How Cheap Labor And Capital Suggest That Faster Growth Is A Great Deal

How Cheap Labor And Capital Suggest That Faster Growth Is A Great Deal

(Longer Than Usual)

In my last post, I stated that the current low level of real wages and real interest rates suggested that there may be large net social benefits associated with markedly faster growth. In this post, I provide a more detailed justification for this claim. I consider the possibility that the government expands its level of activity sufficiently that capital, labor, and output all grow 2.5% faster per year (something like 4-5% per year) than is currently projected over the next four years.  Under this alternative profile, all three variables would be (a little more than) 10% higher than is currently projected at the end of 2020.

Because...