It’s tempting to think some favored policy tweak will produce massively positive economic effects. But that usually isn’t the case. Even big policy changes often produce somewhat muted economic responses. When Congress passed big tax cuts back in 2017, President Trump said he saw “no reason” why economic growth couldn’t accelerate to as high as 6%. Yet growth in the ten quarters since the tax cut has averaged 2.6%, not much better than the 2.3% growth experienced over the previous ten quarters or the 2.5% averaged since 1990.
And that’s OK, writes scientist and policy analyst Vaclav Smil in The Financial Times. The whole economy can’t act like Moore’s Law, such that rapid and constants gains in computing power can be replicated “in other economic sectors and drive decarbonisation of energy, huge food production gains and a fourth industrial revolution.” He notes that “modern economies depend on an enormous range of inputs whose yields, performances and capabilities have been constantly improving; but only at rates an order of magnitude lower than the 30% growth dictated by Moore’s law.”More