(FORTUNE Magazine) – What will it take to get America back on track? Leaving aside the recession and Chinese water torture aftermath, long-term growth has slowed markedly during the Seventies and Eighties from the previous two decades. Sluggishness is a problem not only in the U.S.; rates in most other industrial countries have declined even more, measured by growth per capita. Just about every economist agrees that more investment would help, but what kind and how much? In traditional models, added investment dollars quickly run out of steam as returns diminish, except where dramatic technological advances change the ground rules. A group of so-called new-growth economists are putting together pieces of the puzzle. Some get around the diminishing return problem by allowing for ''spillover'' effects as the benefits of innovative technologies spread beyond the industries that adopt them. Others include humans when they talk about capital investment: A smarter or better-trained work force may increase output as much as a new machine tool. In August, the Federal Reserve Bank of Kansas City pulled a score of such economists together to address its annual Jackson Hole, Wyoming, symposium. The unstated goal: to give the winning party's policy wonks some serious suggestions for after the election. Harvard's J. Bradford De Long and Lawrence H. Summers (currently chief economist of the World Bank) made a potent case for narrowly focused investment. Looking at 47 countries from 1960 to 1985, they found the ones that most increased spending on machinery grew fastest. Machinery pays off because it leverages new technologies quickly, yielding large benefits elsewhere as acquired skills spread throughout the work force. Acknowledging that their prescription sounds much like what President Kennedy's Council of Economic Advisers advocated in 1962, De Long and Summers call for tighter fiscal and looser monetary policy to lift national savings, an investment tax credit, and trade policies that don't penalize capital goods imports. Kennedy's CEA didn't have the human capital notion to kick around, of course, and most of the Jackson Hole group paid tribute to this intuitively sensible idea. To general enthusiasm, Harvard's Robert Barro produced research showing a strong correlation between years of schooling and a country's economic growth rate. But no economist can yet pinpoint the factors that make people more productive, including quality of education, training, and work force attitudes. The conferees agreed that it's worth the effort to try to nail down some of these ephemera. All but lost amid the warm feelings about directing investment to machines and people was a strong reminder from conservative economists that government can screw things up. The most detailed critique came from Kumiharu Shigehara, who since May has been the chief economist of the Organization for Economic Cooperation & Development. If education is so important, he asked, why has growth been declining in OECD countries during two decades of rising educational attainment? Investment shortfalls can't entirely explain the slowdown either. Blame blunders by governments and central bankers, said Shigehara -- and start with those that produced the inflation of the Seventies, followed by the harsh efforts to contain it during the Eighties. The result: volatile financial markets and uncertainty about future policies, which distorted investment decisions. Add other fiscal follies, including protectionism and . -- notably in European countries -- rigid labor markets. The best strategy for growth, according to Shigehara: ''sound, stable, and credible macroeconomic policy rules,'' which will let businesses and consumers plan rationally for the long run. Shigehara's call will ring true to any executive trying to figure out what maddening tack Congress or the Administration will take next. It doesn't necessarily rule out sensible government intervention -- Summers pointedly called for a permanent investment tax credit, which would avoid the distortions caused by on-again, off-again incentives. But will the message be heard in Washington this winter?