Robert Gordon

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.

economic “derailment”

David Lipton, a deputy director at the IMF, gave a speech on March 8 in which he stated, “Global economic recovery continues, but we are clearly at a delicate juncture, where risk of economic derailment has grown.”

Why?

In many parts of Europe, for instance, sovereign and private sector balance sheets remain highly leveraged and banks’ non-performing loans high. In the US, aging-related spending pressures and unfulfilled infrastructure needs diminish economic prospects. And in Japan, deflation is putting the recovery at risk.
At the same time, we are witnessing an emergence of new risks. The global economic slowdown is hurting bank balance sheets and financing conditions have tightened considerably. In emerging markets, excess capacity is being unwound through sharp declines in capital spending, while rising private debt, often denominated in foreign currency, is increasing risks to banks and sovereign balance sheets.

Concerns about the global outlook have weighed heavily on world financial markets. The decline in equity price indices in 2016 so far this year has averaged over 6 percent, implying a loss of global market capitalization of over US$ 6 trillion (or 8.5 percent of global GDP). This is roughly half the US$ 12.3 trillion loss incurred in the most acute phase of the global financial crisis. Some Asian markets, such as in China and Japan, have been particularly hard hit, with losses of over 20 percent since the beginning of the year. Meanwhile, emerging market currencies have weakened, while their sovereign credit spreads have continued to widen—in Latin America and Africa by over 300 basis points over the past year.

What may be most disconcerting is that the rise in global risk aversion is leading to a sharp retrenchment in global capital and trade flows. Last year, for example, emerging markets saw about $200 billion in net capital outflows, compared with $125 billion in net capital inflows in 2014. Trade flows meanwhile are being dragged down by weak export and import growth in large emerging markets such as China, as well as Russia and Brazil, which have been under considerable stress.
Furthermore, inflation has fallen to historical lows. Headline inflation in advanced economies in 2015, at 0.3 percent, was the lowest since the financial crisis, and in emerging markets core inflation remains well below central bank targets.

The solutions proposed are mostly things you might expect from the IMF – free trade, free capital flows, floating exchange rates, and reduced regulation of big business. But buried in the fuzzy language, they are nowhere near as hawkish on debt as they once were and are talking about richer countries reducing taxes on labor, and taking on debt to invest in infrastructure, education, and research.

teaching creativity

Here are some ideas on teaching kids to be creative. The main idea seems to be to focus on values rather than rules. The article talks about risk taking, but the way I would put this is, encourage them to think about the “why” of good behavior and let them figure out the “what” for themselves. I’m not sure I see the risk in that, other than the risk of not going with the crowd.

There are a few paragraphs on brainstorming research.

…there a few things that happen that make brainstorming groups less than the sum of their parts.

One is called production blocking, and it’s the basic idea that we can’t all talk at once. And as a result, some ideas and some students just don’t get heard. Two, there’s ego threat, where kids are nervous about looking stupid or foolish, so they hold back on their most original ideas. And then, three is conformity. One or two ideas get raised that are popular. Everyone wants to jump on the majority bandwagon, as opposed to bringing in some radical, different ways of thinking.

You put kids in separate rooms, what you get is all of the ideas on the table, and then you can bring the group together for what the group does best, which is the wisdom of crowds. The evaluating. The idea selecting. The figuring out which of these ideas really has potential to be, not only novel, but also useful.

Remaking Economic Development

This is a new Brookings study on a vision for economic development at the metro scale. Here’s an excerpt, but the rest is worth reading.

As Michael Porter, the Harvard authority on competitiveness, describes it, the anchor firms, supply chains, supporting entities and organizations, research centers and specialized knowledge assets that make up industry clusters arise from a “highly localized process” that creates differentiated competitive advantages tailored for particular industry clusters.

Those assets are sometimes called “market drivers,” “factors of production,” or the “industrial commons”— because they benefit a wide array of firms. They include applied research and technical expertise, supports for entrepreneurial activity, robust pipelines of skilled labor, deep benches of suppliers and related firms, globally connected infrastructure, and responsive, predictable governance to maintain them all. It is the productive mix and synergy among these distinctive drivers—innovation, traded sectors, human capital, infrastructure, and governance—that create the conditions in which industries thrive, create value, and generate growth and income.

Globalization and technology have not dispersed these market assets but instead have further concentrated them in cities and metropolitan regions, with leading centers of knowledge and production capturing an increasingly greater share of specific market opportunities.

That is in part because innovation today reinforces the power of place. The rapid pace of competition requires solutions often developed through collaborations among firms, research institutions, national labs, competitors, customers, venture capitalists, and entrepreneurs—collaborations that are most readily forged through the networks formed within metropolitan regions.

 

This sounds right to me. Policies like minimum wage and affordable housing have their place, but ultimately I feel like they are treating the symptom and not the disease. The pie has to be growing.

green household cleaning recipes

Here are some recipes for non-toxic household cleaners. Toxic household cleaners are one of those things I put in the “toxic, and not necessary” category which there is just no reason to tolerate. Not all members of my household are sold on this idea though, and if I am being completely honest I probably do less than my fair share of the household cleaning so it is not that easy to take the moral high ground. Also some think I’m just cheap. Which I can’t really deny.

Carbon Nanotubes Produced from Ambient Carbon Dioxide

Producing carbon nanofibers from ambient carbon dioxide seems like a potential breakthrough. You are removing the greenhouse gas from the air, and producing an incredibly useful product that can be used for everything from batteries to store renewable energy (discussed in this article) to (I am speculating) strong, light-weight carbon-negative materials that could replace a portion of the heavy-footprint steel and concrete we use today.

Carbon Nanotubes Produced from Ambient Carbon Dioxide for Environmentally Sustainable Lithium-Ion and Sodium-Ion Battery Anodes

The cost and practicality of greenhouse gas removal processes, which are critical for environmental sustainability, pivot on high-value secondary applications derived from carbon capture and conversion techniques. Using the solar thermal electrochemical process (STEP), ambient CO2 captured in molten lithiated carbonates leads to the production of carbon nanofibers (CNFs) and carbon nanotubes (CNTs) at high yield through electrolysis using inexpensive steel electrodes. These low-cost CO2-derived CNTs and CNFs are demonstrated as high performance energy storage materials in both lithium-ion and sodium-ion batteries. Owing to synthetic control of sp3 content in the synthesized nanostructures, optimized storage capacities are measured over 370 mAh g–1 (lithium) and 130 mAh g–1 (sodium) with no capacity fade under durability tests up to 200 and 600 cycles, respectively. This work demonstrates that ambient CO2, considered as an environmental pollutant, can be attributed economic value in grid-scale and portable energy storage systems with STEP scale-up practicality in the context of combined cycle natural gas electric power generation.

Combined with renewable energy sources, maybe this is the breakthrough technology that gets us over the current hump where we are pushing against the ecological limits, and sets us on a path of continuing growth with a lower footprint until we eventually push against the limits again. Or, put the right incentives and policies in place to control the unsustainable portion of the growth, and with this technology in place maybe we can make it all the way until the asteroid hits. And by then, we can try to have people spread across a few planets. And then we are good until the sun burns out, or the aliens come for us, or the universe collapses. None of which will be my problem.

subsidizing Uber as an alternative to transit

A suburb of Orlando plans to subsidize 20% of all Uber rides, and 25% of ones that begin or end at a train station. It kind of makes sense that a small city with no previous investment in transit would choose to do this. There is no capital investment required, so they could just set a budget and stop the program for the year if they exceed it. They seem to think it will also help with road building and maintenance costs. I don’t quite get that – you assume people take trips because they need to get from point A to point B, and changing the economics of what vehicles they choose may not affect overall demand or reduce wear and tear. It might even increase demand if people take trips they would not have previously. It could drastically reduce the amount of space needed for parking, and that space and expense could be repurposed for something else. It could definitely cut down on drunk driving. They mention that it could hurt the poor, but I think all you need there is a hotline with operators who can book calls and arrange payment for people who don’t have an internet connection. It could provide jobs for laid-off taxi dispatchers.

how freight moves

Here are some statistics on how freight moves in the U.S. Compared to my preconceived notions, trucking is even more dominant compared to rail than I thought. Even pipelines move more than twice the weight of rail. Air is vanishingly small in terms of weight, but used to move higher-value items. It’s not too surprising that the monetary value of everything shipped is projected to grow along with the economy, but it is a little surprising to me that the weight of everything shipped is projected to grow by 40% over the next 30 years. It argues against the idea that we are “dematerializing”, or achieving economic growth without physical growth. Sure, people like Alan Greenspan can make an argument that the weight per dollar is not increasing, but what does that mean exactly when a dollar is a fairly arbitrary human measure of value? Ultimately the tonnage of everything we move, from raw materials and fossil fuels to manufactured goods to waste, is one proxy for ecological footprint, and it doesn’t look like we are going to turn the corner soon. The only way that would change is if we had a closed loop, “circular economy” where the waste becomes raw materials again. Then we could theoretically keep shipping it around the loop faster and faster without increasing our footprint. That is, given enough clean, cheap energy.

Greyhound in the 21st Century

Here’s an interesting article in The Dallas Morning News on Greyhound’s technology strategy.

The 101-year-old company stands at a nexus these days. Uber, car-sharing services and autonomous vehicles will likely thoroughly rearrange ground transportation over the next decade. And young millennials continue their migration to downtown areas — sometimes without cars…

Now Greyhound sells at least 60 percent of its tickets through mobile digital devices like cellphones and tablets, Leach said. And over the next few years, the company wants to become part of a loose urban-mobility network built around ride-sharing and autonomous vehicles…

Despite their Old World aura, buses are a solid part of the modern transportation industry, and Greyhound is still the largest player, with an estimated 31.2 percent share of the market.

Well, if by “Old World” you mean Europe, they have had an efficient inter-city train system for about 50 years. We don’t have that in the U.S. for at least two reasons. First, because we have an enormous investment in a highway system that benefits the auto, oil and finance industries. That system is not optimal by any stretch of the imagination, but now that we’ve built it, we are stuck maintaining it and it would be extremely difficult to abandon it in favor of a better system like an efficient inter-city train network. There isn’t enough money to do both at the same tie. Second, the current approach is further entrenched by our federal political system which gives disproportionate votes and funds to the empty spaces between cities.

Now, if you’re a bus service, you benefit from that sunk investment in the highway system because you don’t have to pay anything near its true cost. Your customers are paying those costs in taxes and blood, but your prices appear cheap to them. Add in a few perks like wireless and clean comfortable seats, and your service becomes a near optimal way to navigate a very suboptimal transportation system.