Posts tagged with: economic growth

The key to creating economic flourishing is economic growth and the key to creating long-term economic growth is to create new ideas. But what is the key to creating ideas that lead to innovation?

Economist Alex Tabarrok says the idea equation goes like this: Ideas = Population x Incentives x Ideas/per hour

This equation is a useful way to lay out the factors affecting idea production, says Tabarrok in the video below. When we understand the factors behind production, then we can better predict how the future will go.

malthus-glasses1The doom delusions of central planners and population “experts” are well documented and refuted, ranging from the early pessimism of the Rev. Thomas Robert Malthus to the more fanatical predictions of Paul Ehrlich.

Through these lenses, population growth is a driver of poverty, following from a framing of the human person as a strain and a drain on society and the environment. As Michael Mattheson Miller has written, such thinking suffers from a zero-sum mindset wherein the economy (or any web of human relationships) is a fixed pie “with only so much to go around.” “But the economy is not a pie,” he explains, “Economies can grow, and population growth can actually help development. A growing population means more labor, which along with land and capital are the main factors of production.”

Yet even still, despite the range of agricultural and technological innovations, and the worldwide evidence of booming prosperity in highly populated areas like Hong Kong, Japan, and South Korea, the Malthusians of yesteryear are connecting their cramped imaginations to present-day concerns.

In an article at National Review, Kevin Williamson identifies this wrinkle, noting that the “new new Malthusians” are worried less about human impacts on natural resources and instead worry about the human costs of our own unbounded ingenuity: (more…)

Blog author: KHanby
Tuesday, September 6, 2016
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Economic Growth

Economic Growth in the U.S. has slowed down compared to historical averages according to recent reports from the Bureau of Economic Analysis.  Some are claiming that this is okay and that it is “normal” while there are others who disagree and understand that economic growth is essential to a prospering society.  This division among people on how they view economic growth also represents a division among the two major political parties on how they view economic growth.  Director of Research here at the Acton Institute, Samuel Gregg, recently penned an article for stream.org about the fundamental differences between the Democratic and Republican Party platforms on the topic of economic growth.

Gregg starts out by explaining the Dems position on economic growth and how they focus most of their economics on redistribution: (more…)

bourgeious-equality-mccloskeyIn Dierdre McCloskey’s latest book, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, she builds on her ongoing thesis that our newfound prosperity is not due to systems, tools, or materials, but the ideas, virtues, and rhetoric behind them.

Much has been made of her argument as it relates to the (ir)relevance of those material features as causes: “coal or thrift or capital or exports or exploitation or imperialism or good property rights or even good science.” But less has been said about her views on the spiritual/material as it relates to the byproducts.

I’m not yet finished with the book, but on page 70, she offers her view on the spiritual dynamics of what’s to come.

Contrary to popular claims that an increasingly prosperous free society will necessarily trend toward greed, envy, and idleness, McCloskey sees a future with more resources, and thus, more time and space for the transcendent. “One would hope that the Great Enrichment would be used for higher purposes,” she writes…”Enrichment leads to enrichment, not loss of one’s own soul.” (more…)

Leighblackall-76202405Andrew Biggs of AEI has a piece up today at Forbes addressing the gender pay gap and provides a neat solution: “forbid women from staying at home with their children.” As Biggs points out, such a policy would address perhaps the greatest root cause of gender pay inequality: varied work experience attributable to choices women make. “Most mothers who stay at home or work only part-time are doing what they wish to do and what they view as best for their kids,” writes Biggs. This results in gaps in pay when those women re-enter the work force or increase their labor participation.

Biggs’ proposal to “make staying at home with kids illegal, just like child labor is illegal” would have another benefit favored by many: it would be a boon to GDP. As I point out in a review essay in the latest issue of Christian Scholar’s Review, the work that stay-at-home parents do is not counted toward GDP. When those parents pay someone to take care of their children as part of a business transaction, however, as in the case of day care centers, then that exchange does count towards GDP.

My piece, “Affluence Agonistes–A Review Essay,” takes a look at the book The Poverty of Nations by Wayne Grudem and Barry Asmus, in addition to a couple of other recent publications. The CSR essay expands upon a review of the Grudem/Asmus book I wrote for Public Discourse, “Life to the Full: The Dangers of Material Wealth and Spiritual Poverty.” As Grudem and Asmus put it simply, to combat poverty “the goal must be to increase a nation’s GDP.”

So not only are stay-at-home moms a major source of wage inequality, they are also “a drag on GDP.” As one press report put it, “With female participation stagnating, potential growth isn’t rising as quickly.”

Biggs’ proposal to ban stay-at-home mothers should logically be embraced by both anti-gender inequality progressives as well as GDP growth fundamentalists. As I argue in the essay, “If a nation were to pursue GDP growth as its highest goal, it would probably institute policies and incentives to induce women to work outside the home and professionalize child care. GDP incentivizes specialization and the division of labor, since such transactions are the only things taken into account.”

But the Grove City College economist Shawn Ritenour rightly concludes, “We ought not give into the temptation that all of human welfare is encapsulated in GDP.” Another way of putting it is that men, women, and children do not “live on GDP per capita alone.”

Update: For those readers who might not bother to read Biggs’ piece, he does not (and neither do I, for that matter) actually advocate for this policy.

A simple example of hamburgers being made at home versus at a restaurant can help illuminate the explosion of prosperity since the Industrial Revolution, says Don Boudreaux in this Marginal Revolution University video.

The story of the division of labor and development of specialized tools is an old story (Adam Smith introduced the concept in his Wealth of Nations), but it still has tremendous explanatory power about how prosperity is created.

“Globalization must do more than connect elites and big businesses that have the legal means to expand their markets, create capital, and increase their wealth.” –Hernando de Soto

6898950_7a0fd3b3d9_bWhen assessing the causes of the recent boom in global prosperity, economists and analysts will point much of their praise to the power of free trade and globalization, and rightly so.

But while these are important drivers, we mustn’t forget that many people remain disconnected from networks of productivity and “circles of exchange.” Despite wonderful expansions in international free trade, much of this has occurred between “outsiders,” with many partners still languishing due to a lack of internal free trade within their countries.

Much of this is due to an absence of basic property rights, as economist Hernando de Soto argues throughout his popular book, The Mystery of Capital. If the global poor don’t have the legal means or incentives to trade beyond families and small communities, so-called “globalization” will still leave plenty behind. (more…)