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Summer Travel Offers Insights Into What Drives Economic Growth
Why do we travel? Alain de Botton suggests in his engaging meditation on this question, The Art of Travel, that it’s the human craving for variety that impels us to leave home and incur the headaches of exploring the world.
If you’re like me, you’ve just made the transition from the slower pace of summer into a busy fall. Perhaps you’ve recently returned from a wonderful summer trip. In my family’s case, we enjoyed a week with close friends in Spain. Reflecting on this experience, it turns out that summer travel offers insights into what drives economic growth – and why official growth measurements understate how fast human well-being is improving in the contemporary world.
One memorable experience on our trip was sampling a dazzling variety of olive oils, some quite different from anything we’d tasted here. We were just as delighted to enjoy a range of unfamiliar wines, cheeses, and tapas, as well as the distinctive art and architecture of Spain and the novel experience of watching World Cup games in a Barcelona bar.
This quintessentially human appetite for variety accounts for a larger proportion of economic activity than most people realize. The leisure and hospitality sector alone employs 11 percent of the U.S. workforce, or 16.5 million people, and 16 percent of the workforce in Spain.
And it’s growing fast. U.S. leisure and hospitality employment has grown 28 percent since 2010, compared to 10 percent for total employment. Wages in this sector, while relatively low, are growing faster than overall wages – 3.2 percent vs. 2.9 percent year-over-year in the last jobs report. International tourist arrivals in both the U.S. and Spain have nearly doubled over the past 20 years. As a share of the U.S. economy, the sector has more than doubled since the 1960s.
But our craving for variety energizes economic growth in more fundamental ways. Economists have found that the human preference for product variety, not just the desire to pay less for the same goods, motivates much of modern international trade. Others point towards a profound shift in human consumption towards goods categories that feature wide and growing variety. Also, a country’s GDP per capita is highly correlated with the variety of goods it produces. Most likely, causality runs both ways: wealthier people buy a more diverse basket of products, but economies that are successful in delighting people with a wide variety of products also become richer as a result.
Conventional measures of GDP growth, moreover, don’t do a good job of capturing the spectacular rise in the variety of products and experiences people can now enjoy in a lifetime relative to the monotonous world of past generations. One meal is equivalent to another in the process of adding up GDP, but our family’s well-being meaningfully improved thanks to the foods and wines of Spain, some of which were notably inexpensive. Since a dollar of wages buys far more variety than it did two generations ago, “real” incomes have increased faster than the typically gloomy headlines in the news let on.
J.H. Cullum Clark is Director, Bush Institute-SMU Economic Growth Initiative and an Adjunct Professor of Economics at SMU. Within the Economic Growth Initiative, he leads the Bush Institute’s work on domestic economic policy and economic growth. Before joining the Bush Institute and SMU, Clark worked in the investment industry for 25 years. He served as an equity analyst and portfolio manager at Brown Brothers Harriman & Co. (1993-96), as a portfolio manager at Warburg Pincus Asset Management (1996-2000), as President and Chief Investment Officer of Cimarron Global Investors, a Dallas-based hedge fund firm (2000-02), and as President of Prothro Clark Company, a Dallas family investment office (2002-18). Prior to entering the investment industry, he served for one year on the staff of the U.S. Senate Select Committee on Intelligence.
Clark fulfilled a lifelong goal by earning his Ph.D. in Economics at SMU in May 2017, and subsequently joined the faculty of SMU’s Department of Economics. His research has focused on monetary policy, fiscal policy, financial markets, economic geography, urban economics, modern economic history, and economic growth.
Clark's volunteer leadership activities include serving on the boards of Uplift Education, the Eugene McDermott Foundation, the Yale University Art Gallery, and the Foundation for the Arts, as well as on the investment committee of SMU. He earned a B.A. in History from Yale University in 1989 and an A.M. in Political Science from Harvard University in 1993, in addition to his Ph.D. in 2017. After graduating from Yale he lived for one year in Japan. Clark and his wife Nita have three daughters: Lili, Annabel, and Charlotte.Full Bio
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