(1) a shortage of infrastructure spending — our “physical plant” is getting older, and no one wants to spend money on repairing streets and burying electrical lines and replacing decrepit buildings

(2) a slowdown in R&D spending, coupled with aiming much of our national R&D at “safe” low-payoff activities rather than breaking new ground — i.e., the “new” industries that ought to be soaking up the unemployed and new college graduates aren’t getting started

(3) the USA as a whole is being hollowed out. We’re filling up the coastal cities with people, and the great bulk of the interior is becoming depopulated, being used for farming and some natural resource extraction, but nothing more. We’re turning the American heartland into something like a great Gobi desert — and deserts don’t contribute much to national wealth.

The answers, to my thinking are a) true, there are resource constraints that we must consider–and here too policy can help a lot, b) the big issue for me here is efficiency–doing more with less, and c) some simple arithmetic of growth.

Re a) we must recognize not only the constraints on growth, but the damage unconstrained growth powered by fossil fuels does to the environment. A tax on carbon use is not only a no-brainer–it’s a classical economics solution (internalizing an externality) that pols would support were they not bought and paid for on this issue.

b) As I stress in the blog, there’s a lot of waste/slack going on that we should squeeze out. Maybe a third of health care spending in the US is wasted; too many are underemployed; we’re leaving efficiency gains on the table all over the place! That implies more growth by using existing, or even fewer, resources. (and ftr, we are using energy a lot more efficiently than we used to).

c) Since output (GDP) divided by hours worked equals productivity by definition, take natural logs, move things around, and think in terms of growth rates and you get that GDP growth equals productivity growth plus labor force growth (really, hours, but they’re obviously related). So, improving efficiency, or productivity (as in ‘b’) boosts growth as does faster growing labor force. And visa versa.

Your penultimate paragraph is interesting–sometimes I think/hope we’re moving in that direction, but most often, I must say, I fear that it’s congenitally hard for humans to move forward that way. Much more to say about that, and I’m obviously all about WITT vs YOYO, but history is pretty clear that we’ve got a bit of screw loose in this regard.

It would also be good to be able to show where the greatest needs are so that people could begin to see their self-interest: how they are being short-changed today and how their lives could be better. Bridges not falling down is just a start. I would love to see the Chicago CTA modernized to eliminate the eyesore of rusting structures, and bring beautiful, comfortable, well-lit stations, (much) quieter wheels, quicker trips, etc., all to encourage higher usage. How many thousands of workers could be put to work for several years just doing that one project? How many more such projects — yes, including projects that improve auto travel — could we find around the country?

Unfortunately, what we get are generalizations and platitudes. We who do believe it, who even suspect that short-changing infrastructure employment made the employment generated by bubbles necessary to keep unemployment to politically defendable levels, need help. We need well-founded data and graphs to spread the message.

I’ve recently started following your posts, which are insightful and have great analysis. Thanks for sharing your contributions.

I’m also in the middle of reading Michael Lewis’ books about what caused the mortgage/economic crises (Liar’s Poker, The Big Short, Boomerang). Many of the characters in his books represent the few who depart from status quo thinking, and ask tough questions where most have become complacent and complicit. Had more people done so, and had more people listened, the crises may have taken different turns.

In the vein of trying to understand something that seems basic about economic growth in our capitalistic environment, I have a question that follows on your CBO post:

It’s always seemed to me that if you look at the world as a finite place with finite dimensions (notwithstanding our sundry capabilities to innovate and become more efficient), with a finite number of people vying for finite resources, why do we expect and–maybe more importantly–why to we message the American population that continuous year-over-year growth (GDP) is possible or even desirable?

A thoughtful and analytical post about this conundrum–around our collective desire for constant “growth” vs. focusing on any number of other national/global indicator–would be most welcome.

As we think about the way forward over the next four years, and the next 40 we must find new, more appropriate ways of leading in this world—in politics, economics, education, and health care. We have to create ways to cooperate with our growing neighbors around the globe.

What if US leaders started placing heavier emphases on things like quality of life, corporate value, and collaborative economics? The younger generations are starting to think this way and more bridges need to be built around this topic that span our generations.

What are your thoughts about this and how we could move the conversation to a less capitalistic-cetric place?

http://www.cepr.net/index.php/blogs/beat-the-press/the-washington-post-is-trying-to-scare-you-again