How to get continuous economic growth and stability?

Question

for the United States by the way.

What do you think should be the short term and long term goals of United States to get continuous growth and stability in the economy? And what obstacles would we have to over some to get these goals?
Thanks!

Answer 1

No way. Growth can't continue forever. It doesn't matter if it is economic growth or population growth, something will stop it.

That something can be disease (think the Black Death), the scarcity (real or manufactured) of some critical resource (think oil, both in the past and the future), some major disruption (think Krakatoa blowing up and affecting agriculture world-wide
http://en.wikipedia.org/wiki/Krakatoa

or the impact of rising sea levels due to global warming), or some cultural factor (the decline of Rome and, for some centuries, China), etc.

So the questions really are:

1. Do we want to ignore reality and pretend it is possible?
2. If not, what should be our long term goal?

If you choose to ignore reality, then there are many theories about steering economies. So far, none of those that have been politically tolerable have worked for long

The economists who promote them claim that their theories haven't been given a fair chance. They are right, of course, but as much because giving the theories a "fair chance" is politically unpalatable as for any other factor, and no answer that isn't acceptable politically can survive. (Or is this being too realistic again?)

It is also true, however, that all these theories are based on simplified models of the economy, where "simplified" really means over-simplified. For example, there is no good theory of technological development, yet it is clear that technology has been a crucial component to economic growth since the industrial revolution.

So given that their theories are crippled, how can you accept their "solutions"? (This isn't to say that their criticisms of the other theories aren't valid. We do know lots of ways to run an economy that will not deliver continuous economic growth and stability.

BTW, innovation is the antagonist of stability. You really can't have both for long.)

Answer 2

Price level stability, It has long been the theory that unless inflation is tamed at 2% or under, long term growth is sacrificed. There is a temptation to allow inflation to persist above this level in order to keep the economy stimulated and fully employed. Often we must accept a certain amount of unemployment to keep the economy from overheating and bringing about inflation.