I GROWING BODY of literature now argues that the public capital stock has significant, positive effects on private sector output, productivity and capital formation.1 Most of this literature suggests that a decline in the growth of the public capital stock since the early 1970s caused a "productivity slump" in the private sector lowering profitability and investment. 2 Unless these trends are reversed, say the studies, the nation's standard of living will be further threatened. This article explains this public capital hypothesis and evaluates the evidence supporting it. ways, streets and roads, mass transit and airport facilities, educational buildings, electric, gas and water supply facilities and distribution systems, wastewater treatment facilities, and administration, police, fire, justice and hospital facilities and equipment. Public capital comprises federal, state and local government capital goods. It includes high

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