Thursday, July 6, 2017

What happened to diminishing returns?

Donald Trump believes he can grow the economy by 3 percent a year during his presidency. This is almost twice the rate of growth seen during the closing years of the Obama Administration.

Is this possible? Most economists say no and I agree with them, but maybe not for the same reasons.

At the beginning of this country's history when next to nothing existed, and later on as the industrial revolution followed by the age of the automobile set in and more recent advances like computing and the internet made their marks, massive growth numbers were common, albeit progressively dwindling, following a well-known economical law called “diminishing returns”.

Today as the whole world competes equally, as almost every human being owns a fridge or, better yet, a smart-phone, we've entered a massive slow-down where we repair and replace more single units than we buy them in huge quantities, hence the slower rate of growth.

From now on, growth will have to come from something qualitative and not quantitative, but this sounds as if I were repeating myself!

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