This morning Fed Chairman Ben Bernanke gave his annual address to the Fed policy symposium in Jackson Hole. This year, the topic of the conference was Achieving Maximum Long-Run Growth. In his remarks, Bernanke focused on fiscal, rather than monetary policy. While discussing the state of the economy and the deficit, he also focused on the need for improving US productivity and competitiveness:
Fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs. To the fullest extent possible, our nation's tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure. We cannot expect our economy to grow its way out of our fiscal imbalances, but a more productive economy will ease the tradeoffs that we face.
These remarks echo his comments earlier this year at Athena Alliance's conference on New Building Blocks for Jobs and Economic Growth. In those remarks (see earlier posting on highlights, transcript and video), Bernanke noted:
The topics you will address today and tomorrow, bearing on innovation and intangible capital, are central to understanding how we can best promote robust economic growth in the long run.Unfortunately, as I've noted before, many of the policy prescriptions coming out of Washington focus on the generalities and not on any specifics that would foster investment in and utilization of intangibles. When they do look at innovation and intangibles, they focus almost exclusively on technology (as did even Mr. Bernanke, although he did mention other intangibles at the end). If we are to ramp up economic growth, we need to ramp up our attention to intangibles.
Over long spans of time, economic growth and the associated improvements in living standards reflect a number of determinants, including increases in workers' skills, rates of saving and capital accumulation, and institutional factors ranging from the flexibility of markets to the quality of the legal and regulatory frameworks. However, innovation and technological change are undoubtedly central to the growth process; over the past 200 years or so, innovation, technical advances, and investment in capital goods embodying new technologies have transformed economies around the world. In recent decades, as this audience well knows, advances in semiconductor technology have radically changed many aspects of our lives, from communication to health care. Technological developments further in the past, such as electrification or the internal combustion engine, were equally revolutionary, if not more so. In addition, recent research has highlighted the important role played by intangible capital, such as the knowledge embodied in the workforce, business plans and practices, and brand names. This research suggests that technological progress and the accumulation of intangible capital have together accounted for well over half of the increase in output per hour in the United States during the past several decades.