Powerful ideas spur growth debate — Neuse News

RALEIGH – Science fiction pioneer HG Wells once observed that “human history is, in essence, a history of ideas.” This is a wise observation – and it speaks to the political debates we have had here in North Carolina.

Wells himself was an influential purveyor of ideas. Some were commendable, such as his exploration of the effects of technological change. Other ideas Wells embraced, such as socialism and eugenics, were abhorrent. Yet by engaging in serious discussion of important ideas, Wells contributed not only to the development of science fiction as a literary genre, but also to the realization that human affairs cannot be reduced to a mechanistic clash of impulses and interests.

Many “experts” disagree. They think that when politicians or intellectuals argue for or against a particular policy, they are just erecting a rhetorical smokescreen to disguise what are truly selfish actions. You have no doubt heard such a cynical analysis on several occasions. You’ve heard that a particular faction or political movement simply says what its backers demand.

Impulses and interests matter, of course, but so do ideas. Consider our ongoing debates about how best to accelerate and expand economic growth in North Carolina. Progressives and Democrats tend to argue that the state will prosper as it spends more money on public services designed to increase the productive capacity of the economy. Conservatives and Republicans alike tend to argue that North Carolina will prosper as long as it lowers the tax and regulatory barriers that prevent entrepreneurs, investors, and highly productive professionals from starting and growing businesses in our state.

This is not simply a conflict of personal or institutional agendas. It reflects a long-standing debate on the economics of growth. In general, we can group the different theories into three categories, each bearing the name of an influential thinker:

Growth of the Smithian from the scale. In 1776, Adam Smith argued that economic progress comes from expanding the scope of production and trade. This allows people to specialize in the tasks they do best, trade what they earn with others (within a company or around the world), and improve each other as a result. .

Solovian growth investment. Beginning in the 1950s, Robert Solow, an economist at the Massachusetts Institute of Technology, co-created an influential model to explain long-term growth that included changes in population, capital formation, and technology. In public policy circles, this model has often been used to argue for increased public spending on infrastructure (physical capital), research and development (intellectual capital), and education (human capital).

Schumpeterian growth of entrepreneurship. Joseph Schumpeter, an Austrian-born economist at Harvard University during the first half of the 20th century, argued that it was impossible to explain economic trends without acknowledging the “creative destruction” carried out by individuals who react to previously unforeseen opportunities in the market by creating, financing or managing new businesses.

These ideas are not incompatible. Indeed, it would be truly odd for anyone to dismiss the economic benefits of trade, capital formation or entrepreneurship. The debate is about focus and priorities. Trade, for example, is a net positive, but the effects are generally not gigantic. With respect to capital, economies with large investments clearly grow faster over time than economies with little or no investment. But past a certain point, spending more money—particularly in the public sector—does not produce enough productivity gains to offset the cost of the expenditure.

These are ideas worth far more study and discussion. You can expect North Carolina policymakers, academics, and journalists to do just that for years to come. You can also expect cynics to continue to deny that there is an important debate to be had – that abstract ideas and intellectual arguments are irrelevant to real policy-making activity, which is motivated only by power and interest.

For people who disdain the value of persuasion, they seem to spend an extraordinary amount of time and effort trying to persuade us that they are right.

John Hood is a board member of the John Locke Foundation. His latest books Mountain folklore and forest peoplecombine epic fantasy and ancient American history (FolkloreCycle.com).

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