“New Building Blocks for Jobs and Economic Growth”

I am pleased to speak at this conference on new building blocks for jobs and economic growth. The conference organizers have gathered an outstanding group of participants and have set an ambitious agenda. 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. I won’t have to spend much time convincing this audience of the importance of long-run economic growth. The Nobel Prize-winning economist Robert E. Lucas, Jr., wrote that once one starts thinking about long-run growth and economic development, “it is hard to think about anything else.”1 Although I don’t think I would go quite that far, it is certainly true that relatively small differences in rates of economic growth, maintained over a sustained period, can have enormous implications for material living standards. A growth rate of output per person of 2-1/2 percent per year doubles average living standards in 28 years--about one generation--whereas output per person growing at what seems a modestly slower rate of 1-1/2 percent a year leads to a doubling in average living standards in about 47 years--roughly two generations. Compound interest is powerful! Of course, factors other than aggregate economic growth contribute to changes in living standards for different segments of the population, including shifts in relative wages and in rates of labor market participation. Nonetheless, if output per person increases more rapidly, the prospects for greater and more broad-based prosperity are significantly enhanced. 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 th