Golden passage from Brad Delong. For once I’m going to put up a quote and not add my thoughts – as they’d just get in the way:
The focus on real GDP growth and its possible–or likely–slowing is a setup to panic us into making policy decisions we really do not want to make. The “great stagnation” literature as it is currently constituted seems to me at least to guide our attention in the wrong direction–and to quite possibly stampede us into making policy decisions we really would not want to make if we thought more deeply and calmly. The chain of logic is that measures to reduce inequality have a cost in terms of reducing the growth rate of the economy–that the bucket of redistribution is, in the terms of Arthur Okun’s Equality and Efficiency: The Big Tradeoff, a leaky bucket–and that when growth is slower we can no longer afford to engage in redistribution. This seems to me to be the wrong way to conceptualize it: the evidence that the bucket is leaky is weak–or, rather, there are many buckets, some very leaky, some not leaky at all, some anti-leaky–and in any event whether we should tradeoff potential growth for other objectives is not something the depends on how fast growth is. Policies that make sense if underlying GDP per worker growth is 3% probably still make sense if underlying GDP per worker growth is 1%. Policies that don’t make sense if underlying GDP per worker growth is 1% probably still don’t make sense if underlying GDP per worker growth is 3%.
But my aim here is simply to lay down a marker as far as point is concerned: to enjoin you not to get stampeded into going someplace you really do not want to go.