The iron law of convergence does not get as much publicity as it should.
The iron law of convergence is that rate at which the poor states caught up to the rich was not particularly fast though, only about 2–3 percent a year. This law has shown up up across jurisdictions where there is high level of mobility of capital and diffusion of knowledge such as European regions, American states and Japanese prefectures.
Over at the Cato Institute, they hosted an online forum about reviving economic growth. There are lots of smart people involved. The web page has lots of big pictures of their heads, I guess to indicate that their brains are like, totally huge.
Anyway, each one wrote up some proposed policy reform that would help boost long-run growth prospects. Brad DeLong responded to many of the proposals here before his head exploded reading Doug Holtz-Eakin’s essay.
I’m not going to quibble with any of the minutiae of the proposals. My point is going to be a general one on the possible growth effects of [insert policy here]. Short answer, there won’t be any.
There are two ways to boost GDP growth. Either
- Actively raise current GDP through increased spending by some sector of the economy.
- Raise potential GDP and let transitional growth speed up.
The second one…
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Utopia, you are standing in it! 
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