Gene writes: "I heard Paul Romer present yesterday at NYU. He gave a very interesting talk on his plans for charter cities. But he began his talk claiming something very strange."First of all," he said, "think about shaking hands. Shaking hands, I think we can all agree, is an obviously inefficient norm. It's a major way to transmit disease." (I quote from memory!)
Well, there certainly is that downsize to shaking hands. But it also provides social bonding, human contact, acts as a signaling device ("he had a good, firm handshake"), and probably more of which I am not thinking.
So how does Romer know that these benefits do not outweigh the costs? "
It's not the only strange thing Paul Romer says. He's also wants to subsidize the supply of new scientists and engineers. Romer is a fantastic macroeconomist - I have big reservations about his labor economics. Anyway, I anticipate that once the chapters that Hal and I are writing finally get published, he'll change his tune.