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Working Paper
Measuring the social return to R&D
A large, empirical literature reports estimates of the rate of return to R&D ranging from 30 percent to over 100 percent, supporting the notion that there is too little private investment in research. This conclusion is challenged by the new growth theory. We derive analytically the relationship between the social rate of return to R&D and the coefficient estimates of the empirical literature. We show that these estimates represent a lower bound on the true social rate of return. Using a conservative estimate of the rate of return to R&D of about 30 percent, optimal R&D investment is at least ...
Journal Article
More life vs. more goods: explaining rising health expenditures
Are health expenditures rising for reasons other than waste or fraud? If so, do these reasons portend a continuation of this rapid pace of increase? Is there an end in sight? This Economic Letter draws on recent economic research (Hall and Jones 2004) to explore some possible answers to these questions. One of the perhaps surprising conclusions from this research is that the rising health share may reflect the natural course of economic growth: as we get richer and richer, one of the most valuable and productive opportunities for our spending is to purchase better health and longer lives.
Journal Article
The fiscal problem of the 21st century
Journal Article
Trading Off Consumption and COVID-19 Deaths
This note develops a framework for thinking about the following question: What is the maximum amount of consumption that a utilitarian welfare function would be willing to trade off to avoid the deaths associated with COVID-19? The answer depends crucially on the mortality rate associated with the coronavirus. If the mortality rate averages 0.81%, as projected in one prominent study, our answer is 41% of one year's consumption. If the mortality rate instead averages 0.44% across age groups, as suggested by a recent seroprevalence study, our answer is 28%.
Conference Paper
Jackson Hole 2023 - Panel - Structural Constraints on Growth
Working Paper
The Future of U.S. Economic Growth
Modern growth theory suggests that more than 3/4 of growth since 1950 reflects rising educational attainment and research intensity. As these transition dynamics fade, U.S. economic growth is likely to slow at some point. However, the rise of China, India, and other emerging economies may allow another few decades of rapid growth in world researchers. Finally, and more speculatively, the shape of the idea production function introduces a fundamental uncertainty into the future of growth. For example, the possibility that artificial intelligence will allow machines to replace workers to some ...
Journal Article
Using chain-weighted NIPA data
Conference Paper
Growth, capital shares, and a new perspective on production functions
Standard growth theory implies that steady-state growth in the presence of exponential declines in the prices of computers and other capital equipment requires a Cobb-Douglas production function. Conventional wisdom holds that capital shares are relatively constant, so that the Cobb-Douglas approach might be a good way to model growth. Unfortunately, this conventional wisdom is misguided. Capital shares exhibit substantial trends and fluctuations in many countries and in many industries. Taken together, these facts represent a puzzle for growth theory. This paper resolves the puzzle by (a) ...