Cheer Up: World Growth Is Accelerating

Current pessimism about the world economy is overdone. The world’s three biggest economies -- the U.S., China and Japan -- are all in decent shape. Barring a major new deterioration in Europe and unforeseen calamities in the rest of the developing world, a moderate acceleration of global growth looks likely.

How much of an acceleration and how long it might last depend partly on something we can’t really know: the world’s long-term trend rate of growth. This would be a good number to know. It would make it easier to predict stress on scarce resources, for instance, or to decide whether inflation or deflation is in the outlook. Knowing whether growth is above or below trend would make it easier to judge whether the global stance of macroeconomic policy is too expansionary or too contractionary. Trend growth drives long-term welfare: Knowing how quickly living standards will advance would be useful in countless ways.