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Friday, June 13, 2014

'The Lack of Major Wars May Be Hurting Economic Growth'

Tyler Cowen:

The Lack of Major Wars May Be Hurting Economic Growth: The continuing slowness of economic growth in high-income economies has prompted soul-searching among economists. They have looked to weak demand, rising inequality, Chinese competition, over-regulation, inadequate infrastructure and an exhaustion of new technological ideas as possible culprits.
An additional explanation of slow growth is now receiving attention, however. It is the persistence and expectation of peace. The world just hasn’t had that much warfare lately, at least not by historical standards. ...
Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects. ...

    Posted by on Friday, June 13, 2014 at 08:44 AM in Economics | Permalink  Comments (93)

          


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