'In short, the best way to improve both the growth and the distribution of income in the U.S. economy would be to encourage productive investment at every level, including government (productive infrastructure, clean energy), industry (investment and R&D incentives), and individuals (education, employer credits for job training).'<blockquote>'So how should we think about economic policy, and which directions would be most beneficial? From my perspective, the answer is straightforward. We define the “standard of living” of a nation by the amount of goods and services that a person can
obtain for an hour of work. We define “productivity” by the amount of goods and services that a person can
produce with an hour of work. While real wages ebb and flow over the economic cycle, over the long-term, “standard of living” and “productivity” go hand in hand.
Increase productive investment, and you increase the amount of output that an employee can produce with an hour of work. Moreover, the great irony of economics is that as productive investment becomes less scarce, each unit of it becomes less profitable. So output increases, and a greater share of output goes to wages instead of profits. Expanding productive investment at every level of the economy gives you both a larger pie and an improved income distribution.
If you net out all the assets and liabilities in an economy, you’ll find that the nation’s accumulated stock of real investment is the
only thing that remains. That’s the central driver of a nation’s productivity, and the true basis for a nation’s wealth. Broadly defined, it includes a nation’s accumulated stock of real private investment (e.g. housing, capital goods, factories), real public investment (e.g. infrastructure), intangible intellectual capital (e.g. education, inventions, organizational knowledge and systems), and its endowment of basic resources such as land, energy, and water. Encourage, incentivize, and protect all of those, and you’ll find an economy that delivers prosperity. Fail to encourage productive investment at every level, and you’ll find an economy in long-term decline.
In short, the best way to improve both the growth and the distribution of income in the U.S. economy would be to encourage productive investment at every level, including government (productive infrastructure, clean energy), industry (investment and R&D incentives), and individuals (education, employer credits for job training).
The primary source of failure in the U.S. economy over the past 15 years has been a policy environment aimed at encouraging consumption over productive investment. Those policies have been dominated by the Federal Reserve’s quest to punish saving, fuel debt-financed consumption, and produce an illusory “wealth effect” from financial speculation
..
As a final note on economic policy, I’ll repeat something I’ve emphasized regularly over the years. Good policy acts to relieve constraints where they are binding; to coordinate activities that can’t be effectively executed solely by private initiatives; and to provide incentives or impose costs on the activities of those whose actions produce benefits or damages for others. This kind of thinking also reduces to the project level. For example, the most promising infrastructure investments are likely to be those that reduce congestion (lane expansions, bridge renovations) or relax long-term supply constraints (e.g. alternative energy), as opposed to building new systems (e.g. high speed rail) where existing ones aren’t at full capacity, or extending transportation infrastructure to low-population or low-demand areas.
In my view, these are the measures by which economic policy should be judged, to estimate whether or not they are likely to benefit the country. Does the policy encourage productive investment, or does it instead encourage consumption, malinvestment, or speculation? Does the policy have high “marginal benefit”? For example does it spend a fairly modest amount per person to improve outcomes for those who have little, or does it spend a large amount per person to produce small improvements for those who already have a great deal? Does the policy relax constraints that are binding, or does it create overcapacity where there is already slack capacity? Does the policy increase incentives for economic activities that have “spillover” benefits for others? Does the policy increase costs for economic activities that impose “spillover” damages on others? Does the policy require those who invest or lend with public funds to have some amount of their own capital at risk? Does the policy tie incentives to tangible economic benefits such as job creation? Whatever the policy, the more directly it encourages productive investment at the private, public, or individual levels, the greater the likely benefit to the country.
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Some have suggested that it should be the job of Democrats to deal with the distress of Democrats, and the job of Republicans to deal with the distress of Republicans. I wholly disagree. The first act of wisdom, and the first step toward peace and reconciliation, is for each side to listen, nonjudgmentally, to the suffering - real or perceived - of the other side. The job of any true leader, indeed, the mark of any true leader, whatever their political persuasion, is to encourage that understanding.
A way forward, I think, is to suspend the inclination to reduce other human beings to labels. Labels are our way of defending our attachments and avoiding any attempt to understand and address the other side’s concerns, fear, anger, misunderstanding, or perceptions of injustice. One usually finds that it’s possible to address the concerns of others in a way that still meets one’s own interests, but it takes a certain amount of courage to open a dialogue when the other side uses labels like “extremist” and “enemy” too. Peace isn't just a random outcome that comes from hope. It's a
practice, and is often the strongest and most successful
strategy. My friend and teacher Thich Nhat Hanh once said “To love our enemy is impossible. The moment we understand our enemy, we feel compassion towards him or her, and he or she is no longer our enemy. When you begin to see that your enemy is suffering, that is the beginning of insight.”
Gandhi said "If we could change ourselves, the tendencies in the world would also change." For me, that change includes a world that focuses less on a dualistic "us vs them" mentality, and more on a recognition of our shared humanity. Ultimately, all of us are made of that same substance. We share the same momentary blink-of-an-eye in the eternity of time, on the same tiny
dot in the vastness of the universe. That’s an extraordinary thing to have in common. The sooner we approach each other with that recognition, the stronger we’ll be as a country and as a world.'
- John P. Hussman, Ph.D.,
Judging Economic Policy, November 14, 2016</blockquote>
Context<blockquote>
'..I’ve lost all respect for monetary economists..''..We still have too much debt, not just in the US but around the world. Budget deficits are out of control, not just in the US but around the world..''..the infrastructure program to truly "make America great again."..'</blockquote>