The impossibility of static equilibrium competition — consistently changing incentives, knowledge and institutes, all things subsitute (ie only one good: utility) and yet all things are unique (even two apples).

Competition as innovation v immitation — innovation leads to monopoly and innovation leads to competition… but also immitation = innovation incentive because both are equally new pieces of knowledge to the individual. Also, when innovation isn’t easily immitated it encourages other innovation.

Understanding specialisation — comes from bigger markets and diversity. Does it necessarily lead to more innovation? If specialisation is good then are takeovers and monopolies more efficient?

Definition of competition — the number of firms v the barriers to entry (transaction costs & government). Define competition as a situation were there is an incentive and capacity for a second firm to enter the market?

Business incentives — (1) to make more money v (2) to stay in business. The second incentive is stronger and under competition the second incentive is an incentive to innovate. Therefore the incentive to innovate is greater than the potential reward from any resultant monopoly profits.

Evidence for competition-growth links — check productivity of liberalised industries (before/after), compare public & private monopolies, check the impact of regulation, check the impact of mergers and the impact of blocking mergers, check the impact of tax.

X-efficiency is half the story — x-efficiency is a static reason for believing that competition leads to a better outcome. It increases the expected GDP but not the expected GDP growth rate. There is also a dynamic link between competition and growth.

Time value of money — the discount rate accounts for (1) the cost of capital; and (2) it’s better to have the option to act now. The cost of capital should not be the risk-free cost of capital because there is a clear economic benefit to taking risk (otherwise we wouldn’t take them). Return on a risky asset covers two things: (1) the inherently greater expected return in the risky asset; and (2) extra reward to compensate for taking on the risk. Therefore the appropriate cost of capital is somewhere between the risk-free rate and the expected rate.

Immigration elasticities — compare migrant flows between new EU countries (e.g. Poland, Czech) and open EU countries (e.g UK, Ireland) to determine the elasticity of demand for living in a high-paying country.

Trickle-down effect — check the performance of poor people in countries to see if they get a benefit from general economic growth in that country.

Government failure — the public choice bias comes from information assymetry, not just from self-interest (eg teachers, doctors) & the funding problem where money is spread around too widely (and never deeply) & the policital “need” to act despite objective assessment (squeekly wheel).

Economics in context — factors of production (resources, knowledge) brought together through institutions (family, firms, NGO, bureaucracy, law) to achieve outcomes. Narrow economics is just about “firms”… but is now being extended to family (Becker), bureacracy (public choice), law (law & economics). Dynamic economics considers changes in factors of production. NIE looks at which institutions are best at achieving outcomes. Firm theory looks to better understand how the institution of the firm actually works (as opposed to it’s abstract role as a processor of resources to outcomes). Social capital refers to family/friend/social institutions and their value.