Importance Of Government For Economic Growth Nonsense

Posted: 6/30/2016

Trigger

Just read this Great inventions are important for growth. So is policy. I pick this article, because I believe their are a lot more economists or intellectuals out there who would argue along similar lines. That such laughable articles are published by the American Enterprise Institute is a bit shocking.

A Critique

The article opens with this paragraph:

“In both research papers and his excellent book “The Rise and Fall of American Growth,” economist Robert Gordon writes about the huge economic impact of some “could only happen once” inventions: the internal combustion engine, running water and indoor toilets, electrification. Newer inventions — the IT revolution today, robotics and AI tomorrow — won’t provide the same transformational oomph to productivity going forward, he argues.” (emphasis added)

This is already highly arguable whether contemporary inventions/innovations are having lesser an impact than the older ones.

Then the article goes on to argue that:

1. “we present a more optimistic historical narrative in which government policy and institutional design have the power to support technological progress. … And the researchers illustrate this point by comparing the rise of patenting (a measure of innovation) to the establishment of post offices (a measure of government “infrastructural” capacity). The theory here is that having a post office around made it easier to patent because mail service made it easier to obtain new knowledge and information, made it easier to submit patent application, suggested a functioning government ”
   [What a baloney! A measure of innovation, what a joke! Without government there still would have been some kind of private postal service, if customers had found it useful. Patents, or government enforced, temporary monopolies, are actually a considerable impediment to growth and innovation.]
2. “... We find a significant correlation between a history of state presence–using the number of post offices as a proxy–and patenting in US counties. … This relationship is not only statistically significant, but also economically meaningful. … Taken together–while we do not establish unambiguously that the post office and greater state capacity caused an increase in patenting-–our results highlight an intriguing correlation and suggest that the infrastructural capacity of the US state played an important role in sustaining 19th century innovation and technological change. ”
   [What a baloney again! The typical confusion of correlation and causation!]