Don’t Focus On The Long Term

Should the richest and highest productivity societies on earth all suddenly stop worrying about the mass unemployment that’s afflicting us and instead worry about why we don’t have even higher ever levels of productivity? So argues the University of Chicago’s Ragu Rajan in a piece lauded by Tyler Cowen. I’m closer to Karl Smith who deems it “nonsense on stilts.”

I think that what draws people into Rajan’s trap is an excessive tendency to associate “focus on long-term sustainable growth” with the ideas that they happen to favor. This models political disagreement as one in which there’s an unquivocal “long-term sustainable growth” agenda that some politicians are failing to implement out of either cowardice or else a belief that some priority other than “long-term sustainable growth” is more important at the moment. Under the circumstances, raising the status of “long-term sustainable growth” as a priority relative to fixing mass unemployment starts to look like a clever rhetorical strategy. The cure is to remind yourself that there’s profound and perfectly sincere disagreement about what a long-term sustainable growth agenda looks like. In particular, if you’re a University of Chicago economist you should remind yourself that a great many intelligent people believe a long-term sustainable growth agenda consist of large-scale public expenditures on clean electricity generation, high-speed rail, and universial preschool, a much greater government role in the health care sector, and increased subsidization of public colleges, all financed in large part by sharply higher marginal tax rates on high-income individuals. This is an agenda for improving America’s stock of physical and human capital, as well as creating a framework in which research and technological progress thrive. It’s typically paired with an agenda for overhauling labor law so as to encourage union organizing at large private firms to create a dynamic where US enterprises are steadily nudged into a high-productivity high-wage equilibrium. In other words, Rajan should consider that Joe Stiglitz agrees with him about the need to focus on long-term growth but has a diametrically opposed view of what that would look like.

That’s just to say that taking an argument out of the controversial but ponderable realm of “why are all these able-bodied people looking at job listings instead of working” and into the truly mysterious depths of “why do some countries prosper more than others over the long-term” is not actually a productive move.

And these are different questions. Spain is richer than Argentina, but has many more unemployed workers. Asking how Spain can get even richer is a good question to ask, but so is asking how to not have so many unemployed workers.