Brad DeLong was asked to provide his views on the medium term economy that we are approaching. He restricts his analysis to the advanced economies in the North Atlantic and concludes that government spending as a share of the economy should be greater than it is today. He assumes that interest rates for government debt will remain lower than the economic growth rate. That makes the debt affordable. The next question is whether government investments are worthwhile. He argues against the assumption of government failure that is a critical assumption in conservative ideology.
His argument is also based upon the changes that we see in modern economies. We are no longer in the commodity based economy described by Adam Smith. He describes some of the key elements of the information technology that has emerged to replace the economy envisioned by Adam Smith. For example, Google has one of the largest market caps in the global economy. Its profits are not based upon the price that its users are willing to pay for the services that it provides. Advertisers pay for the services provided by Google in order to more effectively target their ads to consumers. Facebook operates the some kind of business. It also has an extremely large market capitalization that continues to grow as advertisers learn how to exploit the information provided by Facebook.
DeLong's argument is well constructed but it is not easy reading for non-economists. However, those who are willing to spend the time that it takes to consider his arguments will benefit from them. It could provide a good basis for a seminar on our economic future.
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