The Secret of Economic Growth

I was impressed by the interview with Mark Sanford in the WSJ. Apparently I wasn’t alone. But you don’t have to understand the augmented Solow model or state the proposition in folksy way Sanford did. It’s real simple: for an economy to prosper and grow, you need two things: capital investment and human capital investment. The trick is getting the combination right – and no one seems to have much of an answer. However, some things are clear. Actions that retard capital investment (like high taxes) retard economic growth. Actions that retard human capital investment (not enough invested in education) also retard economic growth. And there are lots of ways to screw up. Applying capital to the wrong things doesn’t help. Having schools that don’t educate, or educate in areas of marginal usefulness, doesn’t help either.

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