There are "no new clever schemes that will turn the economy around, and if you hear about a really great new idea, you're being had," said Robert M. Solow, Institute Professor emeritus. Inaugurating the annual meeting of the MIT Energy Initiative's external advisory committee (of which he is a member), Solow addressed an audience that included the general public as well as distinguished fellow committee members George P. Shultz, former U.S. Secretary of State; and John S. Reed, chairman of the MIT Corporation. In a talk tinged at times with frustration, the Nobel laureate took the measure of the nation's deep and lingering recession, and despite a grim assessment, offered some strategies that could eventually bring relief, and in which the energy sector might play a significant role.
From his perch as a macroeconomist and longtime student of the U.S. economy (a half-century and counting), Solow discerns a troubling picture in the current economic scene: Corporate profits have roared back from the recession, and "are at or near all-time highs in the U.S. right now," and "real output, real GDP, what the economy throws off for its people per year is just about back to where it was three years ago, at the peak."
Yet the "single-most important fact about the American economy now, is that we have unused capacity to produce," he said. The economy could be generating 7 percent more in goods and services per year — in the order of a trillion dollars' worth of output — but instead there is "idle or underworked capital, as well as unemployed labor." Six million fewer people have jobs today than three years ago....MORE