The third of the four things that I had hoped to have finished by mid-May is finally put to bed--on July 9. *Sigh*.
Nevertheless, I like it a lot: it is a chapter for a book to be edited by Henry Aaron, part of Brookings's Agenda for the Nation series. It's co-written with the brilliant and thoughtful team of Claudia Goldin and Larry Katz. We're supposed to talk about sustaining American economic growth. What do we say?
A fast growing economy is a rich economy. A rich economy is one in which people have more options and better choices: the people canthrough their individual private and collective public decisionsdecide to consume more, lower tax rates, increase the scope of public education, take better care of the environment, strengthen national defense or accomplish any other goals they might choose. For an economist these are sufficient reasons to consider growth a good thing. Moreover, in America at least, slow economic growth appears to heighten political gridlock, and thus reduce the quality of political decisions.
Although faster economic growth is a good thing, it is not the only good thing. The future benefits of more rapid economic growth come at a cost. Resources have to be diverted from consumption, and devoted to physical capital deepening, education and training, and research and development. There is, of course, a trade-off. It is the purpose of this chapter to sketch out what this trade-off is.
We look sequentially at the three broad factors that have driven modern American economic growth: human capital, the formal knowledge and the skills acquired through practice and experience of our labor force; physical capital, the machines, buildings, and infrastructure that amplify worker productivity and embody much of our collective technological knowledge; and the ideas that make up our modern industrial technology and that are in the end the crucial factor making our society so rich in historical and comparative perspective. Of these, ideastechnologymust take first place when ultimate causes are discussed. But it is human capitaleducation and skillsthat must take first place when we think about policy. This is so for four reasons: First, human capital has played the principal role in driving America's edge in twentieth-century economic growth: the increase in average schooling by some seven years between 1875 and 1975 appears to be the principal factor behind America's twentieth-century economic edge over the rest of the world economy's industrial core. Second, we understand more about the effects of some policies intended to boost the knowledge and skills of the labor force than about the effects of policies intended to increase directly either the physical capital stock or the stock of ideas.
Third, and probably most important, efforts to upgrade the knowledge and skills of America's workers promise not only higher levels of output but also a less badly skewed distribution of income. The goal of economic growth cannot be simply the volume of output alone, but a high volume of output distributed to Americans in a way that enables them to lead better lives. A measure of well-being like the geometric mean of household consumption comes closer to capturing our intuitions of what a prosperous and wealthy society is than does simply total GDP per capita. Thus policies to improve educational opportunity are, as Alan Blinder has repeatedly said, a "two-fer." Thus we begin the body of this chapter with a survey of U.S. human capital trends and policies. Only afterwards do we turn to policies aimed at increasing physical investment, and enhancing technological progress.
For some strange reason, my .pdf file maker decided the paper needed to be broken into several parts:
Posted by DeLong at July 08, 2002 12:32 PM | Trackback
J. Bradford DeLong, Claudia Goldin, and Lawrence H. Katz (forthcoming 2003), "Sustaining Economic Growth," in Henry Aaron, ed., Agenda for the Nation (Washington, DC: Brookings Institution). Additional end material: a few figures; a few tables; a few more tables.