October 20, 2014

What We Fight For

Cue the Mulan soundtrack. But for a Prosperitarian, the prize is not a comely Chinese lass, but a rockin'-high per capita GDP.

I try to sell this idea all the time, but I always sell the subjunctive: if we were to unleash innovation, our nieces/nephews/grandchildren will have richer life. But Forbes's Rich Karlgaard projects the compound interest curve backward. He asks what could have been?

Suppose the U.S. economy, since 1949, were giving up 2% extra growth per year because of bad economic policy. Or, as [Financial advisor Dave] Ramsey might say, because Presidents, legislators and unelected regulators were born stupid or try their best to act that way.

Karlgaard suggests what today's world would look like with 2% better growth. I'll invite you to read the entire short piece. But it is a pretty picture:
--The 2014 GDP would be $32 trillion, not $17 trillion.

-- Per capita income would be $101,000, not $54,000.

-- Per capita wealth would be $480,000, not $260,000. It would probably be higher than that, since savings rates might be higher.

-- The U.S. would have no federal, state or municipal debts or deficits.

-- Pensions would be solid. So would Social Security.

And what of the innovation that extra capital could have financed? He has a few suggestions, but I posit they may not be outlandish enough.

Advocates protecting from "Catastrophic" climate change -- for example -- claim there is little or no cost for their solutions. If I'm wrong, we'll all drown as the waves roll over Weld County; if they're wrong, we'll just have all these groovy solar panels and clean air (and thousands of green jobs if they're on form...)

This is the obvious application, but Karlgaard is talking about regulation across the board. Conceding that some of it has been beneficial -- but correctly stating that the benefits are never compared to the opportunity costs of what we could have done with twice the wealth.

Hat-tip: Insty, who calls it "Heinleinian 'Bad Luck'"

Economics and Markets Posted by John Kranz at October 20, 2014 10:47 AM

You two are still setting the bar too low. I'll take the doubled GDP/income/wealth/non-debtedness/innovation AND the comely Chinese lass.

Posted by: johngalt at October 20, 2014 2:20 PM

Twice the money would be easy to explain to the lovely bride...

Posted by: Jk at October 20, 2014 8:55 PM

I plugged this post in a call to Grassroots Radio Colorado last evening. Here's the podcast. Start at 23:00, but if you're in a hurry skip to 26:50. But I recommend starting at 23:00.

Posted by: johngalt at October 21, 2014 4:03 PM

The rest of the show was pretty good too, including both Tom Tancredo and state senator Kevin Lundberg agreeing with what I'd said. Listen through to the end if you have time.

Posted by: johngalt at October 21, 2014 4:06 PM | What do you think? [4]