I don't think so.
I think human ingenuity, like human stupidity, is infinite!
ROBERT Gordon, a curmudgeonly 73-year-old economist, believes our best days are over. After a century of life-changing innovations that spurred growth, he says human progress is slowing to a crawl.
Joel Mokyr, a cheerful 67-year-old economist, imagines a coming age of new inventions, including gene therapies to prolong our life span and miracle seeds that can feed the world without fertilisers.
These big-name colleagues at Northwestern University in Chicago represent opposite poles in the debate over the future of the 21st century economy: rapid innovation driven by robotic manufacturing, 3D printing and cloud computing, versus years of job losses, stagnant wages and rising income inequality.
The divergent views are more than academic. For many Americans, the recession left behind the scars of lost jobs, lower wages and depressed home prices. The question is whether tough times are here for good. The answer depends on who you ask.
“I think the rate of innovation is just getting faster and faster,” Mr Mokyr said over noodles and spicy chicken at a Thai restaurant near the campus where he and Mr Gordon have taught for four decades.
“What’s the evidence of that?” snapped Gordon. “There isn’t any.”
The men get along fine when talk is limited to, say, faculty gossip. About the future, though, they bicker constantly. When Mokyr described life-prolonging medical advances, Gordon cut in: “Extending life without curing Alzheimer’s means people who can walk but can’t think.”
Gordon landed at Northwestern from the University of Chicago in 1973, a year before Mokyr arrived there from Yale after finishing his PhD. Their tit-for-tat repartee makes them popular speakers — for economists, at least. Gordon recently began charging as much as $US20,000 for US appearances — a fee, he said, dictated by his new booking agent.
Even there, the men are at odds. “I am a rank-and-file academic, not a basketball star,” Mokyr said. “I have neither a literary agent nor a speaker bureau. I charge what they pay me. If it’s not enough I don’t go.”
The professors headlined a Bank of Korea event in Seoul earlier this month. “We always go mano-a-mano,” Mokyr said. “But we often end up talking about different things. Bob’s a macroeconomist, I’m an economic historian.”
Mokyr has long studied how new tools have led to economic breakthroughs. For example, how the development of telescopes allowed for rapid advances in astronomy. History makes him certain his colleague is wrong.
Gordon’s ideas, in fact, fly in the face of modern economic orthodoxy. Since Nobel economist Robert Solow first argued in the 1950s that growth was driven by new technology, most economists have embraced the idea. Progress may be uneven, according to this view, but there is no reason to expect the world to run out of ideas.
“Bob says the low-hanging fruit has been picked, because we won’t invent indoor plumbing again,” Mokyr said. In speeches, Gordon often displays images of a flush toilet and iPhone and asks: which would you give up?
Mokyr said many economists before Gordon had proclaimed the end of progress, but these pessimists had always been proved wrong. It was a popular theme during the Depression, he said, but modern economists now recognised the 1930s as a period of rapid technological progress with such advances as the development of jet engines and radar.
Today, Mokyr said, fast computing was a new tool that would open the way to new inventions in the future.
The darkness of Mokyr’s family history contrasts with his optimism for the future. His parents were Dutch Jews who survived the Holocaust. His father, a civil servant, died of cancer when Mokyr was a year old. He was raised by his mother in a small apartment in the port city of Haifa in Israel.
“My mother was not an optimist,” he said. “She had lived a very tough life.”
Gordon, the more famous of the two men, has the credentials to buck conventional wisdom. His parents and a brother were PhD economists. His father, an expert on business cycles, taught at the University of California, Berkeley, for decades. Business Week called them “the flying Wallendas of economics”, after the acrobatics family. Gordon wrote a widely used macroeconomic textbook and has served for more than three decades on a committee of the National Bureau of Economic Research that determines when recessions begin and end.
If anything, his family should have made him an optimist. Gordon’s father grew up grindingly poor, at one point supporting three younger brothers after his own father died; his eventual success mirrored the larger transformation of the US into the world’s richest country.
“His generation saw the move from crowded tenements in the 1920s to suburbia in the 1950s — with everyone having a yard and a car,” Gordon said, a leap showing how much progress had since slowed.
Gordon sees a hobbled US economy ahead. Americans are getting older, leaving too few workers to support the ageing population. The problem is even worse in other Western economies. An ageing citizenry is among a list of troubles, including the declining share of working-age men with jobs; stagnant rates of Americans earning college degrees; jobs lost abroad and high government debt. The biggest obstacle, he said, was growing income inequality.
To compensate, Gordon said, economies needed technological advances. The problem was that the biggest breakthroughs — such as electrification, or the discovery of antibiotics — were behind us.
Electricity changed how people lived and worked, and it spawned hundreds of new industries. The technology that allowed people to communicate instantly or travel quickly over long distances were 19th and 20th-century innovations.
More recent inventions — including the internet — would not pack the same punch, he said: “The rapid progress made over the past 250 years could well turn out to be a unique episode in human history,” he said.
Mobile phones, he said, were just a refinement of the telephone. “Look at what an ideal kitchen looked like in 1955 — it’s not that different than today,” he said. “It’s nothing like moving from clothes lines to clothes dryers.”
Cars also illustrate how rapid advances have petered out in recent decades. A century ago, the Ford Model T, with its 20-horsepower engine, reached a top speed of 70km/h. By the mid-1950s, Gordon said, his father had a Chevrolet station wagon that was five times as powerful. More than 50 years later, he has a Subaru station wagon that was comparable with his father’s Chevy in size, speed and cargo capacity.
Gordon said his ideas began taking shape between semesters at graduate school. He worked during the summer of 1965 for a team of economists analysing the dazzling productivity growth that began around 1920 and ran through World War II and the post-war boom.
Except for an upturn in the 1990s, growth has been tepid ever since.
“Everyone has looked for a big overarching factor to explain this,” Gordon said.
“But it occurred to me, it could be as simple as that we had run out of the great inventions.”
Gordon said his ideas evolved from there. In 2000, he published a paper saying that computer technology, hailed as the driver of the “new economy”, was far less impressive than earlier big inventions. He generated more controversy with a 2012 academic paper titled “Is US Economic Growth Over?”
The paper included a dire prediction: the economy would grow less than half as fast as the remarkable 2 per cent average it notched between 1870 and 2007.
“Americans got used to their standard of living doubling from that of their parents. No more,” he told investment managers in Germany this year.
If he is right, the standard of living for the average American — measured in per capita income — would in the future take 78 years to double, compared with the 35 years it took between 1972 and 2007. The wealthiest 1 per cent, on the other hand, could double their standard of living in as little as 23 years, he said.
Other economists have voiced worries about stagnating growth, but none quite as sweeping. Tyler Cowen of George Mason University in a 2011 book described a technological plateau that slowed US growth. Cowen has softened his stance lately, noting that such developments as the shale gas boom had improved the long-term outlook. Larry Summers, former chief economic adviser to President Barack Obama, told a gathering of the International Monetary Fund last year that the US and other advanced economies faced a prolonged period of extremely slow growth known as secular stagnation.
But in an interview, Summers said he did not share Gordon’s belief that innovation had stalled. He agreed that the benefits of meagre economic growth “will not be hugely felt by the middle class”.
Other experts side with Mokyr. Timothy Taylor, an economist at Macalester College and editor of the Journal of Economic Perspectives, said, “People like Bob Gordon are making an argument that’s been heard repeatedly for the last 150 years.”
Former Fed chairman Ben Bernanke, in a commencement speech last year, told graduates of Bard College at Simon’s Rock, “Both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.”
Criticism from Mokyr and others has prompted Gordon to focus more on economic headwinds. Even if the pace of innovation remained unchanged, he said, current obstacles were enough to support his projections.
Gordon is now writing Beyond the Rainbow: The Rise and Fall of Growth in the American Standard of Living, one book in series on economic history being overseen by Mokyr as chief editor.
Much of Gordon’s work focuses on an economy’s output. Mokyr, meanwhile, is more interested in how new inventions improve the quality of life in ways that don’t show up in traditional measures: new medicines that treat chronic pain or allow older people to stay active years longer. A hip replacement, he said, let him keep riding his bike to and from work.
“For Bob, it’s all about the measure of input and output — especially output,” said Mokyr.
That was why the ageing population was such a big problem for Gordon, since retired people stop producing.
Gordon countered that many of the innovations Mokyr anticipated — such as new technology to clean air and water pollution — would solve problems created by past economic growth. Those should not be counted the same way as breakthroughs that added to output, he said.
“Maybe the problem is that we didn’t measure growth in the past correctly,” Mokyr retorted, “because we didn’t account for the costs.”
The two men agree on one point. “One of the main missions I have in life is to point out to my students how lucky they are to be born in the 20th century,” Mokyr said.
“Compared to what life was like 100 or 200 years ago, we’re incredibly fortunate.”
ADDITIONAL REPORTING: MICHAEL J. CASEY
By Timothy Aeppel
With many thanks to The Australian
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