Faster, Please! · Economics & Policy
TIER 4 Wed, 16 Jul 2025 22:44:44 +0000
A smart techno-strategy builds on US strengths ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ | | ---|---|--- | | | Forwarded this email? Subscribe here for more --- _This is a free edition of_ _**Faster, Please!**_ ,_my regular newsletter about creating a better America and world by accelerating scientific discovery, technological progress, and commercial innovation. (And creating a pro-progress culture.) If you enjoy it and find it helpful in any way, please consider buying a subscription to the twice-weekly regular issues that include in-depth essays, Q &As with smart people, and summaries of relevant news stories. _ Upgrade to paid * * * # 🐼 😲 Bracing for China Shock 2.0 ### A smart techno-strategy builds on US strengths | | James Pethokoukis --- | Jul 16 --- | --- --- | | | --- | | --- | | --- | | --- | | READ IN APP --- | | ---|---|--- My fellow pro-growth/progress/abundance Up Wingers, Too much of America's policy-thinking and policymaking bandwidth is devoted to fighting yesterday's economic battles. While Washington obsesses over tariffs and low-skill manufacturing jobs lost to China's turn-of-the-century economic transformation, it's missing a far more consequential threat: China's systematic conquest of cutting-edge technologies. So argue David Autor and Gordon Hanson, the economists who first documented the original "China Shock" in influential research published a decade ago. That event -- the manufacturing employment impact on various US regions from a surge of Chinese imports -- was a one-off. As the two economists, along with co-author David Dorn, wrote back in 2016, "The great China trade experiment may soon be over, if it is not already." And as Autor and Hanson explain in a new New York Times essay, "In essence, China figured out how to do what it should have been doing decades earlier." #### **Tomorrow's technologies** That was then, and this is now. Their current concern is "China Shock 2.0," which they argue is on course to be both devastating and sustained. They cite research that finds China now leads the United States in 57 out of 64 critical technologies as of the 2019-2023 period. This is a sharp rise from the 2003-2007 period, when China led in just three technologies, while the US led in 60. Autor and Hanson see China's innovation model as formidable: nimble state-private partnerships that reward local officials for advancing strategic industries. The results speak for themselves -- BYD in electric vehicles, DJI in drones, CATL in batteries. These are not lumbering state enterprises but "apex predators" emerging from what the authors call "the economic Darwinism that is Chinese industrial policy." By contrast, the economists characterize America's response under President Trump -- blanket tariffs -- as pathetically inadequate. From their commentary: > This would have been a lackluster strategy for fighting the trade war America lost 20 years ago. On our current trajectory, we might just get those jobs making tennis sneakers. And if we push things further, we could be assembling iPhones in Texas by 2030, a job so tedious and poorly paid that the satirical newspaper The Onion once memed, "Chinese factory workers fear they may never be replaced with machines." One thing that tariffs alone will never do is make the United States an attractive place to innovate. Yes, tariffs belong in our trade arsenal -- but as precision munitions, not as land mines that maim foes, friends and noncombatants equally. Of course, Autor and Hanson do offer a plan, one that aims for a third way between what they see as protectionist fantasy and naive openness. Rather than wielding tariffs as blunt instruments against allies, America should forge coalitions, making trade restrictions multilateral and thus more effective. At the same time, the authors advocate inviting Chinese manufacturers to American soil so that foreign competition sharpens domestic players or culls the weak. What's more, the duo urges Washington to embrace China's venture-capital approach to strategic sectors -- drones, chips, fusion -- accepting high failure rates for individual bets while spurring entire industries. But they caution that such planning requires long-term commitment rather than America's trademark policy whiplash. "Choose the battles that we can win (semiconductors) or those we simply cannot afford to lose (rare earths), and make the long-term investments to reach the right outcome. The American political system has the attention span of a squirrel on cocaine." #### A few caveats Let me walk you, dear readers, through my thinking on the China Shock 2.0 agenda. A good baseline way of evaluating this proposal might be to start with "A Toolkit of Policies to Promote Innovation," a 2019 policy review by economists Nicholas Bloom, John Van Reenen and Heidi Williams. These top-notch scholars rank innovation tools based on cost-benefit analysis, quality and conclusiveness of evidence, and impact. Their findings are clear: R&D tax credits, skilled immigration, STEM-focused education, and support for research universities yield the highest returns with the least political distortion. In contrast, mission-oriented policies directed at specific technological outcomes rank low on evidence and uncertain in pay off. Relatedly, I worry that Autor and Hanson understate the classic interventionist dangers of politicization, rent-seeking, and resource misallocation. In short, trying to out-China China with centralized planning is a high-risk bet. | | ---|---|--- "A Toolkit of Policies to Promote Innovation" There's a strong case to be made that America doesn't need to beat China at its own game. Instead, it should double down on what works. America's greatest breakthroughs -- from the internet to the iPhone to mRNA vaccines -- were not products of five-year plans, but emerged from a decentralized public-private ecosystem, open talent pipelines, and plenty of bottom-up competition. Government action has its place, particularly for funding of basic research (also mentioned in the NYT essay) and taxing unwanted externalities like carbon pollution as way of nudging capital. And there are center-right economists who would be comfortable with employing additional tools where energy abundance or national security stakes are large and private players retains skin in the game. (This is already happening, for example, in the energy sector where the Department of Energy funds R&D, demonstration, and pilot projects (such as with fusion and advanced geothermal) through programs that require private companies to match federal contributions to some degree and hit specific technical targets before receiving payments. I'm not sure the difference between that and a sprawling Federal Reserve of Innovation of the sort Autor and Hanson are talking about.) Bottom line: A smart China Shock 2.0 strategy builds on US strengths -- and is careful to avoid state capitalism cosplay. Upgrade to paid Share * * * | | ---|---|--- As Congress Does Less, The Courts Are Doing More Breaking news: _The Dispatch_ has acquired SCOTUSblog, the gold standard in Supreme Court analysis. Reliable coverage of the Supreme Court has never been more important. With an unbridled executive branch and a Congress eager to surrender its constitutional prerogatives, the federal judiciary is playing an increasingly important role in shaping the country's direction. Join 600,000 loyal readers and check out _The Dispatch_ today. No insulting clickbait, no false outrage, no annoying auto-play videos--just reliable journalism that helps you understand the big decisions that will shape our nation's future. **Faster, Please! readers: Take 25% off a** _**Dispatch**_**membership today** Claim your 25% off membership * * * ## **Micro Reads** ### ▶ Economics * **White collar workers displaced by AI could spark a revolution \- NYP** * **Trump Effect Starts to Show Up in Economy \- WSJ** * **Forget TACO. Trump Is Winning His Trade War. \- WSJ** * **Bessent's Interest Rate Bet Could Be a Big Loser \- Bberg Opinion** * **A Sovereign-Wealth Fund to Keep America's Technological Edge \- WSJ Opinion** * **Are Companies Saving for a Rainy Day? \- Richmond Fed** ### ▶ Business * **Anduril Is Aiming to Do to Lockheed What Tesla Did to Ford \- Barron's** * **Nvidia chief vows to'accelerate recovery' of China sales as H20 chip ban lifted \- FT** * **Nvidia's China Troubles Aren't Over \- WSJ** * **Science suffers when meteorites and fossils become an asset class \- FT** ### ▶ Policy/Politics * **Trump Hails $90 Billion in AI Infrastructure Investments at Pennsylvania Summit \- NYT** * **America's Anti-Immigrant Fever Is Starting to Break \- Bberg Opinion** * **Rights of Minors and Parents Deservedly Prevail Over"Sweeping" Florida Social Media Law \- AEI** ### ▶ AI/Digital * **China Is Spending Billions to Become an A.I. Superpower \- NYT** * **Google's generative video model Veo 3 has a subtitles problem \- MIT** * **How I Learned to Stop Worrying and Have Fun With A.I. \- NYT** * **Another High-Profile OpenAI Researcher Departs for Meta \- Wired** * **We've discovered a new kind of magnetism. What can we do with it? \- NS** * **Advancing AI Capabilities and Evolving Labor Outcomes \- Arxiv** * **Artificial Finance: How AI Thinks About Money \- Arxiv** * **Reflections on OpenAI \- Calvin French-Owen** * **Shared Imagination: LLMs Hallucinate Alike \- Arxiv** ### ▶ Biotech/Health * **Inside the Silicon Valley push to breed super-babies \- Wapo** * **Large study squashes anti-vaccine talking points about aluminum \- Ars** * **One potent gene raises risk of Alzheimer's, Parkinson's and other brain diseases \- Nature** * **The word'cancer' leads to overtreatment and fear. Should we drop it? \- Aeon** ### ▶ Clean Energy/Climate * **Climate Policy in America: Where We Go From Here \- Heatmap** * **Google and Brookfield strike $3bn hydro power deal \- FT** * **The future is made of energy \- Orca Notes** ### ▶ Space/Transportation * **Congress moves to reject bulk of White House's proposed NASA cuts \- Ars** * **'Not that into peace doves': The Apollo-Soyuz patch NASA rejected \- Ars** ### ▶ Up Wing/Down Wing * **Why it's taking LA so long to rebuild \- Vox** * **Medieval preacher invoked chivalric hero as a meme in sermon \- Ars** * **Federal Prosecutors Close Inquiry Into Polymarket Betting Website \- NYT** * **Rishi Sunak: A 21st-Century Democratic Alliance \- WSJ Opinion** ### ▶ Substacks/Newsletters * **Developing countries: A follow-up \- Noahpinion** * **The Pentagon just went all in on AI \- AI Supremacy** * **The investment-led approach to climate only works if you actually do it \- Slow Boring** * **The U.S. Needs More Public Mineral Exploration \- The Ecomodernist** * **The Slow Apocalypse: When will we run out of kids? \- Strange Loop Canon** * **Tradeoffs of Lower Fertility Rates \- Conversable Economist** * **Have renewables decreased electricity prices? \- The Climate Brink** * **Ukrainian Refugees Probably Didn't Reduce the Birth Rate in Czechia \- Laissez-Faire, Laissez-Passer** ### ▶ Social Media **On AI and jobs of the future \- @sama** Faster, Please! is a reader-supported publication. 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