JLF head John Hood has a new column out on the importance of capital in growing North Carolina’s economy. A highlight:
Let’s get real. There are many fine things that North Carolinians can appreciate and enjoy with their own time and money. But when it comes to building the fundamentals for economic success, the main contributions state government can make are 1) establishing rule of law and the security of private contracts, 2) ensuring the existence of high-quality roads and schools at an economical price, and 3) keeping tax and regulatory burdens as low as is consistent with the first two items.
These insights come from decades of empirical research. They also come from the realization that economic success flows from productive capacity — from the supply side of the economy, in other words, not the demand side. If companies become more productive, they will survive, grow, hire, and buy services. They tend to become more productive by acquiring more and better capital. That includes physical capital such as plants and equipment, intellectual capital such as inventions and innovations, and human capital such as better-trained employees and vendors.
