How fast can the economy grow?

Movie by Shutterstock

Article Highlights

  • Increases in labor productivity are a key determinant of the rise in potential output.

    Tweet This

  • Growth in potential output is really what matters for increasing the standard of living.

    Tweet This

  • At an annual growth rate of 2.25% since 1889, U.S. output per hour doubles every 31 years.

    Tweet This

Discussions about the economy tend to focus much more on the Fed’s latest program to stimulate spending and the drama on Capitol Hill than on the potential for the economy to generate higher income over the long haul. Yet, the growth in potential output is really what matters for the standard of living. And increases in labor productivity are a key determinant of the rise in potential output. Between 1889 and 2012 ― the longest span of time with reasonably consistent data― real output per hour worked in the United States rose about 2¼ percent per year on average. At this annual rate, output per hour doubles every 31 years, which implies roughly a 15-fold increase since 1889.

 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Stephen D.
Oliner

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 27
    MON
  • 28
    TUE
  • 29
    WED
  • 30
    THU
  • 31
    FRI
Monday, October 27, 2014 | 10:00 a.m. – 11:30 a.m.
State income taxes and the Supreme Court: Maryland Comptroller v. Wynne

Please join AEI for a panel discussion exploring these and other questions about this crucial case.

Tuesday, October 28, 2014 | 9:30 a.m. – 12:15 p.m.
For richer, for poorer: How family structures economic success in America

Join Lerman, Wilcox, and a group of distinguished scholars and commentators for the release of Lerman and Wilcox’s report, which examines the relationships among and policy implications of marriage, family structure, and economic success in America.

Tuesday, October 28, 2014 | 5:30 p.m. – 7:00 p.m.
The 7 deadly virtues: 18 conservative writers on why the virtuous life is funny as hell

Please join AEI for a book forum moderated by Last and featuring five of these leading conservative voices. By the time the forum is over, attendees may be on their way to discovering an entirely different — and better — moral universe.

Thursday, October 30, 2014 | 2:00 p.m. – 3:00 p.m.
A nuclear deal with Iran? Weighing the possibilities

Join us, as experts discuss their predictions for whether the United States will strike a nuclear deal with Iran ahead of the November 24 deadline, and the repercussions of the possible outcomes.

Thursday, October 30, 2014 | 5:00 p.m. – 6:15 p.m.
The forgotten depression — 1921: The crash that cured itself

Please join Author James Grant and AEI senior economists for a discussion about Grant's book, "The Forgotten Depression: 1921: The Crash That Cured Itself" (Simon & Schuster, 2014).

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.