Tell Me the Growth Rate
By Bryan Caplan
Suppose half of the sectors of the economy grow forever at 4%, while the rest completely stagnate. I’m strongly tempted to say that this economy’s growth rate equals 2% forever. Anyone tempted to disagree? If so, why?
Before you answer: Would it matter if the 4%-growth sectors were all in “virtual reality” – and the stagnant sectors were for actual food, shelter, cars, etc.? If it matters, why does it matter?