On how to increase economic growth

One of the little things that seems to get missed in the conversation about economic growth is how it actually happens and what might be out there preventing it from happening. We hear a great deal these days about how if there isn't enough aggregate demand then there will be unemployed people and other resources laying idle. We must therefore inject more government (in the form of spending) into the economy and thus growth will rise.

Well, yes, OK, let's just, for the moment, take that as being true. But let's also look at the other side of this government/growth equation:

On January 10, 2008, our company actually, shockingly, had a creative idea. Instead of refueling our boats at a lake in Ventura County, CA using zillions of 5 gallon gas carriers, lets put in a small double wall gas tank. It would save a ton of useless labor, it would greatly reduce fuel spills on the lake (the nozzle, unlike the 5 gallon cans, has overflow protection), it would save lots of trips into town to fill gas tanks — a winner all the way around. Granted this was a pretty small idea, but sometimes success in small business is a lot of bunts and singles. After hundreds of manhours of effort, numerous checks written to the County and the state, and I don’t know how many forms filled out, on July 1, 2010, exactly 901 days after we got the creative idea, Ventura County gave us the last permit we needed to go forward.

No, I don't claim that government is always a problem, nor that government is always the problem. Just that sometimes the "efficiency" of government is a drag on that economic growth. And that, given that economic growth is the only way out of our current mess, that perhaps we ought to be looking at where government is that drag: and then stop it being so.

Another way of putting much the same point is that a lack of aggregate demand leaves us below the trend growth rate: a bad thing. The red tape with which government swathes the economy reduces that possible trend growth rate: just as much a bad thing.

All of which means that those who are calling for that greater fiscal stimulus in order to boost aggregate demand, that macro-economic solution, should also be calling, as vociferously as we do here for that micro-economic solution, for that bonfire of the regulations which constrains potential trend growth. The only puzzle left is why they don't: it would of course be far too cynical of me to suggest that those calling for more spending are those who make their living by doing the spending, while those not calling for a reduction in red tape are those who make their living by administering red tape.

Far, far, too cynical.