• The FTC has proposed a national ban on noncompetes, which are clauses in a worker’s employment contract that prevent them from working for a competitor for a set period of time.
• Evidence suggests that banning noncompetes can raise wages for low-wage workers by 2-3%, and for workers bound by noncompetes by as much as 14-21%.
• Businesses argue that noncompetes make them more willing to hire and train workers, and that they allow them to invest more in creating new technologies.
• Opponents argue that noncompetes quash innovation by preventing new companies from entering an industry.
• The debate is ultimately about the choice between a dynamic, competitive economy and one dominated by big, secure companies.
• Park et al. (2023) argue that papers and patents are becoming less disruptive over time, with a measure of disruptiveness (CD index) declining across a variety of fields.
• Alternative explanations for the decline include: low-hanging fruit hypothesis, burden of knowledge hypothesis, and cultural/institutional changes in academia.
• Pierre Azoulay’s analysis of life sciences papers suggests that the decline in disruptiveness may have halted in the 80s.
• Olivier Blanchard’s thread asserts that inflation is the outcome of a distributional conflict between firms, workers, and taxpayers.
• Paul Krugman’s “Football Game Theory of Inflation” likens the process to a football game in which everyone tries to stand up to see over everyone else.
• Ivan Werning’s model suggests that a wage-price spiral can occur even with falling real wages.
• Ricardo Reis argues that labor may not be the most important variable cost for companies, and thus wage demands may not be driving inflation.
Published January 7, 2023. Visit Noahpinion to read Noah Smith’s original post.