it was at the end of 2017, while the U.S. economy has grown 19%."

"Europe’s share of global economic output, measured in current dollars, fell from roughly 33% to 23% between 2005 and 2024, according to World Bank data. Much of that relative decline is due to the rise of China and India (and is less drastic using other measures of output), but the U.S. share of global output held up much better. Europe’s proportion of the global economy is now likely the lowest since the Middle Ages"

"European household wealth has grown by a third as much as Americans’ since 2009. Per capita GDP in the U.S. is now $86,000 a year, versus $56,000 for Germany and $53,000 for the U.K."

"Americans . . . have over 50% more living space on average per person. More than four in five Americans have air conditioners and clothes dryers at home, compared with between one-fifth and one-third of Europeans. Executive assistants in New York City earn around the same as specialist doctors in London."

"The average European is nearly 45 years old, compared with 39 for the average American, and the continent’s working-age population is predicted to fall by nearly 50 million by 2050"

"But Europe’s lack of economic dynamism has deeper roots, too. Taxes and regulations have risen inexorably; the volume of EU regulations has doubled since 2010. Sprawling rules protect old buildings, incumbent firms and aging consumers, limiting the creation of new infrastructure and industries. As Italy’s prime minister Giorgia Meloni puts it, “America innovates, China imitates, Europe regulates.”

Red tape in Britain is so bad that it took electricity firm Scottish Power 12 years to get permits for a high-voltage transmission line across Scotland. A project to build a new tunnel under the Thames river outside London has so far spent $340 million just on planning permits—documents that total 359,000 pages. Games Workshop, a fast-growing gaming company, is facing delays to build a new parking lot on its headquarters because a single bat lives there."

"In Germany, industrial electricity costs three times as much as in the U.S.; in the U.K., four times as much. Britons now consume less electricity per person than the Chinese, and Germany’s overall electricity consumption is lower than it was before the Berlin Wall fell. Yet Germany has banned nuclear energy, and the U.K. has scrapped new offshore oil and gas exploration."

"“In many sectors, Europe is uninvestable,” says Peter Huntsman, the CEO." [of Huntsman Corp., a Texas-based chemicals manufacturer]

"Ten years ago, four European companies ranked in the global top 10 by revenues. Today, the continent’s biggest company by market value, German software firm SAP, ranks 28th. America’s share of global stock market valuations has held steady at 48% since 2000, but the EU’s has fallen from 18% to 10%, and the U.K.’s from 8.3% to 2.6%"

"Mario Draghi, a former top European central banker, proposed a series of such steps in a landmark EU report last year, including pan-European capital, savings and energy markets; a lower regulatory burden on startups" [to "exploit economies of scale and unleash entrepreneurial vigor"]

"National trade unions and industrial lobbies often don’t want competition from neighboring European firms and workers, so they block the completion of Europe’s single market. While the EU has harmonized many regulations, national rules vary when it comes to business and professional licenses, taxes, and environmental and health standards. These frictions make it harder for a German consultant or electrician to work in France, for example, or for an Italian food producer to sell goods in Spain."

"Yet Germany’s roughly $1 trillion sugar rush of new spending won’t change the underlying dynamics of a manufacturing sector struggling with sky-high energy prices, greater competition from China and too much red tape. “You will get some splashy highways, but it’s not the treatment that will fix what’s wrong with the German economy,” said Robin Brooks, an economist at the Brookings Institution."

"the continent has been better at allowing in low-skilled asylum seekers and their families than high-skilled engineers and doctors."

"Tax revenue as a share of economic output is already around 38% in Germany, 43% in Italy and 44% in France, compared with 25% in the U.S."

"Sweden has quietly spurred economic growth by cutting back its welfare state—tightening government spending, revamping the pension system and slashing corporate and personal tax rates. Per capita incomes are now climbing, and the country has seen a burst of entrepreneurship. Sweden even moved ahead of the U.S. in the number of billionaires per capita, thanks to a thriving tech startup scene and a video-game industry"

"Europeans consistently vote for politicians who protect the status quo and expand the welfare state"

"In France . . . government spending is around 57% of GDP, compared with 36% for the U.S." 

Netscape’s Lessons for AI Mania

Today’s innovators are market darlings, but not all of them will make it

By Andy Kessler. Excerpts:

"The initial public offering was filed at $14. Everyone wanted shares"

"the stock popped to $74, ending the day at $58." 

"it was 30 years ago this week, Aug. 9, 1995." 

"It took General Dynamics Corp. 43 years to become a corporation worth today’s $2.7 billion in the stock market. It took Netscape Communications Corp. about a minute.”"

"For investors, it was a new sky-is-the-limit internet era, and long-duration investing became standard. Growth was more important than profit. Funky ideas got funded. Money accelerated innovation as investors were willing to fund losses. Speculation roared and momentum lured in new and late investors. No one wanted to miss out on the next big thing."

"In 1999 dot-com mania saw 480 companies go public, raising $62 billion—most, like Pets.com, with flimsy prospects."

"Netscape was free for individual users, but corporations paid a license fee."

"Every company put up a website, but this enabled search engines like Google to crawl distant computers and run ads against search results, hurting magazines and broadcasters. Craigslist ran classified ads online, killing many local newspapers. E-commerce sites like Amazon devastated much of retail."

"With today’s flurry to invest in any company that can spell AI, Netscape’s biggest lesson is that nothing lasts forever. AOL bought Netscape in 1998 for $4.2 billion in stock. AOL’s peak value reached $222 billion in December 1999, and in January 2000 it bought Time Warner for $182 billion. The dot-com boom peaked a month later, and the merger was a massive failure. AOL stopped supporting Netscape browsers in 2008. In 2015 AOL was sold to Verizon for peanuts, and in 2021, along with the remains of Yahoo, it was sold to private-equity firm Apollo." 

Trump’s Unsung Economic Booster: Deregulation

Nuclear power exemplifies how revamping dated and onerous rules could kick-start investment and innovation

By Greg Ip. Excerpts:

"What level of radiation may a U.S. nuclear power plant emit? “As low as reasonably achievable,” the U.S. Nuclear Regulatory Commission has long declared."

"There is little consensus that radiation at extremely low levels is harmful."

"Yet the persistence of the standard is one reason why nuclear power plants cost so much and take so long to build."

"Since then [1978], just a handful have been approved."

"NRC’s radiation standards, which are often lower than natural background levels"

"Whether a rule’s costs are worth those benefits is often a judgment call."

"cost-benefit analysis has only an indirect link to actual economic output."

"“anything that goes into a reactor that’s safety relevant has to be nuclear-certified with incredibly strict quality control,” said Ted Nordhaus, founder of the Breakthrough Institute, who has written extensively on nuclear power. This slows deployment and innovation."