Andy

Economists do not understand what drives productivity growth very well. However, we know these facts: productivity grew rapidly after the second world war and then sometime between the late 1960s and mid-1970s it slowed dramatically only to re-accelerate to record levels in the mid-1990s. Unfortunately, even before the downturn, underlying productivity growth appeared to be slowing.

The most plausible explanation is that an array of transforming investments and technologies – the interstate highway system, widespread air travel and the expansion of electronics – were spurs to growth during the postwar period. Eventually their impact dissipated and, as energy costs rose, growth slowed until the information technology revolution kicked in during the 1990s. Unfortunately, the IT supply shock that powered the economy in the 1990s and early part of this decade appears to be diminishing.

So there is a need to ensure that the pressure to increase spending is directed at areas where it will have the most transformational impact. We need to identify those investments that stimulate demand in the short run and have a positive impact on productivity. These include renewable energy technologies and the infrastructure to support them, the broader application of biotechnologies and expanding broadband connectivity, an area where the US has fallen behind.

The crisis has also reminded us of the lessons of the technology bubble, Japan’s experience in the 1990s and of the US Great Depression – that finance-led growth is problematic. The wealth and income gains from the easy availability of credit were highly concentrated in the hands of a fortunate few. The benefits also proved temporary. In retrospect, the fact that 40 per cent of American corporate profits in 2006 went to the financial sector, and the closely related outcome – a doubling of the share of income going to the top 1 per cent of the population – should have been signs something was amiss.

Nate

Constructing new LEED-certified green buildings is all well and good, but if they’re further from your workers’ homes and you have to tear down perfectly good old buildings to do so, the hoped-for energy savings are wasted.

Embodied energy. Another term unlovely to the ear, it’s one with which preservationists need to get comfortable. In two words, it neatly encapsulates a persuasive rationale for sustaining old buildings rather than building from scratch. When people talk about energy use and buildings, they invariably mean operating energy: how much energy a building—whether new or old—will use from today forward for heating, cooling, and illumination. Starting at this point of analysis—the present—new will often trump old. But the analysis takes into account neither the energy that’s already bound up in preexisting buildings nor the energy used to construct a new green building instead of reusing an old one. “Old buildings are a fossil fuel repository,” as Jackson put it, “places where we’ve saved energy.”

If embodied energy is taken into consideration, a new building that’s replaced an older building will take up to 65 years to start saving energy…and those buildings aren’t really designed to last that long.