Foreword

Abstract

A prominent headline in today's New York Times (January 29, 2011, p. B1) announces that “U.S. Economic Growth Bounces Back to Rate Seen Before Recession.” We know exactly what this means. Nevertheless the phrase irritates me, and I am not sure whether I am defending clarity and precision or merely being pedantic. The accompanying news story says that real GDP “grew at an annual rate of 3.2 percent in the fourth quarter” of 2010. So the recession gap between potential output and actual output narrowed a little. Most of that 3.2 percent increase in real aggregate output has in my (precise? pedantic?) mind little or nothing to do with economic growth. It represents an increase in aggregate demand, easily accommodated within existing capacity. The 3.2 percent might have been 6.2 percent, as in some other cyclical recoveries, and that would clearly have been an implausible “growth” rate. To be more specific, this increase in natural output was not the result of any favorable change in the determinants of long-run growth. Instead, it was the consequence of the Federal Reserve's unprecedented policy of asset purchaser and credit expansion for anti-cyclical reasons, along with some help from the last effects of earlier fiscal stimulus.

Citation

Solow, R.M. (2011), "Foreword", de La Grandville, O. (Ed.) Economic Growth and Development (Frontiers of Economics and Globalization, Vol. 11), Emerald Group Publishing Limited, Leeds, pp. xxiii-xxv. https://doi.org/10.1108/S1574-8715(2011)0000011005