Change, stability and acceleration in economic growth.

AuthorMarcus, Morton J.

Most Hoosiers hate the idea of roundabouts on the road--when they are announced. More citizens hate them when they are finally built. Yet after a while, they are accepted and, eventually, appreciated and even praised. Here in Indiana, we have seen this pattern in Bloomington, Carmel, Princeton and Washington.

Change is not sought by the majority of citizens. Yet, people commonly say, "Change is the only constant."

There are several ways of expressing economic growth. (1) Perhaps the simplest indicator of growth (or decline) is the change in earnings. Aggregate earnings equal the number of jobs times the average compensation for those jobs. (2)

An increase in the number of jobs is nominally good. Mayors, governors and presidents seek election on positive changes in the number of jobs. They seek excuses when jobs decline. Thoughtful people recognize that an increase in the number of jobs is not necessarily "good" when it means people must take added employment because of added, unwanted responsibilities or calamity in their lives.

Similarly, increases in wages or benefits are accepted as positive when they suggest increased skills, higher productivity or increased demand for the output of labor. However, higher earnings may be indicative of higher risks or labor shortages due to warfare or natural disasters.

How Indiana compares to the U.S.

The comparative growth paths of nonfarm earnings in the United States and Indiana from 1984 to 2015 are illustrated in Figure 1.

Those paths are similar, if not identical, for the first 15 years, beginning in 1984, with the nation's average annual growth rate exceeding Indiana's by a mere 0.02 percent. However, in the next span of 11 years, Indiana trails the U.S. by an annual average of 1.5 percent. Thereafter, the two are once more on fairly parallel paths, with Indiana behind by just 0.06 percent per year (see Table 1).

During this 31-year stretch of time, Indiana exceeded the nation's rate of earnings 11 times and fell behind 20 times. This divergence of Indiana from the national growth path probably has nothing to do with any political event or any initiative by the state. We'll have to delve into what happened at a later date.

Our interest here is the nature of those growth paths. It seems reasonable to assume that, as with most changes in life, some growth is preferred to none, and more is preferred to less--until it is too much. Growth (or decline) has both costs and benefits associated with it...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT