John Taylor discriminates between the 1983-85 and the 2009-12 expansions. The first he calls “economic expansion” while he refers to the second as a “regulatory expansion”. To him that is the best explanation for the very different economic performances in the two expansions.

Taylor puts up this comparative Real GDP growth chart:

And argues the difference can be adequately explained by the next chart which shows the number of number of federal workers engaged in regulatory activities (a proxy for the “production” of regulations) in the years before and during both recoveries:

Who knows, maybe the following comparative chart showing the growth in Nominal GDP in the two periods does a better job at explaining the wide difference in Real GDP growth observed.

Taylor puts up another chart showing the growth in federal workers engaged in regulatory activities for the past 50 years. Note that except during the 1980-85 period, it´s mostly increasing. The increase in the first half of the 1990´s, for example, didn´t stop the economy from growing, remembering that the 1990s registered the longest period of economic expansion in the nation’s history.

In any case regulation affects mostly the “supply side” and may improve, or impair, long run potential growth but it´s monetary policy that has the largest effect on the cyclical behavior of the economy. And I believe the Nominal GDP growth comparison best illuminates the important differences in real economic behavior during the two periods.

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