In recent decades there has been a major restructuring of the economy from capital-intensive manufacturing to knowledge-intensive, innovation-driven fields which increases the demand for high skilled workers. But why is it, that the US is producing a lot more innovation than other parts of the world?

Edward W. Conard is an American businessman, author, and scholar. He is a New York Times-bestselling author of The Upside of Inequality: How Good Intentions Undermine the Middle Class and Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong; and a contributor to the book Income, Wealth, Consumption, and Inequality. Conard is an adjunct fellow at the American Enterprise Institute for Public Policy Research. Previously, he was a managing director at Bain Capital, where he worked closely with former presidential candidate Mitt Romney.

Edward and Greg talk about how information technology led to increased productivity and how the vast majority of the benefits generated by these technological advances go to the consumers and only a tiny fraction is captured by the people that are in the business of producing it. They also discuss why the argument that the middle class is being hollowed out is wrong, and Edward’s strategy for increasing wages for the middle and working classes.

Episode Quotes:

The constraint to growth in the world

04:52: We can't afford to waste our talent because we have a lot less of it. And we have a lot more need from our population in terms of the economic help they need in order to live a happy life and in our economy. Because we have a lot of talent, a lot of it is not properly trained, and ultimately, we have to get the properly trained talent to take risks. (05:20) Because if all we do is our doctor or lawyer, they're not going to increase productivity. They're not going to produce innovation. And so that is the constraint to growth in our economy, it’s probably the constraint to growth in the world.

41:41: The lack of talent is a real constraint in trying to get things done. Not only find the ideas but reduce the risk. And so that's a very important piece of it. This whole risk with our savings gives the impression that capital's really cheap.

How ideas affect taxes

07:22: If you have great ideas, the tax rate is going to matter a lot because you're multiplying by the tax rate. If you don't have good ideas, it doesn't matter if you have zero times in a high or a low tax; then we're still going to be zero.

Two effects of properly trained talent 

39:41: Properly trained talent has two effects. One is that it goes out and finds the ideas because, without talent, you don't find the ideas. But the second thing it does is reduce the risk of implementing those ideas. So it has this risk-reducing function.

Show Links:Recommended Resources:

• Thomas Piketty
• Equality and Efficiency: The Big Tradeoff by Arthur Okun 

Guest Profile:

• Professional at American Enterprise Institute
• Edward Conard’s Website
• Edward Conard on LinkedIn
• Edward Conard on Twitter
• Edward Conard on Youtube
• Edward Conard on Facebook

His Work:

• Articles in National Review
• The Upside of Inequality: How Good Intentions Undermine the Middle Class 
• Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong 
• The Economics of Inequality in High-wage Economies By Edward Conard