The Great Recession ended over five years ago, yet the U.S. economy remains sluggish. At a Cato Institute Conference, The Future of U.S Economic Growth, the nation's top economists and leading policy experts explored what policy changes might be needed to reverse the growth slowdown. "Given that policy change is difficult and time-consuming, it's inevitable that we can only try a limited number of reforms," Brink Lindsey, Cato's vice president for research, said in his opening remarks. "So of all the countless levers we could be pulling, which offer the biggest bang for the buck?"
Erik Brynjolfsson of the Massachusetts Institute of Technology focused on the future of innovation: Have the good ideas already been used up or is there a bright future ahead? He challenged the idea that the country has passed over a great divide where the most useful inventions — from the telephone to the automobile — have already been thought of. "There's a long tradition of people being pessimistic, especially in the throes of an economic downturn," he said. "The nice thing is that we know what happened after these predictions of stagnation: we had some of the best decades of economic growth and technological progress in human history."
Edmund Phelps, a Nobel laureate at Columbia University, explained that a significant factor behind the innovation drop-off is cultural. He pointed, for instance, to the rise of materialism. "Kids are being brought up to seek the highest paycheck consistent with job security," he said. "This has a very direct effect on the supply of innovation. If money is the only metric that matters — if wealth and wealth inequality become the focus in society, rather than adventure and exploration and creativity — then there's not going to be very much innovative activity."
Edward Glaeser of Harvard University said that his prescription for reform is to eliminate most land-use powers of local governments throughout the country. In the 1960s, he said, developers had an easy time doing business in America. Now, however, housing supply in the nation's most productive areas is being prevented by various regulatory barriers. This needs to change if the country is going to harness its potential.
Other speakers throughout the day included Dale Jorgenson of Harvard University, Robert Gordon of Northwestern University, and Tyler Cowen of George Mason University.
In conjunction with the conference, Cato organized a special online forum of essays that also explore the possible avenues for pro-growth policy reforms. Peter Van Doren, a Cato senior fellow and editor of Regulationmagazine, examined what factors combine to produce economic output and found little support that "simple changes" would improve productivity. So what advice does he give? "Of the policies I examined, zoning, low-income college student assistance, and patent reform seem to offer the most promising, though limited, gains."
The online forum features an eclectic group of contributors from across the ideological spectrum in order to stimulate creative thinking about reform alternatives. Other contributors include Ramesh Ponnuru of National Review, Jonathan Rauch of the Brookings Institution, Susan Dudley of George Washington University, and Michael Mandel of the Progressive Policy Institute.