Sometimes I think the economics blogosphere focuses excessively on the small things, things of transitory importance. We think in rates of growth but neglect the level. We write treatises about how to reduce cyclical unemployment today but grow silent about the structural unemployment which is with us always. We stress about short-run macroeconomic stabilization but forget that, in the long run, productivity is the sole determinant of living standards.
Keynes wasn't wrong when he said "in the long run we are all dead." Economics needs to think about the short run. It matters. We are most definitely doing short-run macroeconomic policy wrong in this moment, and paying trillions in opportunity costs because of it. Yet I worry that long-run economic growth gets short shrift in our dialogue.
Scott Sumner, for instance, recently wrote this on his blog:
Macro is basically composed of three fields:Now, Sumner is a monetary economics guy. In the academic division of labor, it is his job to be thinking about the short run and medium run. He is allowed to find the long-run stuff less interesting, long, boring, random, whatever.
1. Long run RGDP growth.
2. Nominal macro variables in the long run (P, NGDP, i, E, etc)
3. Business cycles.
Money is all of part two, and half of part three. That means monetary economics is half of macro. It’s also far and away the more interesting half. The real side is a long, boring and random list of factors that affect RGDP (capital, labor, technology, good governance, natural disasters, etc.
But then I find myself asking: Who, then, is thinking about the long run? How many economic-growth economists do you see blogging? How often are those principles discussed?
My answers: Few. Few. Not often enough.
I will take myself as an example, because I hate straw-man arguments. Looking through my own record, I came up with a rough estimate that less than a quarter of my blog posts have focused on long-run economics. And that estimate is up significantly since the start of this summer, when I made several explicit commitments to think about issues like poverty, development, human capital, to name a few.
Starting Monday, then, I'll be kicking off a weeklong series of posts about long-run growth, and I am open to topic suggestions within that area.
Let's start with this: the United States has the highest per capita income of any large country on a purchasing power parity basis. We are surpassed only by small wealthy states and petro-states -- Luxembourg, Singapore, and Hong Kong in the former category, Qatar, Norway, and Brunei in the latter. Most large developed nations -- i.e. those with a comparable set of challenges in long-run growth -- lag significantly behind.