Since its founding, American dynamism has gone hand-in-hand with the American Dream. By technical definition, a dynamic economy is one that adapts, innovates, and fosters growth and productivity. However, dynamism must be supported by pro-market institutions and a cultural spirit that embraces opportunity, entrepreneurship, and new ideas. Amidst evolving trends in U.S. economic dynamism—and a growing focus on security rather than growth—we invited a select group of innovators, scholars, and thought leaders to discuss the state of American dynamism.
Sam Bowman, founding editor of Works in Progress and Head of Publishing at Stripe. Follow Sam on X @s8mb or subscribe to his newsletter, “Consumer Surplus.”
How would you describe the current state of dynamism in the United States? Are you optimistic or pessimistic about the future of dynamism?
From the outside, the United States feels like the most economically dynamic place on Earth, though it’s still vastly less so than it could be. Every talented founder wants to move to America, the most impressive advances in both software and hardtech are all happening in America, energy is much cheaper and more abundant in America than in Europe, and—crucially for dynamism, which relies on unsuccessful and inefficient businesses being wound down, to free up the people and capital employed there for better things—bankruptcies and business failures are treated as a normal part of the path to success, not as a mark of shame. My main reason to be pessimistic is the risk of war or domestic political instability undermining America’s current success.
What are the main obstacles to economic dynamism, and what reforms would you suggest to overcome them?
Cities are engines of economic dynamism, because they allow people to share and combine ideas most easily with each other and access the talent they need to start and scale their businesses. So, limits on cities’ growth, like restrictions on housebuilding and transport infrastructure, end up being huge barriers to dynamism. This is most notable in the San Francisco Bay Area, which would likely grow by millions of people if it was allowed to, many of whom would also found new businesses. San Francisco itself is actually driving people away because the city has been allowed to decay, with drug abuse, homelessness, and crime destroying many parts of the city. What should be America’s most prosperous and dynamic city is instead shrinking, and we are likely missing out on many great ideas and businesses that might have been developed there. So, my main pro-dynamism reform is to make America’s cities wonderful places: safe, beautiful, dense, and allowed to grow.
How can the United States foster a culture of dynamism?
I think the most important element of a culture of dynamism is respect and admiration for mercantile success. This seems pretty fundamental to why American policy has avoided so many of the mistakes that European governments have made: in America, people tend to admire rich, successful people and see their comfortable lives as somewhat deserved. This tends to produce taxes that are less punitive and antitrust regimes that impose fewer burdens and duties on successful innovators—competition law in America exclusively relates to businesses obstructing the process of competition, whereas in Europe it also involves burdens and duties on large companies to, for example, keep their prices low. In the long run, the most ambitious entrepreneurs will prefer the regime in which they will be celebrated for their success, not penalised or villainised.
Why should the United States prioritize economic dynamism? (Or why shouldn’t it?)
Markets work through a process of trial and error. Because we can never know in advance what ideas will and won’t work—what products will be popular, or what business models will be most productive—we have to just try things out in the real world. The good ideas are the ones that survive. Dynamism is just a measure of this process of trial and error. While there is no objectively best level (we wouldn’t want a system where every business went bankrupt every year to be replaced by a new one, even though this would be the maximum amount of “dynamism” possible), we should aim to remove any obstacles to this process happening, because we both want new ideas to come to market to be tested and bad ideas to be eliminated as quickly as possible so the resources that have gone into them can be used for something else.
Johan Norberg, Senior Fellow at the Cato Institute and the European Centre for International Political Economy. He is the author and editor of more than 20 books, including “The Capitalist Manifest: Why the Global Free Market Will Save the World” (read an excerpt). Follow Johan on X @johanknorberg or discover his work here.
How would you describe the current state of dynamism in the United States? Are you optimistic or pessimistic about the future of dynamism?
I am a worried optimist. Unfortunately, we seem to be living in an era of nostalgia, where most talk is about how to restore some sort of mythological past. This is often the case when the world seems dangerous. On the other hand, the most innovative technologies and disruptive businesses still come from the U.S. So we know that dynamism works in practice, now we only have to make sure it works in theory, so that it can be extended to the whole of society.
What are the main obstacles to economic dynamism, and what reforms would you suggest to overcome them?
I think it’s a mental, institutionalized NIMBYism. Whenever something works, we want to protect it and defend it, with standards, occupational licensing, regulations, tariffs, and barriers to immigration, and that is dangerous, because we need new energy, talent, and startups. Only by constantly exposing our old triumphs to competition and change will we see continued progress. So, the regulatory system default should be changed from everything is banned without an explicit permission to everything is permitted unless explicitly banned.
How can the United States foster a culture of dynamism?
We have to talk and teach that dynamism and innovation is not a necessary evil, but an adventure, a way of creating meaning and opportunity in our lives. And we have to start with our children. My kids often come home from school telling me that the world is falling apart, because they learned of all the problems of the world. What if, instead, they had been learning stories about how heroes, innovators, and eccentrics in previous eras had solved problems that seemed hopeless at the time? And started business models that were considered impossible? I think that would create the necessary spark to get more people dreaming rather than despairing.
Why should the United States prioritize economic dynamism? (Or why shouldn’t it?)
Because in the long run, innovation and growth make all the difference. With 1% growth per capita, we double our wealth every 70th year. If we can increase it to 2%, we do it every 35 years. That is such an incredible increase in our capacity and living standards that everything else is trivial. And it is rare in human history. The rule is stagnation and long-term decline. We need to actively defend and encourage dynamism, because the forces holding it back are so strong, and the cost if they win is immense.
Also, dynamists have more fun. People who think they can make a difference are happier and more successful in life, even when they in fact widely exaggerate the extent to which they can make a difference.
Alex Tabarrok, Bartley J. Madden Chair in Economics at the Mercatus Center and Professor of Economics at George Mason University. He is a cofounder of Marginal Revolution University, an online platform for learning economics, and he regularly writes at the blog Marginal Revolution. Follow Alex on X @ATabarrok or learn more here.
How would you describe the current state of dynamism in the United States? Are you optimistic or pessimistic about the future of dynamism?
Dynamism is up in the United States, but no one knows why. Since at least the 1980s, there has been a decline in the number of young firms and their share of employment, and job reallocation rates have slowly gone down. Firms got older and bigger. Many theories were proposed, including technological stagnation, regulation, and an aging workforce.
Now, since COVID, the number of startups has increased dramatically. Yet none of the leading contenders for explaining the decline in dynamism predicted this increase. Technological growth is not obviously up (maybe AI will do this, but that is yet to come), regulation has not decreased, and the workforce has continued to age. So, while I am grateful for the wave of startups, I think it is too early to say whether this marks a trend shift or a one-time response to factors like COVID.
What are the main obstacles to economic dynamism, and what reforms would you suggest to overcome them?
My own work on regulation suggests, rather surprisingly, that regulation has not been the main driver of declining dynamism. Frankly, I myself am surprised at this result! I do think, however, that the housing market is a big drag on dynamism because we have made it very difficult for people to move to opportunity. The most dynamic places in the United States have the highest housing prices—mostly due to a failure to build and not due to a lack of land. Fixing our housing markets to “build, baby build” is the number one way to increase dynamism. The second would be to increase immigration, especially high-skill immigration. The third would be not to strangle our universities, especially STEM research.
I am hopeful that as a former developer, President Trump will work to make it easier to build housing in the United States, but the Trump administration policies are working against immigration and American universities, and that is worrying.
How can the United States foster a culture of dynamism?
Dynamism requires what Ayn Rand called the benevolent universe premise, optimism towards the future and the confidence to cooperate with one’s fellow man to build that future. The United States has historically held these values par excellence, but since 9/11 there has been an undercurrent of fear and suspicion that has made the U.S. shrink from the future and from the world. We need greater confidence and sunny optimism.
Why should the United States prioritize economic dynamism? (Or why shouldn’t it?)
The United States is the world’s richest large economy. We have it good—but in some ways, we’ve grown complacent. It’s tempting to resist change or long for a “simpler” past, but that’s futile. Those who embrace change are best positioned to shape it to their advantage. Resisting change leads to stagnation or, worse, a fight over dividing the pie instead of growing it. Given our diversity, the U.S. is especially prone to such battles. As a diverse society, we can ill afford either a zero-sum society or zero-sum mentality. For us, growth isn’t just the path to prosperity—it’s the foundation of peace. A thriving economy creates opportunity, reduces conflict over resources, and strengthens social cohesion. We can be unified only in growing the pie.
Eli Dourado, Chief Economist at the Abundance Institute. He is on a sacred quest to increase the pace of American economic growth. Follow Eli on X @elidourado or subscribe to his newsletter.
How would you describe the current state of dynamism in the United States? Are you optimistic or pessimistic about the future of dynamism?
The U.S. has a lot of the ingredients for dynamism: a flexible labor market and solid capital markets, and certain industries like software and media publishing are incredibly dynamic. But other industries—like infrastructure development, housing construction, hospitals, pharmaceuticals, and generally anything that deals with the physical world where people could get hurt or inconvenienced—are much less dynamic. I’m optimistic insofar as people are starting to realize this and push back against how hard it is to get anything done in the physical world.
What are the main obstacles to economic dynamism, and what reforms would you suggest to overcome them?
The biggest obstacles tend to have to do with process and preemptive regulation. We have instituted premarket barriers that prevent deployment without some sort of compliance process. For example, in a lot of infrastructure development, there are usually requirements for permitting involving procedural review under the National Environmental Policy Act or state equivalents. In other industries like nuclear, aviation, and pharmaceuticals, you have to show that your product is safe before it is allowed on the market, rather than using liability or post-market regulatory surveillance (as with cars) to ensure safety. In some areas, like cargo trains and container ports, we have also limited the deployment of technology in order to satisfy labor demands. To increase dynamism, we need to make it simple to deploy new products and technologies and deal with the problems these cause on the back end.
How can the United States foster a culture of dynamism?
I think dynamism begets more dynamism. If you have a highly dynamic economy, it fosters economic growth and positive-sum mindsets that lead to greater support for dynamism. We need to instantiate more dynamism in sectors that will have a broad-based effect on wellbeing so that all members of society start to benefit. If your dynamic sectors are software and media, that can be good for the San Francisco Bay Area and Hollywood, but it doesn’t help people in the Ozarks and Appalachians. By increasing dynamism in sectors that make everyone better off, we can increase the base of support for continued dynamism. Ultimately, I think this has to be an elite-led project, since we have a terrible track record over the last 50 years of delivering rapid economic growth for the masses. It will only succeed insofar as it delivers broad-based growth.
Why should the United States prioritize economic dynamism? (Or why shouldn’t it?)
I think the U.S. should prioritize broad-based economic growth, which is more or less isomorphic with dynamism. But we need to be conscious that this doesn’t just mean the top-line GDP numbers, it means growth for all kinds of people with all kinds of educational levels and all kinds of abilities. Dynamism can deliver broad-based growth, provided that it is consistently applied in every sector of the economy. Cheap energy, cheap housing, new pharmaceutical cures that obviate human-led medical care, new forms of transportation, advances in materials and other physical sciences—these are the kinds of changes we need to actually deliver to the public if we want good economic outcomes.
Russell Sobel, BB&T Distinguished Professor of Economics and Entrepreneurship at The Citadel, The Military College of South Carolina. His research focuses on state economic policy reform and entrepreneurship. Follow Russell on X @RussellSobel or learn more here.
How would you describe the current state of dynamism in the United States? Are you optimistic or pessimistic about the future of dynamism?
Business dynamism, in terms of the creative destruction and turnover of establishments, has been on an upward trend in the United States over the past few years and will continue to do so. I am very optimistic that innovations such as AI and the political policy changes associated with the change in presidential administration—such as funding reductions and reallocation, and perhaps reduced regulations—will also lead to forces for increased dynamism.
What are the main obstacles to economic dynamism, and what reforms would you suggest to overcome them?
The two main obstacles to dynamism are government regulations that make it difficult or more costly for new small firms to enter the marketplace and the abundance of government subsidies that keep otherwise failing firms or industries in business. Regulations should be lowered, especially those such as certificate of need laws, licensing, etc. Also, we should quit subsidizing firms or industries for which consumer demand does not sufficiently cover the cost.
How can the United States foster a culture of dynamism?
I think the U.S. and most other economically free countries already do so. I cannot think specifically of a way to do so, other than perhaps finding ways to reduce worker expectations that they will stay in the same jobs for their entire lives, which it seems most government workers do.
Why should the United States prioritize economic dynamism? (Or why shouldn’t it?)
Dynamism should be driven by market forces, which change over time. This isn’t a choice of prioritization in my view, so much as a natural phenomenon that should be allowed to happen at its own pace. Some major innovations, such as the internet or the automobile, lead to waves of creative destruction, so it increases temporarily after such events, then returns to normal.
John Lettieri, President and CEO of the Economic Innovation Group (EIG), which is dedicated to forging a more dynamic economy to the benefit of American workers, entrepreneurs, and communities. Follow John on X @LettieriDC or learn more here
How would you describe the current state of dynamism in the United States? Are you optimistic or pessimistic about the future of dynamism?
There are reasons to be cautiously optimistic. The pandemic sparked a large and sustained boost to the rate of business formation, which is a signal indicator of the overall dynamism of the U.S. economy. However, many structural barriers remain, and policymakers have done essentially nothing to capitalize on this unexpected momentum with a supportive policy agenda.
What are the main obstacles to economic dynamism, and what reforms would you suggest to overcome them?
The U.S. faces many obstacles to dynamism, including steep demographic decline and persistent regulatory bottlenecks. Policymakers can start with three big things to improve economic dynamism at zero cost to taxpayers:
First, the U.S. needs to revamp its skilled immigration system to prioritize those who have the most to contribute to our economy. In addition to fueling American innovation and entrepreneurship, skilled immigrants pay far more in taxes than they consume in government services—meaning we can have faster economic growth and improve the fiscal outlook at the same time.
Second, the federal government needs to get serious about removing barriers to development. This includes incentivizing localities to streamline their zoning and land use rules, as well as making access to federal funding contingent on a minimum level of local deregulation.
And third, we need to aggressively remove barriers to worker mobility like noncompete agreements, which stifle entrepreneurship, innovation, and knowledge diffusion.
How can the United States foster a culture of dynamism?
There seems to be a natural cultural tendency away from dynamism and towards sclerosis as countries become rich and mature, as we can clearly see across Western Europe, for example. The U.S. is on a similar trajectory. I generally believe there is a strong relationship between the youthfulness of a country—best expressed in birth rates and population growth—and its dynamic capacity. Thus, if the U.S. wants to be more dynamic, it needs to be a more pro-family society. And to be pro-family, it needs to pursue things like housing and energy abundance, as well as embracing a cultural norm of celebrating larger families and creating welcoming spaces for children everywhere possible.
Why should the United States prioritize economic dynamism? (Or why shouldn’t it?)
Because economic dynamism is essential to the long-term wellbeing of American workers and families. In a dynamic economy, innovation and competition prevent incumbents from becoming entrenched, the churn of the labor market is pulling workers into ever better opportunities, and people and firms are able to just do things without endless barriers.
