Arnold Kling

Growth as a Silver Lining

Arnold Kling, Great Questions of Economics
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Brad DeLong sees the silver lining in the cloud of a weak economy.

By late 2002 (according to our projections, at least) real GDP will be some ten percent higher than it was four years earlier. When you reflect that the U.S. economy is running much less "hot" today than it was in 1999--compare the then-unemployment rate of roughly 4 percent to today's unemployment rate of roughly 6 percent--you come up with the consensus guess that the productive potential of the American economy today is some 15 percent higher than it was four years ago, and is growing at about 3.75 percent per year.

Discussion Question. If real growth of 3.75 percent proves sustainable for the next ten years, what implications does this have?

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