WSJ Growth Oped

I did an oped on growth in the Wall Street Journal, titled "Ending America’s Slow-Growth Tailspin." I'll post the full thing here in 30 days.

Blog readers will recognize a distilled version of my longer essay on growth (blog post here, html here,   pdf here), and the graph from Smith v. Jones blog post. I think out loud. The growth essay is much more detailed on diagnosis and especially on policy.

There are three basic ideas (two too many for a good oped).

1) Growth is everything. Increasing growth will do way more for every problem you can name than anything else on the economic agenda. Even if workers in 1910 could have taken all of Rockefeller's wealth, they would have been disastrously poor compared to today.

2) Can policies actually improve growth? The tut-tutters mocked Jeb Bush's 4% aspiration. I outline the "we've run out of ideas" school of thought, most recently in Bob Gordon's thoughtful book; the "everything is right but the zero bound" secular-staglation school, and the view that the growth giant is being held back by a liliputian army of politicized regulators.

As evidence,  I improved on the graph from an earlier post of the World Bank's ease of doing business score vs. GDP per capita,

(if you can't see the graph, click here)

This graph adds a few things relative to the one in WSJ. I added some outliers. Libya and Venzuela seem like countries with good reasons to have temporarily more GDP than their institutions can long support, Rwanda and Georgia the opposite. So the correlation is even better than it looks. Given how crude the world bank measure is, it's surprising it works so well. It's mostly about the difficulties of starting small businesses. I added Greece too to gives some sense of variation within the Euro-US world.

The point: Bad policies can do dramatic harm. Ipso facto, good policies must be able to do a lot of good. The US is not perfect!

A famous economist challenged my view that regulation is causing a lot of problems, noting that all of the big business types he talks to don't complain that much. But I think that's a horrendous selection bias. If you talk to the people still in business, you are talking to the ones that have figured out the political and regulatory game. Go talk to the ones whose businesses are closed, or not even started.

Another point, regulation has been getting worse for decades. Why the slump now? I think that a lot of the government onslaught's effect has been to make the economy less resilient. For example, social security disability is not a problem as long as you have a job. When you lose a job, and go on disability, now the huge disincentive to work, study, move, kicks in.  Recovering from a recession needs new jobs, new businesses, new innovations.

3) A very brief outline of policies to get growth going again. I think the key is to move past the standard rhetoric that defines our current partisan bickering. It's not how much we spend, really, it's how we spend it. Free market economics is not "trickle-down" economics, it's about incentives, simplicity, rule of law, and so forth.