True Economic Growth vs. a Pyramid SchemePosted: December 17, 2012 Filed under: Economy, Finance, Politics | Tags: economy, finance, government policy, pyramid scheme Comments Off on True Economic Growth vs. a Pyramid Scheme
Once you start thinking about economic growth, it’s hard to think about anything else.
– Robert E. Lucas
Q: What is the difference between maintaining sound fiscal policy and running a pyramid scheme with respect to government debt?
A: It all depends on the economy’s predicted growth rate.
What is economic growth, where does it come from, and how do we measure it? These are simple questions, but it is fundamentally important to get them right in order to understand what is ahead for the U.S. economy, and how its growth relates to government fiscal policy. Here I would like to take a look at how we measure economic growth, and argue that sometimes true economic growth may not be what it seems, at least in the short term.