CAMBRIDGE: America’s economy is entering a risky phase. The conditions that underpinned its long boom are weakening. It is a fool’s game to try to predict changes in public sentiments. Nonetheless, good economic reasoning can help us to anticipate the economic turbulence ahead.
The US boom has been a mix of reality and wishful thinking. The reality is that technological advancement, combined with flexible and dynamic labor and capital markets, led to a rapid rise in productivity growth and the spread of new technologies. Lives in the US changed remarkably for the better recently, with improvements in the service economy, new medical technologies, access to information, and the like.