Robert Waldmann on the Engines of Growth: Live from Crows Coffee
It is just not credible for me to highlight a comment that starts "this is an unusually excellent post" as a DeLong Smackdown, is it? Alas, because it is one, a good one...
...Also the question is a very good question (and your concern about the power of the wand a good concern).
@Ezra Abrams the question was specifically about increasing "growth".... There is evidence that higher taxes on the top 0.1% would cause higher GDP growth https://ideas.repec.org/p/rtv/ceisrp/281.html but it isn't very strong....
I find it interesting that the word "equipment" doesn't appear on your list. I wonder why.
I agree that education seems to be key to growth. I would have put universal pre-k somewhere on the list. That, I think, is relatively doable for one thing, and the evidence for very high social returns is quite strong.
Also post-12 education. I'd tend to guess that Pell grants are money well spent. For one thing, people who think they can't afford college also think that their K-12 performance (I mean grades) doesn't matter. I think more public financing of higher education would mean selection more on [your] ability than dad's (and now mom's) income, and also change incentives for high school students (or rather create some incentives for the many high school students who now know they just have to attend to study).
On a completely different note, I think there is a lot of growth to be had based on risk premia. with the current system, high returns are required of projects with high idiosyncratic risk. This is not in the representative consumer's interests. I think that growth would be increased at far less than zero cost if the Federal Goverment were to buy 10% of common stock (not chosen, 10% of the shares of every listed firm).
Here I note two bits of evidence
- Singapore is very rich. How did that happen ?
- the US Federal Government made huge gigantic profits saving the financial system even though it bought risky assets (aspecially Fannie and Freddie shares) at far above market prices.
I'd also add that the Wall Street as casino finance is a burden on growth--here especially because it employs smart people who spend their time betting against each other. During the high-growth period finance was highly regulated dull and boring. I don't think that is a coincidence.
I think DARPA is one key engine of growth. It seems to me that publicly financed (or subsidized) research is money well spent.
Finally, I still believe in equipment investment and equipment investment tax credits. Also the R&D tax credit. I don't care if Republicans agree with me, the policies make sense.
