Grasping Reality on TypePad, by Brad DeLong

Dismounting from the Economic Growth Wave: Gordon tells us that the era of modern economic growth that we had gotten used to living in since 1870 or so is over. It was starting in 1870 with the iron-hulled screw-propellered ocean-going steamship, the submarine telegraph cable, and the industrial research lab that the pace of frontier-economy economic growth kicked up a notch to a steady long-term measured per capita economic growth rate of 2%/year. And it is ending now.

Such a 2%/year measured growth rate means that in an average year the share of the average household’s resources needed to acquire what they acquired last year shrinks by 1/50. Well-being rises faster: the resources released by 2%/year growth for other purposes can be and are spent acquiring not just more of what was acquired last year, but all of the new goods and services that are the fruits of ongoing invention and innovation. But we measure what we can measure. What we can measure is the average 1/50 per year reduction in the share of resources needed this year to acquire what was acquired last year.

In Gordon's view, in the future frontier economies will see a measured pace of growth not of 2% but of 1% per year. 2% is at an end. Why? Because we have plucked all the low hanging and important fruit.

1850 to 1950 saw the invention of jet aircraft, telephones, indoor plumbing, gas cooking and heating, electric refrigerators, streetcars, automobiles, radio and television, antibiotics, and steel-and-concrete construction. 1950 to 2015 have seen the diffusion of those technologies—and the coming of computers, cell phones, and the internet.

But what comes next?

Robert Gordon says: less. A slower pace of innovation is produced by the fact that you can only industrialize your society once. Add on the “headwinds” of an aging population, an average educational level that has hit a ceiling, rising inequality, and the inability to continue to run pay-as-you-go social insurance, and for the first time an American generation faces the possibility of not living better than its parents had.

Now there still are techno-optimists. I certainly want to be a techno-optimist. But Gordon’s research program has knocked me back on my intellectual heels. The boulder one must roll uphill to make the case for techno-optimism in the aftermath of Gordon is considerably harder.

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Five Orienting Questions:

1. What, in Gordon's view, explains the ramping-up of the pace of economic growth over time--the increase in the growth of the "efficiency of labor" worldwide from 0.1%/year in the late Agrarian Age 1-1500 to 0.3%/year in the Commercial Revolution Era 1500-1800, and then to 1.4%/year in the First Industrial Revolution Era 1800-1870 before jumping up to 5.3%/year in the Modern Economic Growth Era since 1870?
2. Why does Gordon believe that we do not have another upward jump on the horizon? Or even a stable growth rate? We have had three upward jumps in succession, after all?
3. Gordon claims that the downward shift already happened--we just have not seen in yet in elite standards of living. Is he right?
4. Is Gordon's an argument that wealth cannot increase much, or that utility cannot increase much--that the real transformation is getting away from the Malthusian edge?
5. What is Gordon's argument against the "Varian" point of view--that we build societal well-being out of material goods, information, and communication, and that while the first and second Industrial Revolutions were primarily about material goods the information-age revolutions are about information and communication, and are at least as important once one is away from the Malthusian edge?

Cf. also: [Robert Gordon (2014): The Demise of U.S. Economic Growth: Restatement, Rebuttal, and Reflections][] NBER Working Paper No. 19895 (February) <http://www.nber.org/papers/w19895>

Five More Orienting Questions:

1. What happened around 1880, in Robert Gordon's view?
2. Why did it happen around 1880--not before and not after?
3. Why can't we duplicate what happened around 1880 in its essential elements to deliver another century of 2%/year technology-and-organization-frontier productivity growth?
4. What are the "headwinds" that will push median income growth in the North Atlantic economies well below the 1%-year labor productivity growth that Gordon sees as our likely destiny?
5. Relative to all past civilizations, we are now so rich as to be approaching what they might have seen as a "singularity" of sorts. How many singularities or near-through has humanity transitioned through? How should we think about economic growth across "singularities" or near-singularities?

This course will provide students with an introduction to the research frontier in economic history by studying a carefully curated list of recent books in the field. We will undertake a critical reading of these books, focusing on both their strengths and weaknesses. General questions will include the following. Does the topic justify a book-length treatment? Does the author successfully sustain his/her argument throughout the book? What is the role of books, as opposed to articles, in research in economic history (and in economics more generally)? Supplementary readings are provided to point up this last question. Most sessions will be student led, in that students will take charge of presenting the author’s argument and stimulating classroom discussion.

Course template and architecture by Barry J. Eichengreen...

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