Silvia Merler: Economy of Intangibles: "Over the past 20 years, there has been a steady rise in the importance of intangible investments.... Intangibles share four economic features: scalability, sunkenness, spillovers, and synergies. Haskel and Westlake argue that–taken together–these measurements and economic properties might help us understand secular stagnation...

...The first link between intangible investment and secular stagnation is,according to Haskel and Westlake, mismeasurement. If we mismeasure investment, then measured investment, GDP, and its growth might be too low. Secondly, since intangibles tend to generate more spillovers, a slowdown in intangible capital services growth would manifest itself in the data as a slowdown in total-factor productivity (TFP) growth. Thirdly, intangible-rich firms are scaling up dramatically, contributing to the widening gap between leading and lagging firms. Fourthly, TFP growth could be slower because intangibles are somehow generating fewer spillovers than they used to....

Caggese and Pérez-Orive argued that low interest rates can hurt capital reallocation in addition to reduce aggregate productivity and output in economies that rely strongly on intangible capital.... Productive credit-constrained firms can only borrow against the collateral value of their tangible assets.... Kiyotaki and Zhang examine how aggregate output and income distribution interact with accumulation of intangible capital over time and across generations.... Doettling and Perotti argue that technological progress enhancing the productivity of skills and intangible capital can account for... long term financial trends.... As creating intangibles requires a commitment to human capital rather than physical investments, firms need less external finance....

Intangibles raise questions on the policy side too.... Martin Wolf... argues that... they subvert the familiar functioning of a competitive market economy, most importantly because intangible assets are mobile and thus hard to tax.... Guntram Wolff has a chart showing that Germany is under-performing in intangible investments compared to its peers.... Roger Farmer thinks that intangible investments influence company profitability. If technology companies’ profits are continually reinvested as intangibles, earnings may never appear as output in GDP statistics, but they will affect the company’s market value. For government leaders concerned with providing goods and services during a period of slow growth, getting a handle on this unmeasured GDP is essential...


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