Debate: Growing the Economy From the Supply Side

Two economists discuss how specific kinds of deregulation could speed up growth. They emphasize planning issues: local overregulation of development and the high cost of infrastructure, among others.

2 minute read

October 19, 2016, 11:00 AM PDT

By Philip Rojc @PhilipRojc

In this piece, the follow-up to a debate on how government can promote growth, economists Tyler Cowen and Noah Smith debate how the American economy can be made more efficient and productive. They advocate for looser regulations and labor laws, but they also touch on land use policy and infrastructure. 

Says Smith, "I think the two biggest and most obvious things to address are land-use regulation and occupational licensing. There's an increasing recognition that policies to prevent dense development are holding cities back from their economic potential."

Smith also favors infrastructure investment. "Repairing our existing infrastructure gets the highest returns, of course. But increased investments in new things like self-driving car infrastructure, smart electrical grids and faster broadband seem like they could also pay dividends."

Cowen pushes even harder for deregulation. "We couldn't have built today's energy infrastructure with today's regulations, so how are we to manage the energy infrastructure of the future? Less NIMBYism for wind power is step one of a thousand we could make. Or take fracking. It has made energy cheaper, created jobs and helped lower carbon emissions. And yet it remains a legally fraught enterprise."

Smith agrees that we have made it very difficult to build new infrastructure, but doesn't assign blame to labor laws, as Cowen does. "Regarding infrastructure costs, I doubt that unionized labor is a big part of our problem, since Europe has stronger unions but much cheaper costs. It's probably due more to our inefficient contracting process."

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