Editor’s Note

To borrow Thomas Paine’s words from a quarter-millennium ago, these are truly times that try men’s (and women’s) souls.

But I find comfort in the reality that thoughtful people are still busy advancing ideas that would make the world a better place. Consider the latest crop of articles in this, the 110th quarterly issue of the Review.

Gernot Wagner at the Columbia University Business School offers a primer on the least studied but arguably most promising source of renewable energy. “The Earth beneath our feet holds an almost comically simple solution to our energy problems,” he writes. “Drill down a few kilometers anywhere on the planet and you’ll find temperatures hot enough to boil water. Run that water through a turbine, generate electricity, reinject the cooled water, repeat. No fuel needed. No emissions. Just heat from the planet’s molten core, which will remain hot for billions of years.”

Sung Hee Choe and Esther Krofah at the Milken Institute explore what’s needed to sustain America’s place in biotechnology. “Leadership is no longer guaranteed,” they warn. “The systems that supported past success are under growing strain. Governance of the biomedical system is fragmented across agencies and levels of government. Core infrastructure is unevenly developed and deployed. Funding is often short-term and disconnected from long-term needs. At the same time, peer nations are pursuing coordinated national life sciences strategies that integrate research, data, workforce and policy.”

Rashad Ahmed, James A. Clouse, Fabio Natalucci and Alessandro Rebucci at the Anderson Institute for Finance and Economics assay the impact of stablecoins in light of new regulation legitimizing their place in the economy. “Stablecoins,” they write, “hold the promise of revolutionizing the domestic and international dollar payment system by lowering transaction costs, shortening settlement times, providing continuous 24/7 payment system access and broadening financial inclusion.”

“At the same time, our survey-based analysis warns that stablecoins pose significant risks to systemic financial stability if the market grows as large as currently predicted – and especially if vast scale is achieved in a matter of a few years.”

Simon Radford and Aidan Irwin-Singer at the Milken Institute ask what Europe must do to reclaim a leadership role in the global economy. “Blueprints for raising productivity in Europe share priorities,” they write. “Europe must invest in decarbonization, close the technology and innovation gap with the U.S. and China, and spend more on defense. More investment combined with structural policy changes could raise productivity and wages, making up ground on innovation while also seeing off the domestic challenge of populist insurgent parties.”

“While the scale of the prescription might seem daunting, Europe is seen by many to have considerable comparative advantages to success. Moreover, the present geopolitical environment also provides the necessary pretext, to borrow Jean Monnet’s phrase, of a crisis from which new solutions can be developed.”

Simon Haeder at Ohio State’s College of Public Health ponders the prospects, practical and political, of digging our way out of the health care mess in the United States. “So far,” Haeder explains, “the Trump administration’s focus has been on undoing Democrats’ handiwork. Little focus has been on solving the problems of access, cost and distribution across the U.S. health care system.”

“But in my view, there is a pragmatic solution that could be palatable for both parties. And the model has been around for decades in the form of the Medicare Advantage option that currently allows seniors to trade their Medicare fee-for-service benefits for a broad package of privately supplied managed health services.”

Greg Leiserson at the NYU Law School laments the folly of depriving the Internal Revenue Service of adequate operating funds in an era of growing federal budget deficits and lagging revenues. “Fights about IRS funding mirror broader fights about the role of government in our lives,” he opines, “and the ongoing failure of Congress to adequately fund the IRS reflects the lack of consensus on that issue. But the consequences of starving the IRS hardly fulfill anyone’s idea of fairness or efficiency. A tax system that offers little in the way of assistance in meeting legal obligations and rewards clever evasion imposes unnecessary burdens on the public, undermines trust in government and forces Washington to borrow what it cannot collect.”

David S. Mitchell a senior fellow at the Washington Center for Equitable Growth, makes the case for taxing wealth in the United States. “Despite the preponderance of rhetoric to the contrary,” Mitchell asserts, “taxing wealth is consistent with the U.S. tradition of progressive taxation – and, in fact, is needed to patch an increasingly porous income tax system. Targeting taxes on the superrich’s fast-growing accumulation of wealth, which today is largely in the form of unrealized capital gains, could go a long way toward improving the nation’s fiscal position, combatting inequality, spurring more broad-based economic growth, and helping to offset the drift toward government by and for the rich.”

In this excerpt from his new book, How Progress Ends: Technology, Innovation, and the Fate of Nations, Carl Benedikt Frey at Oxford explores a novel explanation for an old contradiction. “Arguments about economic development are an intellectual echo of a Cold War now more than 30 years behind us,” he writes. “They either exalt decentralized systems, in which small firms experiment with little interference from the government, or they extol centralized bureaucratic systems in which strong states direct the economy through rational industrial policy. I argue these two ideal types each have their own ecological niche – that is, they are each well suited to different environments.”

Happy perusing. — Peter Passell