Why So Low This Century?

one of my research concerns is why growth in the great runs of the 20^th century was actually so – substandard. Booms in the 19^th century – for example, 1875 to 1892 – saw growth sustained for decades at 5.3%. A growth rate of 5.3% means that in just twenty-five years, the economy is two-thirds larger than under a rate of 3.3%.

What was the secret to the outsized growth of the 19^th century, particularly its latter portion, the Gilded Age? There were great technological innovations and large population increases, to be sure – but these things came in the 20^th century as well. What was different back then was the absence of macroeconomic institutions.

http://www.forbes.com/sites/briandomitrovic/2011/06/07/back-on-the-road-to-serfdom-history-says-we-should-be-booming/2/

Fascinating narrative, worthy of consideration in my view.

What is to be done? As it happens, now on offer are serious suggestions in exactly this direction. Reps. Cantor and Ryan are both talking about capping the income tax at 25%, and there’s a new fascination globally with returning to the 19^th-century monetary system of the gold standard.
Dismissing these solutions, as the cognoscenti are prone to do, as reactionary, unrealistic, and not-quite-Ivy-League is to betray ignorance about the immense statics of American economic history. It’s in our sinews to grow at 5-6% per year. If we’re doing less, it’s because we’ve arrogated power to institutions that blunder around in the name of the public good.