A Rutgers historian writes an essay that shows a glaring ignorance of how capital-augmenting technical change works.
Between 1900 and 2000, real gross domestic product per capita (the output of goods and services per person) grew more than 600 percent. Meanwhile, net business investment declined 70 percent as a share of G.D.P. What’s more, in 1900 almost all investment came from the private sector — from companies, not from government — whereas in 2000, most investment was either from government spending (out of tax revenues) or “residential investment,” which means consumer spending on housing, rather than business expenditure on plants, equipment and labor.

In other words, over the course of the last century, net business investment atrophied while G.D.P. per capita increased spectacularly. And the source of that growth? Increased consumer spending, coupled with and amplified by government outlays.
Donald Boudreaux delivers the corrective.
Because each dollar successfully invested raises G.D.P. by multiple dollars, net-investment’s decline as a share of rising G.D.P. (and not, please note, absolutely) is evidence of the impressive success of private investment rather than of the proposition that economic growth requires only “[c]onsumer debt and government spending.”
Then Michael Munger jumps into the ring, off the top rope.
I wonder if he wrote that on his government-invented iPad? F*****g idiot. He apparently thinks that if you write about stuff you don't understand, that makes you an "economic" historian. Yes, sure, I'm a snob. But the guy has a PhD in History from Northern Illinois U. A two-time loser.*
Without any prompting from Cold Spring Shops, he subsequently revises and extends.
*A clarification:  Northern Illinois has a number of quite good departments, including econ.  But the history department is a doctrinaire marxist ideological chop shop.
I'm not sure the description of History is completely accurate.  Professor Livingston surely got onto the culture-studies ride at the right time, but the history department has also been reduced in size and scope over the past 20 years.  We do what we can what we have in economics. And we have Quidditch.

31 October 2011, midafternoon on what passes for a quad.

No comments: