Why the US economy doesn’t weigh as much as we thought it did

AEI Ideas: Why the US economy doesn’t weigh as much as we thought it did

... One way of analyzing the changing nature of the US economy is by looking at how much GDP physically weighs. Former Federal Reserve Chairman Alan Greenspan once remarked that the value of US GDP is five times as great as it was 50 years ago. Yet “the physical weight of our gross domestic product is evidently only modestly higher today than it was 50 or 100 years ago.” Very little of the nation’s economic growth ”represents growth in the tonnage of physical materials — oil, coal, ores, wood, raw chemicals. The remainder represents new insights into how to rearrange those physical materials to better serve human needs.”

In other words, to paraphrase economist Paul Romer, more and more we create value by coming up with different “recipes” to rearrange the physical world. Ideas and innovation are what truly drive growth. So even though America becomes more productive and the size of the economy bigger, it doesn’t gain any weight — just wealth.

Interesting way of illustrating how advanced economies are changing.