Monday, February 01, 2016

ECONOMICS - End of Growth?

"Are the best days of the U.S. economy over?" by Lee Koromvokis, PBS NewsHour 1/28/2016


Many of us of a certain, ahem, age have a hard time keeping up with the latest technology.  But some of the stuff we do manage to master is often a big improvement, if not downright life-transforming.  When I first started working at the “MacNeil-Lehrer NewsHour” in the mid-1980s, in the offices of WNET-channel 13 in New York City, we had no computers, let alone Internet or email.  We received wire service news on teletype machines, wrote our stories on IBM Selectrics, and actually had to make telephone calls or go to the library to fact check.  I recently stumbled on the manila folder file of a story about a scientific advance for which I had communicated with the researchers by hand-typed letters via U.S. Mail!  You can therefore imagine what a difference Google alone has made on my working life, and my productivity.

So it came as some surprise to read in Robert Gordon’s new book, “The Rise and Fall of American Growth,” that, when it comes to the kind of productivity that leads to economic growth, the technological advances of recent decades have nothing on the inventions of the prior century.  Electricity, indoor plumbing, heating and air conditioning, telephone and television, planes-trains-automobiles, the conquest of infectious diseases … the list goes on and on.  Having spent quite a bit of time (in hours) finding the historical footage for this story on the terrific website — a project, by the way, that once would have taken WEEKS in the National Archives — I have newfound appreciation for Prof. Gordon’s “special century” of 1870-1970, and new understanding for why, despite the progress of the digital age, Total Factor Productivity — which measures the contributions of technological innovation to growth — has, since 1970, been rising at only about one third the pace of the previous five decades.  And that really matters for where our economy goes from here, and to the American Dream: The idea that each generation of children will grow up to be better off than the preceding generation.

Note that Prof. Gordon is not saying that technological progress has slowed to a crawl, nor that economic growth has ground to a halt.  He’s saying that the rapid growth of the mid-20th century was a one-time phenomenon, and that the slower growth of recent decades is the new normal.

Is Prof. Gordon right then, that the future ain’t what it used to be?  MIT’s Prof. Erik Brynjolfsson, whom we also interviewed for this story (and in 2014 about his own book, The Second Machine Age) says that just because we’re stuck in a relatively stagnant economy now doesn’t mean we will be forever.  He believes artificial intelligence will be the biggest invention ever, and that when that hits, all bets about productivity and growth are off.

Brynjolfsson's argument about exponential growth — that “it leads us to overestimate what’s going to happen in the short run because at first it’s happening fairly slowly, but then we underestimate what happens in the long run when things really take off” certainly hit home.  In the mid-1990s, Nobel laureate physicist Arno Penzias invited Paul Solman and me to Bell Labs to videotape a demonstration of video conferencing technology.  Embarrassingly for all concerned, it didn’t work.  That was three decades after AT&T had introduced picturephones at the 1964 New York World’s Fair.  Hopeless, right?

And yet, it seemed like suddenly overnight we had Skype, and then FaceTime.  Picturephones at last!  And they worked, at least most of the time.  We use them for interviews now, even on live TV.

Then again, if I had to choose — as Robert Gordon suggests in his dueling Ted Talk with Erik Brynjolfsson — between my iPhone and indoor plumbing, I guess I’d choose the toilet.

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