I appreciate @DonFSchneider taking the time to reply to my recent essay, We're Just Speculating Here... The Rise of Wall Street and the Fall of American Investment. But I'm not persuaded by his "no investment decline" thesis. Two points in particular:
https://twitter.com/DonFSchneider/status/1375832678021406721
1. I do see "much weakness in equipment" in his chart -- at least the last ten straight years of data below his long-run average. Here's net investment as % of GDP by decade:
1960s, 1.7%
1970s, 1.9%
1980s, 1.4%
1990s, 1.5%
2000s, 1.3%
2010s, 1.2%
1960s, 1.7%
1970s, 1.9%
1980s, 1.4%
1990s, 1.5%
2000s, 1.3%
2010s, 1.2%
https://twitter.com/DonFSchneider/status/1375834772837179399
2. Using the GDP deflator for private nonresidential fixed investment to get "real net investment" is facially untenable. He provides the chart. It basically shows no inflation for 40 years. Companies get about as much for $100 in 2020 as they did in 1980.
https://twitter.com/DonFSchneider/status/1375836581668487168
The problem here is with how BEA accounts for computer equip in particular, which has been getting better and cheaper. So, for instance, they say you only had to pay $1 in 1995 for equipment that cost $10 in 1985. In one sense that's true, but in another it's not at all.
Yes, computers got better. But that doesn't mean companies could spend 1/10th as much in the 90s as in the 80s, or half as much in the 10s as the 00s, and be maintaining an equivalent level of investment. @ITIFdc did a nice analysis of this a while back. www2.itif.org/2013-restoring…
In short, analyses rightly tend to focus on investment relative to GDP and recognize we have a problem, rather than using "Real Net Investment" to conclude we don't. Why we have the problem, and what to do, are key questions. I wrote an essay about them:
americancompass.org/essays/specula…
americancompass.org/essays/specula…
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