Very interesting analysis with which I totally agree except on one issue. The laissez-faire attitude toward tech regulation approach is unfortunately not enough to shake the EU ecosystem. This approach is valid for first or even second movers but given the level develpment of external players this would probably result in a worse environment in the short term (although I agree that the implementation should be possitive in the medium term). I honestly believe that things will have to get significantly worse so that the trade off for innovators improves (e.g. one could argue that one still lives better in europe than in the US)
I would argue that this goes way beyond the tech sector and the European Union. I believe that massive cuts to government regulations are the most cost-effective means to promote long-term economic growth. Best of all, it costs no money.
And we can make massive cuts in regulation in a very short time. The state of Idaho in the USA recently cut the total amount of regulations by at least 75% in just a few years. Idaho now has less than 10% the total number of regulations as the state of California.
There is no reason why the EU, the US federal government and other US state governments cannot do the same. Massive cut in energy and housing regulations are particularly needed.
You cannot, in general, talk about cutting regulation like releasing the break pedal (less breaking -> higher velocity, less regulation -> higher GDP). The analogy is too simple.
For instance if you deregulated murder, you would get fancy new startups in the contract killer business, private armies and so on. Probably not a growth motor.
Instead you need to look at specific regulations and ask questions like: what is its purpose, is it effective/efficient/necessary, are there better alternatives and by what measure, etc.
Economic discussions often get reduced to money, but it's a fictitious concept. You can never directly experience money, only the goods and services traded for it.
And yeah, I know there's entire industries built on regulation and I have asked myself many times what the point is...
Oh, please, I am obviously not talking about deregulating murder.
Money is not a fictitious concept. If you think it is, then give me all your money.
It is very possible to deregulate fast. The state of Idaho just did it. The governor cut regulations by 75-95% mainly in just one year, and the state economy has been booming since despite the Covid lockdowns.
Within his first few weeks in office, Gov. Little issued two executive orders aimed at scaling back regulations – the Red Tape Reduction Act and Licensing Freedom Act of 2019.
Gov. Little’s Zero-Based Regulation executive order in 2020 forces a routine review of rule chapters annually. Approximately 20% of rules are reviewed annually, and agencies are eliminating 300 pages of regulations on average each year.
Gov. Little directed state agencies to find efficiencies in the rules they administer as part of the “rules reauthorization process,” under which Idaho’s administrative code expires if it is not reauthorized.
Gov. Little signed an executive order in 2020 shrinking the size of state government by consolidating 11 separate agencies in the new Division of Occupational and Professional Licenses, a move that has led to efficiencies and resulted in better service at a lower cost for Idahoans.
Zero-based regulation has been seen as a national model for other states, and has worked so well the Idaho legislature made it permanent by enshrining it in the state’s Administrative Procedure Act.
Can I easily see which regulations they have removed?
Also, "fictitious concept" was the wrong phrase, "abstract good" fits better, i.e. the number in your bank's database has zero utility to you unless you can trade it in for something that does.
Edit: Found Idaho's bulletin, but navigating it seems like quite a hassle...
No, I do not know how to identify which regulations were removed or reformed.
I have considered interviewing Gov Little and his staff to learn more, because the process needs far more publicity. I am convinced that something like it can be accomplished at the federal level and most states.
i could not agree with the style and substance of andrew's eu vivisection more....giving eurotechnocrats more money and discretion is a recipe for - net zero, i'm looking at you! - 'degrowth' and despair, not entrepreneurialism, schumperterian 'creative destruction' and/or keynesian 'animal spirits'.....that said, folks who've spent time on that continent tend to come away with the sense that europe's 'elite' has mixed feelings about entrepreneurship and entrepreneurs, creative destruction and animal spirits...would love daniel ek's 'take' on this....that would be a good andrew interview...
There’s a lot to agree with in this post. But there’s also one crucial oversight: The tech related productivity gap between Europe and the US is mostly due to a gap in tech diffusion and only to a much lesser degree due to the differences in tech production.
Would it be great for Europe to have a few tech giants of its own? Sure! But will this fix the much lower uptake of digital technologies across the economy? No.
There are some structural factors, in particular Europe‘s high share of small businesses, that make tech diffusion challenging.
This is a good point. Schnabel's speech highlights that European companies invest less in technology and reap fewer productivity benefits from it than their US peers. It's particularly telling that the European divisions of US multinationals invest in and benefit from digital technology much more than their European-native peers, even though they're of comparable size and part of the same regulatory environment.
One conjecture: because of its large high tech industry and population of companies that are proficient at harnessing technology, there are a lot of professionals in the US who are just "good at tech." Tech innovation, tech investment, and deep human capital create a virtuous cycle in the US that's hard to replicate in Europe.
A lot of the growth in the US happens above the heads of an increasing proportion of its people and has been cancerous to the degree that it's endangering their humanity and democracy (arguably it's been a partial plutocracy for quite some time anyway).
The accelerationists might say that it's a small price to pay for the treasures that lay ahead, but it's not clear to me many would even get a share.
That said, business as usual in the EU becomes increasingly unsustainable as well... Let's hope we can avoid too many growing pains.
I think this criticism is a bit of a straw man. The report talks a lot about the regulatory barriers and burdens facing tech firms, in fact right after Andrew starts banging the table (see p. 26)! The focus on government funding is in the specific context of breakthrough innovation (like DARPA) not for tech startups generally.
I take your point, but my read is that the Draghi report highlights under-funding, not over-regulation, as the big barrier to European innovation. For example, the first bold text underneath "A programme to tackle the innovation defecit" on p. 29 is "Europe must improve the conditions for breakthrough innovation by addressing the weaknesses in its
Very interesting analysis with which I totally agree except on one issue. The laissez-faire attitude toward tech regulation approach is unfortunately not enough to shake the EU ecosystem. This approach is valid for first or even second movers but given the level develpment of external players this would probably result in a worse environment in the short term (although I agree that the implementation should be possitive in the medium term). I honestly believe that things will have to get significantly worse so that the trade off for innovators improves (e.g. one could argue that one still lives better in europe than in the US)
I would argue that this goes way beyond the tech sector and the European Union. I believe that massive cuts to government regulations are the most cost-effective means to promote long-term economic growth. Best of all, it costs no money.
And we can make massive cuts in regulation in a very short time. The state of Idaho in the USA recently cut the total amount of regulations by at least 75% in just a few years. Idaho now has less than 10% the total number of regulations as the state of California.
https://gov.idaho.gov/pressrelease/gov-little-cuts-more-red-tape-celebrates-historic-milestone-in-regulation-reform/
https://www.quantgov.org/state-regdata-definitive-edition
There is no reason why the EU, the US federal government and other US state governments cannot do the same. Massive cut in energy and housing regulations are particularly needed.
You cannot, in general, talk about cutting regulation like releasing the break pedal (less breaking -> higher velocity, less regulation -> higher GDP). The analogy is too simple.
For instance if you deregulated murder, you would get fancy new startups in the contract killer business, private armies and so on. Probably not a growth motor.
Instead you need to look at specific regulations and ask questions like: what is its purpose, is it effective/efficient/necessary, are there better alternatives and by what measure, etc.
Economic discussions often get reduced to money, but it's a fictitious concept. You can never directly experience money, only the goods and services traded for it.
And yeah, I know there's entire industries built on regulation and I have asked myself many times what the point is...
Oh, please, I am obviously not talking about deregulating murder.
Money is not a fictitious concept. If you think it is, then give me all your money.
It is very possible to deregulate fast. The state of Idaho just did it. The governor cut regulations by 75-95% mainly in just one year, and the state economy has been booming since despite the Covid lockdowns.
https://gov.idaho.gov/cutting-red-tape/
Here’s how they did it:
Within his first few weeks in office, Gov. Little issued two executive orders aimed at scaling back regulations – the Red Tape Reduction Act and Licensing Freedom Act of 2019.
Gov. Little’s Zero-Based Regulation executive order in 2020 forces a routine review of rule chapters annually. Approximately 20% of rules are reviewed annually, and agencies are eliminating 300 pages of regulations on average each year.
Gov. Little directed state agencies to find efficiencies in the rules they administer as part of the “rules reauthorization process,” under which Idaho’s administrative code expires if it is not reauthorized.
Gov. Little signed an executive order in 2020 shrinking the size of state government by consolidating 11 separate agencies in the new Division of Occupational and Professional Licenses, a move that has led to efficiencies and resulted in better service at a lower cost for Idahoans.
Zero-based regulation has been seen as a national model for other states, and has worked so well the Idaho legislature made it permanent by enshrining it in the state’s Administrative Procedure Act.
Can I easily see which regulations they have removed?
Also, "fictitious concept" was the wrong phrase, "abstract good" fits better, i.e. the number in your bank's database has zero utility to you unless you can trade it in for something that does.
Edit: Found Idaho's bulletin, but navigating it seems like quite a hassle...
Thanks for the clarification.
No, I do not know how to identify which regulations were removed or reformed.
I have considered interviewing Gov Little and his staff to learn more, because the process needs far more publicity. I am convinced that something like it can be accomplished at the federal level and most states.
i could not agree with the style and substance of andrew's eu vivisection more....giving eurotechnocrats more money and discretion is a recipe for - net zero, i'm looking at you! - 'degrowth' and despair, not entrepreneurialism, schumperterian 'creative destruction' and/or keynesian 'animal spirits'.....that said, folks who've spent time on that continent tend to come away with the sense that europe's 'elite' has mixed feelings about entrepreneurship and entrepreneurs, creative destruction and animal spirits...would love daniel ek's 'take' on this....that would be a good andrew interview...
There’s a lot to agree with in this post. But there’s also one crucial oversight: The tech related productivity gap between Europe and the US is mostly due to a gap in tech diffusion and only to a much lesser degree due to the differences in tech production.
Would it be great for Europe to have a few tech giants of its own? Sure! But will this fix the much lower uptake of digital technologies across the economy? No.
There are some structural factors, in particular Europe‘s high share of small businesses, that make tech diffusion challenging.
ECB Board member Isabel Schnabel gave a good speech summarizing the challenges here: https://www.ecb.europa.eu/press/key/date/2024/html/ecb.sp240216~df6f8d9c31.en.html.
More in-depth research can be found at the ECB and JRC. Unfortunately, it’s not as easy as „less regulation.“ This is only one piece of the puzzle.
This is a good point. Schnabel's speech highlights that European companies invest less in technology and reap fewer productivity benefits from it than their US peers. It's particularly telling that the European divisions of US multinationals invest in and benefit from digital technology much more than their European-native peers, even though they're of comparable size and part of the same regulatory environment.
One conjecture: because of its large high tech industry and population of companies that are proficient at harnessing technology, there are a lot of professionals in the US who are just "good at tech." Tech innovation, tech investment, and deep human capital create a virtuous cycle in the US that's hard to replicate in Europe.
I kinda agree, but be careful what you wish for.
A lot of the growth in the US happens above the heads of an increasing proportion of its people and has been cancerous to the degree that it's endangering their humanity and democracy (arguably it's been a partial plutocracy for quite some time anyway).
The accelerationists might say that it's a small price to pay for the treasures that lay ahead, but it's not clear to me many would even get a share.
That said, business as usual in the EU becomes increasingly unsustainable as well... Let's hope we can avoid too many growing pains.
I think this criticism is a bit of a straw man. The report talks a lot about the regulatory barriers and burdens facing tech firms, in fact right after Andrew starts banging the table (see p. 26)! The focus on government funding is in the specific context of breakthrough innovation (like DARPA) not for tech startups generally.
I take your point, but my read is that the Draghi report highlights under-funding, not over-regulation, as the big barrier to European innovation. For example, the first bold text underneath "A programme to tackle the innovation defecit" on p. 29 is "Europe must improve the conditions for breakthrough innovation by addressing the weaknesses in its
common programmes for R&I"