I have been critical of the Mankiw and Barro op-eds which argue that our current weak recovery is the result of low levels of business investment. They argue for lowering taxes on business so that they will invest in the economy. This post provides some data to refute their explanation. Fixed business investment is not the real problem. Low levels of investment in new real estate construction is the culprit. The recoveries from our previous recessions were led by increases in real estate construction. This recovery is weak primarily because of historically low levels of real estate construction.
I often get the feeling that I spend too much of my time responding to false claims by conservative economists who know better. They provide the "academic" cover for the conservative politicians who we expect to make stupid claims. Its really a waste of everyone's time and energy to debate whether the earth is flat or round. My time is wasted as well as the time of smart people like Mankiw and Barro who could be doing much better things with their education and the important positions that they hold in academia.
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