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Samuelson – and Henderson – on Gordon and Growth

Here’s a letter to the Washington Post:

Robert Samuelson summarizes economist Robert Gordon’s reasons for pessimism regarding the future of economic growth (“The Great Reversal,” Oct. 8).  Gordon does indeed identify problems that might cause productivity growth to slow.  But while the wisdom of scholars such as Gordon deserves respect, some economists do challenge Gordon’s pessimism.

For example, David Henderson points out that “the term ‘innovation’ doesn’t apply only to new inventions.  It can apply to new government policies.  What if state and local governments carried out two innovations: (1) allowing jitneys … and (2) pricing road use in a roughly revenue-neutral way (cutting gasoline taxes while raising tolls)?  If those two measures reduced the average American’s time in traffic by even 20 hours a year (which is only 5 minutes a day for a 250-day year), that would be like a 1% increase in real GDP.  Of course, that would be a one-time increase and an increase in growth only over the period in which it happens, but it’s nothing to sneeze at.  But Gordon considers very few policy options.”*

As Henderson recognizes, policy matters immensely.  The greatest single innovation in history was not scientific in the narrow sense.  Rather, it was the freeing of human creativity and commerce from the shackles of superstition and of the state.  Deirdre McCloskey shows compellingly that millennia upon millennia of virtual economic stagnation suddenly gave way – just a few centuries ago, yet only in societies newly and unprecedentedly friendly to bourgeois pursuits – to an explosion of wealth unimaginable even to the greatest visionaries of the 16th century.

There’s no reason to believe that reversing America’s and Europe’s increasing centralization of economic control will not revitalize this capitalist creativity.

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

* David Henderson, “Gordon on Growth: A Critique” (EconLog, Sept. 4, 2012).