So I (virtually) open the (virtual) Wall Street Journal this morning to read:
Edward Lazear: The Worst Economic Recovery in History: Since the second half of 2009, the U.S. economy has grown at a rate of 2.4%, a full percentage point below average long-term growth…
What would Ed Lazear do if any of his students at Stanford were to come to him with a projection that America's long-term growth rate in the 21st century was 3.4%/year?
Ed would tell them that they had done their job wrong.
Ed would send them back to try again.
The 3.4%/year figure is average real GDP growth over the sixty years from 1947-2007. It includes, among its sources of growth, the rapid population and labor-force expansion of the baby-boom generation. It includes, among its sources of growth, the fact that average labor productivity growth in the tumultuous decades of the 1930s and 1940s lagged behind what was technologically possible, and thus there was headroom for more rapid expansion in the first post-World War II decades. Both of those have passed away. And the growth rate of America's productive potential these days is lower as a result.
Academic forecasters of repute argue these days over whether the long-run potential growth rate of GDP in the U.S. since 2000 and into the foreseeable future is closer to 2.5%/year or 3.0%/year.
No economist of repute I know of argues that it is 3.4%/year.
Except for Ed Lazear.