As earnings season is upon us, it’s worth asking: Does business create value these days the way it once did?
One sign it doesn’t is a significant decline in the formation rate of U.S. firms over the past few decades. Economists Peter Orszag and Jason Furman have argued that investment and innovation have taken a back seat to profits derived from economic rents. Political factors also increasingly appear to play a major role in driving corporate profits, as new regulations help incumbent firms, another strike against economic efficiency.
