Arnold Kling

Wal-Mart, Growth, and Ideology

Arnold Kling, Great Questions of Economics
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As noted here previously (see post 59 as well as post 102 below), a McKinsey study found that Wal-Mart made a major contribution to aggregate productivity growth in the United States. This raises an interesting issue for Europeans, as Virginia Postrel noted.

In Europe, anticompetitive retail policies are common, restricting real estate use, store hours and what can be sold by whom. Wal- Mart developed in a largely unregulated retail environment, so its big-box model can't be copied in much of Europe.

In Europe and Japan, governments love innovative technology, but they protect businesses from competition from those who might actually use the latest stuff. This restrains productivity growth.

Economists who focus on innovation as a source of growth are divided on the role of government. Looking at the process of research and its "public-good" character, some economists see a big role for government. On the other hand, looking at the role that competition plays in stimulating the use of innovation, other economists see a need for government to stay out. See 75 percent Mental.

Discussion Question. If competition is the key to producing improvement, should we be happy that the government took over airline screening?

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