Here’s a letter to the Financial Times:
Several questions popped to mind after reading Nobel laureate economist Michael Spence’s essay in your pages today (“America needs a growth strategy“). Here are a few:
- What is his factual basis for accepting the claim that in the U.S. “manufacturing is vanishing”? Data from the Federal Reserve show quite the opposite. [UPDATE: See also the Wells Fargo study linked in the previous post.]
- Mr Spence blames many of America’s current economic woes on “a pattern of underinvestment in infrastructure”; an “education system” plagued by “widespread problems with efficiency and effectiveness”; and “state budgets [that] are in distress as a result of insufficiently conservative budget policies.” Yet he then calls for “a broad public-private partnership to invest in the development of technology in parts of the tradable sector.” What logic leads Mr Spence to suppose that the same institution that mishandles infrastructure, education, and state budgets – namely, government – will perform admirably when entrusted with more power to determine specific patterns of investment? What theory assures Mr Spence that the politics that distort decisions on infrastructure, education, and government budgeting will dwindle into insignificance when politicians possess even greater powers and authority?
I’m truly curious about his answers.
Donald J. Boudreaux
(HT Jim Dorn for alerting me to this FT essay by Spence.)