Investment and economic growth

Going forward, the U.S. economy (and any economy that targets higher incomes for its workers) must adopt an investment-oriented growth strategy with productivity growth as its bottom-line metric for success. Definitional and measurement errors with respect to the investment drivers of productivity growth have hampered the needed policy focus and policy implementations. In terms of the policy targets, (1) substantial resources must be allocated to the required R&D, (2) the R&D will consist of a combination of assets that have varying degrees of public and private content, and (3) the resulting technologies must be modified and integrated into product systems by several industries, frequently in a co-located high-tech supply chain. One of the manifestations of this complexity is that private underinvestment is no longer limited to the R&D stage, but also occurs in production, particularly in the early scale-up phases where considerable uncertainty exists with respect to production system design, hardware and software integration, and equipment calibration and maintenance. Even the market penetration phase requires technical infrastructure support to provide performance assurance to customers, including not only intrinsic performance but assurance of integration compatibility with other system components. This major policy concept means that growth policy must focus on productivity growth and the four elements that drive it (technology, skilled labor, production, and technical infrastructure).