I’m worried about the tiny budget of the National Science Foundation and other basic-research enterprises, about an increasingly shoddy educational system, and about cooking the planet. The stock of capital plant and equipment, not so much.
In our forthcoming From Poverty to Prosperity, Nick Schulz and I present a lot of evidence in support of the view that intangible assets, including human capital and innovation, are significant sources of economic growth. Historically, economists have tended to focus too much on the role of savings and capital accumulation and not enough on these intangible factors.
However, one should not go too far in the opposite direction and ignore savings and capital accumulation altogether. Brad DeLong’s Macro textbook has an excellent chapter on economic growth. His chart showing the differences in the standard of living between high-saving and low-saving countries is persuasive evidence that saving is good.
READER COMMENTS
Chris
Sep 30 2009 at 11:20am
How does “saving is good” match up with the paradox of thrift? Or is Brad not one of the Keynesians pushing that particular line of thought.
John Thacker
Sep 30 2009 at 12:18pm
The NSF budget is not tiny. There is the issue that the NSF was given an enormous budget increase from 2000 to 2004, and then stagnated. The budget increase from 2000 to 2004 was larger than that from 1991 to 2000.
The flood of money and then stagnation, though, drew extra people into science who then had problems when the money stopped growing enough to support them.
Marc
Sep 30 2009 at 12:36pm
The federal government does not need to spend more money on porn addicted employees. The private sector can do a better job at that any way.
Gary Rogers
Sep 30 2009 at 5:21pm
The lack of savings and capital accumulation can be made up through hard work (human capital) and innovation, but when someone else can lay claim to our future production through previously accumulated debt, these quickly evaporate. We have never experienced this in the relatively short life of our country, but history is full of examples of debtor countries. I worry about being sold down the river by charlatan economists who believe in the paradox of thrift.
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