As a difference between rates of growth, 3% is 1.5 greater than 2%. The question is a trick one and plays on public neglect of the nature of compounding growth.
Taking an economy of size 100 in Year Zero (Y0). At Y1:
2% growth yields an economy of size 102
3% growth yields an economy of size 103
Not very impressive.
But at Y10:
2% = 121.9
3% = 134.3
And at Y20:
2% = 148.6
3% = 180.6
All else being equal, you’re substantially better off with 3% growth than 2%, and increasingly better off over time. I believe we are better off with voters who understand that and elect politicians accordingly.
(The example comes from George Will, who in an EconTalk interview voiced his despair that “Washington is full of people who think the difference between 2% GDP growth per year and 3% GDP growth per year is only 1%”)
Sure. But you would need to have asked a question to test this, such as “after 5 years what will the size of the economy that grew at 3 percent be, versus 2 percent?
But yes basic competence is lacking. My biggest peeve is legislation that has a dollar amount not indexed to inflation. It’s basic math competence. You can argue all day about what a dollar quantity should be in order for the law to have the intended effect but if you write a law you need to at least make the quantities have the same meaning they did when the law passed.
As a difference between rates of growth, 3% is 1.5 greater than 2%. The question is a trick one and plays on public neglect of the nature of compounding growth.
Taking an economy of size 100 in Year Zero (Y0). At Y1:
2% growth yields an economy of size 102 3% growth yields an economy of size 103
Not very impressive.
But at Y10:
2% = 121.9
3% = 134.3
And at Y20:
2% = 148.6
3% = 180.6
All else being equal, you’re substantially better off with 3% growth than 2%, and increasingly better off over time. I believe we are better off with voters who understand that and elect politicians accordingly.
(The example comes from George Will, who in an EconTalk interview voiced his despair that “Washington is full of people who think the difference between 2% GDP growth per year and 3% GDP growth per year is only 1%”)
Sure. But you would need to have asked a question to test this, such as “after 5 years what will the size of the economy that grew at 3 percent be, versus 2 percent?
But yes basic competence is lacking. My biggest peeve is legislation that has a dollar amount not indexed to inflation. It’s basic math competence. You can argue all day about what a dollar quantity should be in order for the law to have the intended effect but if you write a law you need to at least make the quantities have the same meaning they did when the law passed.