Paul Romer on a Culture of Science and Working Hard

Episode Summary

Executive Summary: Paul Romer argues economics has real successes in development, stabilization, and climate policy, but has also done harm by overreaching into philosophy, underweighting norms, and weakening competition and regulation. He extends this to COVID-19, advocating mass testing, lighter-use quarantine, and faster institutional adaptation, while emphasizing that science should supply facts and citizens should decide values.

Main Topics: Economics as cost-benefit, not triumph or failure (Priority: 5/5): Romer rejects blanket judgments about economics. He says the profession should be assessed by comparing its gains in development and macro stabilization against its harms in antitrust, deregulation, and misplaced authority. Competition, antitrust, and the costs of bigness (Priority: 5/5): He argues economists normalized dominant firms by making efficiency the main criterion, weakening competition policy and allowing too much concentration in tech and other sectors. Regulation, financial fragility, and the 2008 crisis (Priority: 5/5): Romer blames influential economists like Greenspan for treating regulation as inherently bad, helping create a fragile financial system whose collapse imposed enormous global costs. Economists as technical advisors, not philosopher-kings (Priority: 5/5): He insists economists should provide causal analysis and predictions, but voters must decide the moral and political tradeoffs. He criticizes economists who speak as if they know society's proper ends. Norms, science, and trust (Priority: 4/5): A recurring theme is that economics underestimates the role of norms in shaping behavior. Romer argues science itself helped create a culture of honesty and trust, and that policy can strengthen or weaken these norms. COVID-19 testing as public-good infrastructure (Priority: 5/5): Romer makes a detailed case for massive testing, saying it is far cheaper than the economic shutdowns it could relieve. He favors using tests to enable reopening rather than broad coercive quarantine. Charter cities, migration, and development (Priority: 4/5): He revisits charter cities as a way to create new jurisdictions with better institutions, especially for countries and migrants trapped by failing governance and blocked mobility.

Key Arguments: Economics should be evaluated by a balanced accounting of benefits and harms, not by ideological praise or condemnation. The profession was right about some big things: development policy, stabilization policy, and carbon pricing. Economists failed badly in the lead-up to 2008 by underestimating shadow banking and supporting financial deregulation. Antitrust thinking became too permissive; society may be better off with multiple Amazons rather than one dominant firm. Regulation is often necessary because markets alone do not prevent harmful outcomes, especially in finance and public health. Economists often overstep by acting like philosopher-kings rather than technical experts serving democratic choice. Policies affect social norms; laissez-faire can be harmful if it erodes self-enforcing norms like anti-littering or truthfulness. Science is valuable not just for facts but for norms of integrity, truth-telling, and trust. Mass testing for COVID is economically worthwhile because information about infection status can dramatically reduce shutdown costs. Testing should be paired with access to information and light-touch rules, not necessarily forced quarantine. FDA rules, more than litigation, are the main bottleneck to expanding testing capacity. Charter cities remain viable because new jurisdictions may be a practical way to transfer institutions and attract migration.

Data Points: U.S. life expectancy: declining - Romer cites falling U.S. life expectancy as evidence that policy and institutional failures have real costs. Financial crisis cost: hundreds of trillions of dollars - He cites Haldane's estimate of the worldwide cost of the financial crisis to argue deregulation was extremely costly. Congressional funding for tests: $25 billion - He notes this as already allocated for COVID testing. Proposed additional testing funding: $75 billion - He references a Democratic plan for more federal support. Testing vs soda spending comparison: about twice as much on tests as on soda - Romer uses this comparison to argue funding is not the binding constraint on testing capacity. Potential testing capacity: 23 million tests a day - He suggests this scale could be achieved if the U.S. paid enough and removed regulatory barriers. Germany's reproduction number R: still over 1 - He says Germany's testing success is good but still not enough for suppression. COVID infection fatality rate: about 0.5% - He uses a New York State estimate to infer infection counts from daily deaths. U.S. daily COVID deaths: about 2,000 per day - Used to estimate the number of new infections per day. Estimated new infections per day: about 400,000 - Derived from 2,000 daily deaths and a 0.5% infection fatality rate. Estimated daily contacts to trace: 4 million - Assuming 10 contacts per infected person, he argues contact tracing would require massive scale. Testing capacity shortfall: 10 times - He says the 4 million-test need is roughly ten times current capacity. Jobs freed per additional daily test: about 9 - He cites his model suggesting one extra daily test can allow about nine people to resume normal activity. Nursing home deaths: as many as half of deaths - He argues frequent testing in nursing homes could sharply reduce mortality.

Pivotal Quotes: "we should do a cost-benefit analysis. Look at the big things that economics has done well, the things it may have done badly, and just see how it works out." — Paul Romer: Summarizing his core framework for judging the economics profession. "Our role is that of the technical advisor. We can say... but it's up to you, the voters, to decide whether you want to follow that policy or not." — Paul Romer: Explaining how economists should relate to democratic decision-making. "I'd be better off if we had five Amazons instead of one." — Paul Romer: Illustrating his antitrust and competition-policy concerns.

Implications: The conversation argues for humbler economics, stronger competition policy, tighter financial regulation, and greater respect for norms. For COVID and future crises, Romer pushes a high-testing, data-driven state that informs rather than coerces, while restoring trust in science and institutions.