benefit of additional investment may itself be affected by aging. with slowed labor force growth, the amount of new equipment that can be used productively could be more limited, and the return to capital investment could decline as a consequence. yet it is possible that the return to certain types of capital - particularly those embodying new labor - saving technologies - could increase. although domestic investment has accounted for only half our recent productivity gains, its contribution has historically been much larger. should the pace of efficiency gains slow, it would fall to the level of investment to again become the major contributor to productivity gains. investment, however, cannot occur without saving. but maintaining even a lower rate of capital investment growth will likely require an increased rate of domestic saving because it is difficult to imagine that we can continue indefinitely to borrow saving from abroad at a rate equivalent to 5 percent of u. s. gross domestic product. a key component of domestic saving in the united states in future decades will be the path of the personal saving rate. that rate will depend on a number of factors, especially the behavior of the members of the baby - boom cohort during their retirement years. over the post - world war ii period, the elderly in the united states, contrary to conventional wisdom, seem to have drawn down their accumulated wealth only modestly. apparently retirees spend at a lesser rate and save more than is implicit in the notion that savings are built up during the working years to meet retirement needs. perhaps, people mis - estimate longevity or desire a large cushion of precautionary savings. moreover, often people bequeath a significant proportion of their savings to their children or others rather than spend it during retirement. if the baby - boom generation continues this pattern, achieving a higher private domestic saving rate is not out of reach. even so, critical to national saving will be the level of government, specifically federal government, saving. * * * a doubling of the over - 65 population by 2035 will substantially augment unified budget deficits and, accordingly, reduce federal saving unless actions are taken. but how these deficit trends are addressed can have profound economic effects. for example, aside from suppressing economic growth and the tax base, financing expected future shortfalls in entitlement trust funds solely through increased payroll taxes would likely exacerbate the problem of reductions in labor supply by diminishing the returns to work. by contrast, policies promoting longer working life could ameliorate some of the potential demographic stresses.

5taylor rule was that it described u. s. monetary policy patterns well over a certain period, one that was associated with a reasonable degree of economic stability. nevertheless, central bankers who are aware of the merits of the arguments for policy rules have on occasion deviated substantially from the prescriptions of standard policy rules. further, while the implications of different monetary rules are described in the tealbook and typically referred to in the presentations by several fomc participants, the overall discussion in fomc meetings is not generally cast in terms of how it relates to one version or another of the taylor or any other rule. the other set of rules mentioned frequently in fomc discussions are wicksellian, for there is often a discussion of r *, which in some formulations of the taylor rule is also the constant term. the period since 2008 bears testimony to central bankers ’ willingness to depart from the prescriptions of a pre - specified rule. in the wake of the financial crisis, policymakers found it necessary to follow a more accommodative monetary policy that was appropriate for the new economic conditions. 12 in addition, structural changes in the u. s. economy have apparently lowered the value of the interest rate - - that is, r * - - consistent with neutral policy. 13 such structural changes were not anticipated in advance. 14 of course, once a structural change has occurred and been ascertained by policymakers, they will know see especially engen, laubach, and reifschneider ( 2015 ). because the federal funds rate was at its effective lower bound from late 2008 to late 2015, policy choices about that rate largely involved decisions concerning the forward guidance provided by the fomc. these decisions in turn rested on judgments regarding the period over which the rate should remain at its lower bound, as well as about the pace and magnitude of the subsequent policy firming. see, for example, board of governors ( 2017 ). indeed, milton friedman ’ s advocacy of a policy rule consisting of constant monetary growth rested in part on the existence of uncertainty, as he suggested that economists lacked the knowledge about economic relationships required to improve on that simple rule. see friedman ( 1972 ) for a concise version of his case for the rule and dornbusch and fischer ( 1978, pp. 278 - 80, 516 ) for a textbook account of friedman ’ s rule that emphasized the uncertainty aspect of his argument for the rule. of course,