One of Foreign Policy's Top 100 Global Thinkers
Named one of America’s 25 most influential people by TIME magazine, Paul Romer is the leading speaker on the connection between regulation, innovation, and growth. He is the primary developer of New Growth Theory, which provides a fresh foundation for how businesses and governments think about wealth creation, and a leading advocate of charter cities. Paul was appointed Chief Economist at the World Bank (Sept 2016).
His research addresses one of the oldest questions in economics: What sustains economic growth in a physical world characterized by diminishing returns and scarcity? The answer: the rules societies establish to deal with advances in technology.
Paul argues governments can increase the rate of growth — in ways that benefit all citizens — by creating systems of rules that encourage and respond to new technologies. For a developing country, the most important rules are those that determine the rate of technology transfer from the rest of the world. For an advanced economy, the most important rules may be the ones that influence the rate of technological innovation in the private sector.
Most important of all, however, are the rules that shape cities. Paul is a leading advocate of charter cities — special reform zones where governments can apply innovative systems of rules that can differ markedly from those in the surrounding area. Charter cities give government leaders more options for improving governance, give investors more opportunities to finance socially beneficial infrastructure projects, and give people more opportunities to improve the quality of their lives.
Already a globally recognized leader in this field, Paul continues to move it forward as the founder of NYU's Urbanization Project.
Paul has a background as an entrepreneur: his company Aplia pioneered the connection between online tools and higher education. He serves on the board of trustees for the Carnegie Endowment for the Advancement of Teaching. He is also a member of the board of directors for Community Solutions, a national not-for-profit dedicated to strengthening communities and ending homelessness.
He is the author of dozens of articles, including several popular articles describing the role of technology in growth. His work has appeared in such publications as The Economist, Forbes, The Fortune Encyclopedia of Economics, American Economic Review, European Economic Review, and Journal of Political Economy.
Paul on economic growth:
"A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. History teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.
"Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. Possibilities do not add up. They multiply."
Paul tailors each presentation to the needs of his audience and is not limited to the topics we have listed below. These are subjects that have proven valuable to customers in the past and are meant only to suggest his range and interests. Please ask us about any subject that interests you; we are sure that we can accommodate you.
Government officials will select better policies and business people will make better decisions if they understand both what causes economic growth and what does not. Sustained growth comes from a steady inflow of new ideas. These flows will be larger if a nation maintains the right structural institutions.
Institutions create the playing field where economic competition takes place. A stabilising institution like the central bank keeps inflation low and lifts an economy from a recession. A successful nation must have good stabilising institutions, but ultimately their role is limited. The central bank is not like a coach who helps an athlete rise to higher levels of performance. It is more like an emergency room doctor who stops the bleeding after an accident.
Structural institutions are the ones that foster sustained improvements in economic performance. The conventional wisdom rightly insists that among its structural institutions, a nation must have competitive markets, good schools, and a legal system that facilitates voluntary exchange. But these alone are not enough. Growth comes not from doing ever more of the same thing. It comes instead from new ideas about how to do old things differently or entirely new things for first time.
Throughout human history, drawing from a bigger pool of existing ideas has been the key to discovering new ones. If the local pool got bigger, discoveries came more rapidly, further increasing the size of the local pool. In the past, this virtuous circle meant that regions that started with a lead were able to surge far ahead. Now, globalisation is evening up the opportunities by making a common pool of ideas available everywhere in the world. Increased worker mobility, falling trade barriers, and shrinking communications and transportation costs are moving ideas between once isolated economic regions. Multinational corporations and global supply chains are creating fluid networks that encourage idea flows. The connections they are creating to following countries like India and China are helping these countries catch up more quickly. Other connections between leading countries are speeding innovation at the technological frontier. There is no longer any need for each region to reinvent the wheel. When it already exists somewhere else, a local entrepreneur can use it right away or a local innovator can improve it.
To sustain growth, the most important challenge is to use the best existing ideas and to create new ones. To meet this challenge, nations will need structural institutions that encourage local firms to use the best ideas from anywhere in the world and that connect local innovators into the rapidly developing worldwide networks of idea flows.
Communities are shaped by technologies, to be sure, but also by rules. The rules that IBM established for mainframes were strong and broad. The Wintel rules were strong but narrow. For a time, a narrow focus left room for rapid innovation, but the lead has now shifted to the community governed by Apple. The weak and narrow rules of the Internet left room for innovative new communities governed by Google, Salesforce.com, Amazon, and Facebook, but weak and narrow rules can also impose costs. Internet users playing defense are now at a serious disadvantage relative to black hats playing offense.
The lessons from technical communities apply equally well to nations and cities:
The constraints facing nations and firms arise not from limited technological opportunities but rather our limited capacity for discovering and implementing new rules.
The internal combustion engine is a technology that tells us how to structure interactions between physical objects (e.g. spark plugs and pistons.) “Stop on red” is a rule that tells us how to structure interactions between people. In a modern urban center, there is a better approach: “don’t enter the intersection unless you can leave before the light turns red.” Despite its value in preventing gridlock, it has rarely become the rule. Laws mandate this behavior, but rules depend on individual norms about right and wrong. Most people can’t give up their belief that they are in the right if they enter the intersection when the light is green.
Because our social norms are difficult to change, our rules often fail to keep up as technologies evolve and human interactions scale. Norms about privacy, honesty and courtesy that worked well when a few dozen of academics exchanged email are now exposing us to needless criminal activity. Norms about paying a fixed fee for unlimited data are now bringing the sorts of congestion to our wireless networks that we’re used to seeing in our streets.
Much of the texture of modern life comes from the mismatch between continuously evolving technologies and social norms that go through long periods of stability that are punctuated by bursts of change, change that often comes from startups.
Shaping the Global Development Agenda | The World Bank
A Peaceful Method of Conquest | Dailymotion
Conversations on Urbanization
The world's first charter city? | TED
Rules, Technology and Innovation
Charter Cities | NYU Urbanization Project
Punctuated Equilbria and the Evolution of Norms
A radical idea — Charter cities | TEDGlobal
A global association of financial institutions:
It was fantastic. Paul and Andy and Jaana made a brilliant team, and the time they had taken to discuss the panel beforehand paid dividends. It was the best panel discussion we have done, and the audience feedback was fantastic. So many people stopped me (including other panelists) to say how fascinated they were by the discussion.
A multinational technology and consulting corporation:
Thank you very much for joining me this week at the [. . .] in New York and for contributing to our event in such a substantial manner. You opened many minds with your insights on how the finance function can drive and accelerate enterprise agility. We at [. . .] value the perspectives you brought to our session and appreciate the time you spent with us.