Climate Change and the Competitiveness of Nations

European Straits #20

Dear all,

I happened to be in Las Vegas, with a direct view on the Trump Tower there, when we learned about Donald Trump’s decision that the US should leave the Paris agreement. This deplorable decision only reinforces the critical threat of climate change. But I’m also convinced it puts the US on the losing side of economic development and jobs creation in decades to come.

With his ‘Schumpeterian Growth paradigm’, Philippe Aghion, one of the leading French economists, helps us understand why. In his inaugural lesson at the Collège de France two years ago, titled “Les énigmes de la croissance” (“the enigma of economic growth”), Philippe reminded a captivated audience that most of his research has been dedicated to the complex relationship between competition and innovation.

A widespread view is that too much competition takes a toll on innovation: it forces businesses to cut their margin down, depriving them of the economic surplus necessary to invest in new products or processes. Philip…