Arnold Kling  

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Alex Tabarrok looks at a study showing the increasing churn in the U.S. economy.


The topple rate is a measure of how the rank of large firms on return of assets changes over time. The topple rate has increased by about 60% over the past forty years (ignoring the recent blip up). What this means is that the firms on top are less likely to stay on top today than in the past - the recent blip up indicates the upheaval in firm rankings during the current recession.

That topple rate would have been a good indicator for Nick Schulz and me to use in one of the chapters in our new book (The cover design will be different from what is currently depicted on Amazon). I am proofreading a pdf file now, and I am really happy with it. I strongly recommend reading it when it comes out. There are flaws, for sure, but on many levels the book really works.

From our introduction:


This book presents the main ideas of what we call Economics 2.0. Economists have developed these ideas in order to explain the enormous differences in quality of life over history and across countries.

Economics 2.0 says that these differences reflect intangible assets and invisible liabilities. The intangible assets are knowledge bases. This category includes formal scientific findings, such as the quantum mechanics and chemistry that help engineers design integrated circuits. It also includes less formal learning from experience, such as the know-how that enables general contractors to put up housing developments on schedule and within budget.

Invisible liabilities, on the other hand, are institutional and cultural impediments to innovation and productivity. These range from the structure and conduct of government to the attitudes and customs of ordinary citizens.



COMMENTS (1 to date)
Willem writes:

Web 2.0 was dead before marketeers coined the term. I sure hope Economics 2.0 won't go down the same route!

Businesses are not forever anymore. Just another reason to make sure you invest mostly in human capital and less in company-specific assets. Workers churn, business churn, who knows where you are in 10 years.

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