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encouraging investment over consumption and plowback over dividends,
particularly in the last half century, have led to dangerous overinvestment in the
private sector. The empty eyesores and bulldozer bills of 2008 are symptoms of pro-
investment policies founded in many countries after World War II. They did no
harm when the world needed rebuilding anyhow. But I suggest that output growth
slowed because of them, not despite them, after 1970 or so. | will argue that optimal
investment at the national scale, strange as it sounds, is depreciation plowback and
nothing more. Mill showed how that could be true. The same growth will arrive, say
he and | and the charts and tables, with no consumption sacrificed. More
consumption at no cost to growth adds up to more output. Output nosed down
since 1970 or so because we squelched consumption to no purpose.
That means only private sector overinvestment, prompted by unwise tax motives,
and only at the collective scale. Government follows different motives, and has
somehow followed them to an opposite problem in this country. Our infrastructure
rusts and crumbles. It seems that our good friends in the Tea Party think that roads
and bridges undercut market freedom.
Growth is interesting, even without these opposite distortions, because history is
interesting. Growth is our history. It is not the history of other creatures, who repeat
norms from generation to generation once evolved. That’s why the math of
Hamilton’s rule doesn’t work. And we care about it because there are emotional and
moral and belly issues attached. I gave an idea of its dangers in the foreword. The
past has proved survivable. The future has not. Then what about its cost? Does
faster growth need consumption restraint at the start? Is ita reward for sacrifice?
That’s what Mill tried to answer in 1848.
He started with the idea that output, meaning creation of capital, must mean growth
of capital (“investment”) plus consumption. I will call this the Y=I+C (or Y=C+I)
equation from the standard notation economists use. I will argue that it is true with
two adjustments. Investment must include investment in human capital, and
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