More Free Lunch Economics from Michael Mandel

Michael Mandel replies to James Hamilton:

Moreover, he also doesn’t point that the real consumption per person is actually reduced by the amount of additional savings … The pro-savings people are asking us to accept a sure decline in living standards today, in exchange for the possibility of a moderate increase in income somewhere off in the future … Hamilton says he doesn’t know a policy for increasing productivity growth. I’ve got a simple one – how about increasing government spending on basic research …

An increase in government-sponsored R&D might be a very nice thing as Mandel suggests, but he seems to dodge the question as to how we pay for this extra expenditure. Do we cut some form of private or government consumption? If so, then I’d call this saving.