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Robert Gordon

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Robert Gordon has expanded his argument that innovation and growth are over into a book. Here’s the description from Princeton University Press.

In the century after the Civil War, an economic revolution improved the American standard of living in ways previously unimaginable. Electric lighting, indoor plumbing, home appliances, motor vehicles, air travel, air conditioning, and television transformed households and workplaces. With medical advances, life expectancy between 1870 and 1970 grew from forty-five to seventy-two years. Weaving together a vivid narrative, historical anecdotes, and economic analysis, The Rise and Fall of American Growth provides an in-depth account of this momentous era. But has that era of unprecedented growth come to an end?

Gordon challenges the view that economic growth can or will continue unabated, and he demonstrates that the life-altering scale of innovations between 1870 and 1970 can’t be repeated. He contends that the nation’s productivity growth, which has already slowed to a crawl, will be further held back by the vexing headwinds of rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government. Gordon warns that the younger generation may be the first in American history that fails to exceed their parents’ standard of living, and that rather than depend on the great advances of the past, we must find new solutions to overcome the challenges facing us.

A critical voice in the debates over economic stagnation, The Rise and Fall of American Growth is at once a tribute to a century of radical change and a harbinger of tougher times to come.

Here’s an interview with Gordon where he talks about the book.

Robert Gordon Revisited

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In Robert Gordon’s chapter in the e-book Secular Stagnation: Facts, Causes and Cures, which I reviewed recently, he claims that he never said technological progress is slowing down, but only that future progress will be similar to the rate of the 1970s to now, not the faster rate that happened before the 1970s.

His main argument is that technology will not grow fast enough to offset economic “headwinds”, including population aging, inequality, government debt, and poor education. I don’t deny that these are all problems that we should be trying to address with better policy, and that addressing them would yield benefits. Gordon gives a policy presciption for the U.S. to address them:

My standard list of policy recommendations includes raising the retirement age in line with life expectancy, drastically raising the quotas for legal immigration, legalising drugs and emptying the prisons of non-violent offenders, and learning from Canada how to finance higher education. The US would be a much better place with a medical system as a right of citizenship, a value-added tax to pay for it, a massive tax reform to eliminate the omnipresent loopholes, and an increase in the tax rate on dividends and capital gains back to the 1993-97 Clinton levels.

However, where he doesn’t convince me is his argument that a constant rate of technological progress can’t lead to big gains. If the rate of increase in technology is constant in percentage terms, that means the level of technology is growing exponentially. We are constantly building on the advances of the past. There may be long periods when it seems like nothing is happening, but progress is actually happening behind the scenes, and then it suddenly seems to burst onto the commercial scene. Gordon actually talks about how the technologies that led to very fast productivity growth in the mid-20th century were actually inventions of the late 19th century (electricity, the telephone, etc.). It took a few decades for the technology to kick into everyday life. The 1970s to the present have been a time of huge advance in computer technology, so even if the lag times are not decreasing it should be about time for that to kick in. Biotechnology would be another couple decades behind, since the big advances in genomics started to happen in the 1990s. But there are reasons to be hopeful that the lag time between advances tends to decrease over time. So technology may be increasing not only at a constant percentage rate, which means exponential growth, but the rate of exponential growth itself may be accelerating. Ultimately, this lag time determines whether we are in for a lost decade or two as Gordon’s “headwinds” kick in before the next wave of technology-driven improvement. Of course, Gordon like most economists leaves out some other possible headwinds such as climate change, energy, and food, not to mention the really bad stuff like wars and pandemics.