Debating the Supply Side of Growth

Last month, Bloomberg View columnists Tyler Cowen and Noah Smith met online to debate the merits of government efforts to boost the economy by stimulating demand. Here they follow up that discussion by debating ways to stimulate the economy by making it more productive and efficient.

Smith: In our last debate, we talked about demand-side policy, but I think we both agree that it’s important to think about the supply-side, or ways to increase the country’s total potential output. I see two main categories of policy here: 1) things the government should do less of, and 2) things the government should do more of.

In the first category, I think the two biggest and most obvious things to address are land-use regulation and occupational licensing. There’s an increasing recognition that policies to prevent dense development are holding cities back from their economic potential. Second, in a time when lots of jobs are vulnerable to automation, occupational licensing is preventing people from entering some of the very jobs that are least likely to be eliminated by robots. These are areas where governments need to get out of the way and let the economy do its thing.