Smorgasbord

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2025 for “for having explained innovation-driven economic growth” was awarded to Joel Mokyr, Philippe Aghion and Peter Howitt” (https://www.nobelprize.org/prizes/economic-sciences/2025). From the Popular Information description: 

“Through his research in economic history, Joel Mokyr has demonstrated that a continual flow of useful knowledge is necessary. This useful knowledge has two parts: the first is what Mokyr refers to as propositional knowledge, a systematic description of regularities in the natural world that demonstrate why something works; the second is prescriptive knowledge, such as practical instructions, drawings or recipes that describe what is necessary for something to work. … The 16th and 17th centuries witnessed the Scientific Revolution as part of the Enlightenment. Scientists began to insist upon precise measurement methods, controlled experiments, and that results should be reproducible, leading to improved feedback between propositional and prescriptive knowledge. This increased the accumulation of useful knowledge that could be utilised in the production of goods and ser­vices. . . . [I]nspired by modern data, Philippe Aghion and Peter Howitt constructed a mathemati­cal economic model that … can be used to analyse whether there is an optimal volume of R&D …  It turned out that the answer was far from simple, because two mechanisms pull in different directions. The first mechanism is based upon companies that invest in R&D understanding that their current profits from an innovation will not continue forever. … From the perspective of society, however, the value of the old innovation does not disappear, because the new one builds upon the old knowledge. Outcompeted innovations thus have a greater value for society than for the companies that develop them, which makes the private incentives for R&D smaller than the gains to society as a whole. Society can therefore benefit from subsidising R&D. The second mechanism looks at how, when one company succeeds in pushing another from the top of the ladder … Therefore, even if the new innovation is only slightly better than the old one, profits may be significant and larger than the socioeconomic gains. Therefore, from a socioeconomic perspective, investments in R&D can be too large; technological development can be too rapid and growth too high. This cre­ates arguments against society subsidising R&D. Which of these two forces dominates depends on a range of factors, which vary from market to market and time to time.”

A group of IMF economists draw lessons from a database of fiscal rules in more than 120 countries in “Fiscal Guardrails against High Debt and Looming Spending Pressures” (IMF Staff Discussion Note SDN/2025/004, September 2025, by Julien Acalin, Virginia Alonso-Albarran, Clara Arroyo, Waikei Raphael Lam, Leonardo Martinez, Anh D. M. Nguyen, Francisco Roch, Galen Sher, and Alexandra Solovyeva, https://www.imf.org/en/publications/staff-discussion-notes/issues/2025/09/22/fiscal-guardrails-against-high-debt-and-looming-spending-pressures-569841).

“Although earlier fiscal rules were often too rigid, efforts to introduce greater flexibility have not translated into stronger compliance. … [F]ewer than two-thirds of countries adhere to their deficit rules on average, with lower share for emerging market and developing countries and debt rules. … Fiscal deficits four years after the pandemic continue to exceed fiscal rule limits by a median of 2.0–2.5 percentage points of GDP for about 40 percent of advanced economies and 60 percent of EMDEs [emerging market and developing economies]. In most countries, public debt has surpassed the ceilings in the debt rule by an average of 25 percentage points of GDP. Such large deviations from fiscal rule limits in many countries are driven by both severe shocks and limitations in the design of fiscal rules. During the severe shocks, the magnitudes and the share of countries that deviate from fiscal rule limits increased as expenditures or deficits tend to rise. But even in normal times, some countries have deficits and debt persistently exceeding their fiscal rule limits, partly because of multiple exclusions from the rules, limited fiscal oversight, or lack of fiscal adjustments to reduce debt and deficits. In recent years, fiscal adjustments have been limited, complicating the return to fiscal rule limits.”

Andrew T. Levin and Christina Parajon Skinner discuss “Central Bank Undersight: Assessing the Fed’s Accountability to Congress” (Vanderbilt Law Review, 2024, 77:6, pp. 1769-1830, https://scholarship.law.vanderbilt.edu/vlr/vol77/iss6/3/).

“Over the past 15 years, however, the scope and complexity of monetary policy has outpaced Congress’s ability to monitor these policies through existing mechanisms of oversight. For example, internal shifts in the Fed’s governance and power dynamics have led to the disappearance of dissents on monetary policy decisions, thereby hampering legislators’ abilities to discern the range of views that have informed those decisions. Moreover, in conducting its latest round of securities purchases (“QE4”) during 2020–22, the Fed did not provide legislators with cost-benefit analyses or risk assessments at any stage of the program. Indeed, QE4 is now likely to cost taxpayers more than $1 trillion, but its efficacy has still not been scrutinized by any external reviews.”

Gabriel E. Lade and Aaron Smith provide an overview of “Biofuels: Past, Present, and Future” (Annual Review of Resource Economics, 2025, 17: 105-125, https://www.annualreviews.org/content/journals/10.1146/annurev-resource-011724-082950).

“Before 2005, biofuels comprised little of the country’s energy consumption; ethanol made up less than 3% of gasoline, and biomass-based diesel use was negligible. …  The Energy Policy Act and subsequent RFS2 mandates … transformed the US agricultural sector and gasoline markets; around one-third of all corn produced in the United States is used for fuel production, and nearly every gallon of gasoline sold in the United States contains at least 10% corn ethanol. … Although biomass-based diesel markets are much smaller than ethanol markets by comparison, their growth, paired with the recent surge in renewable diesel, means these fuels now demand more than 40% of the soybean oil produced in the United States. The past and future benefits of these policies beyond increasing crop demand are less clear. Expanding cropland generates substantial carbon emissions that can offset the gains from burning less fossil fuel. Low-carbon biofuels are limited by high cost and the low supply of non-crop feedstocks such as animal fats and used cooking oil. Scaling production technologies for liquid cellulosic ethanol proved much more challenging and costly than thought in 2007. … In summary, while the fuels and focus are different than in 2007, the industry in 2025 has largely returned to past controversies about land use change, food prices, and the high cost of low-carbon feedstocks.”

Gabriel Felbermayr, T. Clifton Morgan, Constantinos Syropoulos, and Yoto V. Yotov review “Economic Sanctions: Stylized Facts and Quantitative Evidence” (Annual Review of Economics, 2025, 17: 175-195, https://www.annualreviews.org/content/journals/10.1146/annurev-economics-081623-020909).

“According to the newest version of the Global Sanctions Data Base, the number of sanction programs in place globally has shot up from about 200 10 years ago to about 600 in 2023. What is more, about 12% of all existing country pairs and 27% of world trade are currently affected by some type of sanction. In their various forms, sanctions are the leading geoeconomic tool aiming to coerce foreign governments into actions that they would not undertake otherwise. … [S]anction processes are much better understood today than they were 30 years ago. The political science community has come to accept what economists already knew (i.e., that sanctions bring substantial economic effects), and economists have come to accept what political scientists have long understood (i.e., that substantial economic costs do not always bring changes in policy). Over that same period of time, the use of sanctions has dramatically increased, and they have come to affect many more bilateral economic relationships. This is a puzzling phenomenon: If sanctions are costly and frequently fail to deliver the desired policy objectives, why have they become so endemic?”

Robin Greenwood, Robert Ialenti, and David Scharfstein explore “The Evolution of Financial Services in the United States” (Annual Review of Financial Economics, 2025, 17: 189-206, https://www.annualreviews.org/content/journals/10.1146/annurev-financial-082123-105625). From the abstract:

“This article surveys the literature on the historical growth and transformation of the US financial sector. The sector expanded rapidly between 1980 and 2006, during which its contribution to GDP rose from 4.8% to 7.6%. After the global financial crisis, the size of the sector stabilized at approximately 7% of GDP. After reviewing this literature, we examine recent developments, including the continued growth of high-fee alternative asset management and the shift away from banks to lending by nonbank financial intermediaries. We interpret both the growth and recent evolution of the sector as reflecting a continued transition to a more market-based financial system, with risk migrating away from banks and into markets.”

The OECD International Migration Outlook 2025, along with its usual overview of trends in migration, migration policy, and migrant integration policy, includes a chapter on “International migration of health professionals to OECD countries,” written by Ave Lauren, José Ramalho, Jean-Christophe Dumont, Gaetan Lafortune, Agya Mahat, and Tapas Nair (https://www.oecd.org/en/publications/2025/11/international-migration-outlook-2025_355ae9fd.html).

“Over the past two decades, the overall share of foreign-born health professionals in OECD countries has increased steadily. In countries with consistent data over the period, the total number of foreign-born doctors rose by 86% between 2000/01 and 2020/21, while the number of foreign-born nurses grew by nearly two and a half times … In both cases, this growth outpaced the general increase in the total number of doctors and nurses, which rose by 41% and 48%, respectively. … Among the main countries of residence, Germany and Australia saw the number of foreign-born doctors nearly triple. The United Kingdom experienced a doubling, and more moderate increases were observed in the United States and France. A similar pattern is evident among foreign-born nurses. Finland saw the steepest rise, with numbers increasing almost eightfold though starting from a very low level in 2000/01. In Norway, they increased more than fourfold. In Germany, Ireland and New Zealand, the numbers more than tripled, while in Australia and Spain, they nearly tripled. Switzerland also recorded a significant increase. Among the other major countries of residence, Canada, the United Kingdom and the United States all saw their numbers more than double … “In absolute terms, the United States remains the primary country of residence for both foreign-born doctors and nurses. … Among all foreign-born health professionals in OECD countries, 36% of all foreign-born doctors and 42% of nurses were practising in the United States in 2020/21.”

Brian Albrecht, Geoffrey A. Manne, David Teece, and Mario A. Zúñiga discuss “From Moore’s Law to Market Rivalry: The Economic Forces That Shape the Semiconductor Manufacturing Industry” (International Center for Law & Economics, November 12, 2025, https://laweconcenter.org/resources/from-moores-law-to-market-rivalry-the-economic-forces-that-shape-the-semiconductor-manufacturing-industry/).

“Two unique, interconnected technological imperatives define semiconductor manufacturing competition. Moore’s Law began as a rule of thumb about transistor counts doubling at a steady cadence. Today its practical meaning is broader: customers expect predictable gains in overall performance per watt and per dollar, and delivered on schedule. That pushes the industry through a relentless metronome of “beats,” where each node (manufacturing generation) must arrive on time with real, measurable gains. Falling behind by a single beat can cost customers for years. Rock’s Law is the darker side of Moore’s Law. It holds that, as chips get denser, the cost of making them rises exponentially. Advanced fabs now cost $10–20 billion, and a single high-NA EUV scanner (the heart of leading-edge lithography) runs north of $400 million. These are not scale or inflation artifacts; they’re the price of pushing matter toward the level of atomic precision demanded by Moore’s Law. Together, these forces create recurring, high-stakes races unmatched by any other market in the world. In these races, firms must commit massive resources years in advance, under extreme uncertainty.”

Symposia

Melissa S. Kearney and Luke Pardue have edited a collection of six essays on Advancing America’s Prosperity (Aspen Economic Strategy Group, 2025, (https://www.economicstrategygroup.org/publication/advancing-americas-prosperity/). As one example, Jeremy Neufeld notes in “Aligning High-Skilled Immigration Policy with National Strategy”: 

“Consider: mRNA vaccine technology was developed in the United States because biochemistry pioneer Katalin Karikó was allowed to come to the country in 1985, before the institution of rules in 1990 and 1998 that would have made it much less likely for her to have been able to successfully immigrate. In the years since, 5G was developed in China because Huawei was able to commercialize the research of Erdal Arikan, the Turkish scientist whose breakthroughs on polar codes provided the basis for the technology. Arikan was an international student who studied in the United States, graduating from the California Institute of Technology and the Massachusetts Institute of Technology. He wanted to stay in the United States and only returned to Turkey when he could not secure a green card. Had he faced the immigration system that Karikó faced, he would be a proud American citizen today. Immigration policy thereby seeded a vaccine revolution. Today’s immigration policy exported 5G to Shenzhen.” As another example, Craig Garthwaite and Timothy Layton discuss “Coverage Isn’t Care: An Abundance Agenda for Medicaid”: “Medicaid is now one of the largest public health-insurance programs in the world, enrolling more people than Medicare and more people than the public, social health-insurance programs of the United Kingdom, Germany, or France. … The contemporary Medicaid population involves children, pregnant women, the disabled, dual-eligible seniors, and those needing long-term care. Medicaid both pays for 41 percent of births in the US and is the largest single payer for long-term care services in the US. It is the nation’s only true cradle-to-grave insurer. …  Despite this fact, the program largely takes a one-size-fits-all approach …”

The Review of Industrial Organization offers a symposium on competition policy in Brazil, China, Egypt, India, and five countries of Central and Eastern Europe (October 2025, https://link.springer.com/journal/11151/volumes-and-issues/67-3). Russell Pittman writes the “Editor’s Introduction to the Special Issue on Competition Law Enforcement in Developing Countries”:

“There are at least 125 countries and jurisdictions in the world with competition laws—perhaps more. … There were only 12 competition law regimes worldwide in 1970, and two of these—the Japanese and German—were forced upon the losers by the victors in World War II. Countries with market economies gradually adopted competition laws in the post-war period, to the point that there were about 40 competition laws by the time of the fall of the Berlin Wall (1989). Over the 20 years that followed, the number exploded, to at least 110 by 2010; and, according to one authoritative source, there are 135 today: 129 countries and 6 regional organizations. What accounts for this explosion? In the most economically advanced of the Central and Eastern European (CEE) countries, reformers had included competition laws in their legal and regulatory agendas from the beginning. In other CEE countries, the desire for an invitation to membership in the European Community clearly played more of a role … More broadly, many developing countries found that loans from the World Bank or the International Monetary Fund, as well as bilateral and multilateral trade agreements with wealthier countries, were conditioned on the writing and implementation of competition laws. … [D]developing countries around the world have received technical assistance in writing and enforcing competition laws and training agency staffs from sources as diverse as the U.S. Department of Justice, Antitrust Division, and U.S. Federal Trade Commission, the European Commission, OECD, UNCTAD, the World Bank, and successful younger competition agencies such as the Hungarian Competition Authority, the Japanese Fair Trade Commission, and the Korea Fair Trade Commission.”

The Bank of International Settlements offers four papers in the BIS Quarterly Review based on its 2025 BIS Triennial Survey of Central Banks regarding foreign exchange markets (December 2025, https://www.bis.org/publ/qtrpdf/r_qt2512.htm). For example, Wenqian Huang, Ingomar Krohn, and Vladyslav Sushko contribute “Global FX markets when hedging takes centre stage.”

“The average daily turnover in over-the-counter (OTC) foreign exchange (FX) spot and derivatives transactions reached $9.5 trillion in April 2025, more than a quarter higher than in April 2022. … Over the past three decades, average daily FX trading volumes have not only dwarfed daily global GDP and international trade but also expanded at a much faster pace. While global FX trading volumes were 12 times global GDP in 1992, they were 30 times that in 2025. … They were about 70 times the volume of global trade in 2025, roughly double the ratio in 1992. This rise in FX volumes reflects financial deepening and greater involvement of non-bank financial institutions (NBFIs) in FX markets, as trading for financial motives has come to dominate trading for the purpose of goods and services exchange.”

More on Power in Labor Markets

For those who would like more on labor market power than the four papers in this issue of JEP, Dan Andrews and Andrea Garnero discuss “Five facts on non-compete and related clauses in OECD countries” (OECD Economics Department Working Papers, April 25, 2025, https://www.oecd.org/en/publications/five-facts-on-non-compete-and-related-clauses-in-oecd-countries_727da13e-en.html). Here are their five facts:

“First, the prevalence of such clauses is high, or at least higher than most would have thought, and may be rising. Second, post-employment restrictions have spread to many parts of the economy, well beyond the relatively narrow group of highly paid managers and professionals. Moreover, such clauses appear to be included in employment contracts even where they are legally unenforceable, simply to deter workers. Third, non-compete clauses are most often bundled with other clauses, typically a non-disclosure agreement. This helps to further suppress workers’ bargaining power without necessarily protecting trade secrets any more than a non-disclosure agreement alone. Fourth, even when unenforceable, non-compete clauses have economic consequences in terms of reduced job mobility, wages, knowledge spillovers and market dynamism. Finally, apart from the United States, other OECD countries have introduced limitations on the use of such clauses in the last decade, and a few others are currently discussing possible restrictions.”

The Oxford Review of Economic Policy offers a 12-paper essay on “New Directions in Competition Policy” (Winter 2024, https://academic.oup.com/oxrep/issue/40/4). Joel Kariel, Jakob Schneebacher, and Mike Walker focus on “Competition policy and labour market power: new evidence and open questions.” From the abstract:

“We survey existing competition enforcement in labour markets and the empirical evidence on the extent and impact of labour market power, with a particular focus on the UK. We find that in contrast to the US, labour market power in the UK has not risen substantially. Nonetheless, workers vary in their exposure and, for some, labour market power has significant economic costs. Labour market power also appears to interact in significant ways with other labour market policies. We argue these findings underscore the danger of making policy decisions based on evidence from other countries, or by analogy with product markets.”

Eric A. Posner and Ruth Zheng recap and follow-up on “The Silicon Valley No-Poach Conspiracy” (University of Chicago, Coase-Sandor Institute for Law & Economics Research Paper Series, 25-18, https://chicagounbound.uchicago.edu/law_and_economics/1033/). From the abstract:

“The Silicon Valley no-poach conspiracy is the most important cartel no one has heard of. It is rarely discussed in the cartel literature and is lost to public memory. More than forty tech firms, including Apple and Google, agreed not to poach employees from one another over three decades, causing an estimated $3.1 billion in lost wages. The Justice Department discovered and broke apart the cartel in 2010, but did not punish the cartel members, who quickly settled with employees and never admitted guilt. However, the case foreshadowed, and perhaps helped spur, two major developments in antitrust law a decade later: the rise of labor antitrust and the erosion of the tech companies’ aura of antitrust invincibility.”

Discussion Starters

 A team of Federal Reserve economists—Matteo Crosignani, Jonathan Kivell, Daniel Mangrum, Donald Morgan, Ambika Nair, Joelle Scally, and Wilbert van der Klaauw—provide evidence on “Financial Inclusion in the United States: Measurement, Determinants, and Recent Developments” (Economic Policy Review: Federal Reserve Bank of New York, September 2025, 31:3, https://www.newyorkfed.org/research/epr/2025/EPR_2025_financial-inclusion_crosignani).

“The FDIC defines an individual as “unbanked” if no one in the household has a checking or savings account with a bank or credit union. … Among those with a bank account, the FDIC further defines as “underbanked” those individuals who are banked but underserved by existing saving, credit, and financial products. … Underbanked individuals usually pay high fees for accessing their money and for transactions while having few opportunities to build savings and assets. According to the latest 2021 FDIC National Survey of Unbanked and Underbanked Households, there are about 5.9 million households (15.6 million adults) that are unbanked, while 18.7 million households (51.1 million adults) are underbanked. … [T]hose who are unbanked accounted for 4.5 percent of U.S. households in 2021, with a further 14.1 percent of households being underbanked.”

M. Scott Taylor investigates “Saving Killer Whales Without Sinking Trade: A market solution to noise pollution” (Property and Environment Research Center (PERC), September 25, 2025, https://www.perc.org/2025/09/25/saving-killer-whales-without-sinking-trade/). From the abstract:

“Despite generating enormous benefits, maritime shipping has raised the underwater ambient noise levels in the world’s oceans by three to four decibels per decade. … Drawing on a unique natural experiment, I link changes in the health of a killer whale population to changes in commercial vessel traffic in their critical habitat. Killer whale births are lower, and deaths higher, in noisy years compared to quiet ones—providing the first empirical evidence linking variation in noise from shipping to the health of a marine mammal population. … I propose a market-based solution that prices underwater noise pollution that provides a win-win solution for both commerce and conservation.”