This is an ugly calculation. My recently updated economic forecast through 2013 shows a wide gap between actual output and potential output. That is roughly equivalent to unemployment being above normal of five percent or so.
In the last year of my forecast horizon, 2013, I predict GDP growth of 3.5 percent. If that pace of growth continued year after year (which I am not actually forecasting), how long until we're back to normal? Actual GDP equal to potential GDP, and unemployment about five percent?
2020. That's not an eye exam result, it's the year we're back to normal if GDP does not accelerate beyond the rate of my 2013 forecast.
My best estimate? GDP growth will accelerate, especially once we work through the excess housing supply. So we should get to normal much sooner than 2020. However, it's well worth noting that current growth rates are dismal, even for relative optimists like me.
Steady state economists expect that resources limits will constrain growth. Growth will tend to push up commodity prices (especially energy), choking off growth. Catch 22.
What we need is an economy that is sustainable, which means an economy that does not have to grow, while making us all well off enough. I think that means new technologies (esp. energy, solar, etc.), stable or (better yet) declining population.
Posted by: Max Kummerow | September 14, 2011 at 01:42 PM