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Understanding Growth, Part 1 Strong Towns

This week I'm going to be offering a Strong Towns interpretation of the insights of Czech economic Tomas Sedlacek whose book, Economics of Good and Evil, I've spent a lot of time with over the past two weeks. Let's just say that I've finally found an economist I can respect.

Speaking during the darkest days of the recent European economic crisis, Sedlacek argued that our economy is not depressed but is more correctly described as manic-depressive. The mania we collectively experience is both on the way up and the way down, although we only choose to treat the latter. The former we embrace.

During the good times, "we always wanted to grow just a little more than we otherwise could." There was always a reason why, if a little bit of growth was good, more would be even better. It was very easy to justify various kinds of mischief -- from annual deficits to artificially low interest rates -- in order to wring just a little more growth out of the economy. This is true whether your goals were motivated by left wing thinking or right wing thinking.

Very consistent with the mindset of The Patron Saint of Strong Towns Thinking, Nassim Taleb, Sedlacek suggests that our economic policy of recent decades has been to sell stability in order to buy growth. This is what I alluded to in the Brainerd example I started this piece with. We're already unstable, yet we're prepared to commit half a generation of projected revenues for the slim chance that we are going to be able to experience some growth today. I've described this concept in some detail in the Growth Ponzi Scheme series

These policies -- nationwide reflecting down to the local level -- have the effect of amplifying growth during the good years and then accelerating downturns in the difficult years. This is why an economy can grow really fast from 2001 through 2008 and then suddenly collapse. Graphically, here is how our current growth economy tends to perform.

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