THE ULTIMATE ENGINES OF GROWTH: A LETTER TO THE ECONOMIST (October 5, 2009)
In your main leader about the present state of the global economy, you encourage policymakers worldwide to foster growth (“After the Storm,” October 5, 2009). No quibbles here. But you go on to say that they must foster innovation and trade, “the ultimate engines of growth,” more than anything else. If I am not mistaken in my understanding of basic economic theory, the real “engine of growth” is investment rather than innovation or trade. Without investment in capital goods, such as machinery and plant, neither will lead to growth. If by introducing the word “ultimate” you are taking a poetic license of sorts, then you could have mentioned many other motivations for investment, including fortune, fame, and perhaps even sexual favors. At any rate, it would be good for you to stick to economic fundamentals when you are addressing the world’s policymakers. As you know perfectly well, most of them have had only a few introductory classes in economics early in their university education.