To hear pundits talk about it, it’s easy to conclude that we have no idea what policies will help with economic growth. After all, we’re debating whether we’re stuck in stagnation or about to witness a new era of technology-led expansion. But there are a set of policies the majority of economists believe will be growth enhancing, and — spoiler alert — cutting taxes isn’t on the list.
This is from a Foreign Affairs essay on automation and the economy by Erik Brynjolfsson, Andrew McAfee, and Michael Spence:
As for spurring economic growth in general, there is a near consensus among serious economists about many of the policies that are necessary. The basic strategy is intellectually simple, if politically difficult: boost public-sector investment over the short and medium term while making such investment more efficient and putting in place a fiscal consolidation plan over the longer term. Public investments are known to yield high returns in basic research in health, science, and technology; in education; and in infrastructure spending on roads, airports, public water and sanitation systems, and energy and communications grids. Increased government spending in these areas would boost economic growth now even as it created real wealth for subsequent generations later.
That’s not to say growth is primarily a factor of policy. No doubt it’s exogenous to a significant degree. But that sort of agenda would almost certainly help.
The essay overall is a concise summary of the global pressures on labor (and even capital) created by digital technologies, and for the longer version Brynjolfsson and McAfee’s recent book The Second Machine Age is also quite good.