More on whether we are underestimating US productivity growth

Arnold Kling offers his thoughts on my weekend post, “Goldman Sachs says the US economy could be growing a lot faster than GDP stats say. Here’s why.”  From Kling:

You know I don’t like anything that smacks of treating the economy as a homogeneous GDP factory. But if you do think in those terms, then I am inclined to agree with the Goldman folks. The aggregate measures show the GDP factory becoming more and more profitable, even with rather slow growth in revenue (nominal GDP). To get that, you need productivity growth to be better than wage growth. And, yes, that means that an implication of the Goldman view (and mine) is that the people who complain that labor is not getting its fair share would have more fuel to feed their complaints.

It means that real interest rates have been higher than they appeared to be. So does that mean that the zero bound was more binding than we thought? But we got higher growth than we thought??? I think that, on balance, this is bad for people who harp on the zero bound, but my biases have always been against that viewpoint. Meanwhile, righties, it also means that people who think that there must be inflation going on somewhere, because the Fed is such a wicked institution, are not correct. I expect to get a lot of push-back on that.

More here. Here is a bit more on the interest rates issue:

Third, our analysis suggests another reason not to go too far in reducing our estimate of medium-term equilibrium federal funds rate. Although potential GDP growth has slowed on the back of lower growth in the working-age population, it is possible that a significant portion of the post-2000 productivity slowdown is more apparent than real. If so, the medium-term real equilibrium funds rate—using a correctly measured price index—might not have fallen as much as many now believe. At the margin, the analysis therefore reinforces our view that the equilibrium real rate will move back into the 1%-2% over the medium term.