For the past decade Robert Gordon has written about The Rise and Fall of American Growth, praising the first in our past that was and lamenting the second in our present that is. Now comes Dietz Vollrath with a lively, accurate, and essential corrective to Gordon's pessimism: growth is slow today, he demonstrates, not because our economy is failing but because our economy has succeeded: Dietz Vollrath: Optimal Stagnation: Why Slower Economic Growth Is a Sign of Success: "In 1940 you might have spent your money installing plumbing for running water, or a toilet.... The same went for air conditioning, a TV, or a computer at other points in time during the 20th century. But once we had those goods, then what did we spend our money on?... Goods became cheaper and we filled up our houses with them.... Spending turned towards services... longer and better vacations... classes... medical specialists... physical therapy... data... Netflix and Hulu.... The flow of workers out of producing goods didn’t signal some kind of failure.... In the 21st century... these shifts became a drag on economic growth...[for] most service industries have relatively low productivity growth.... As we shifted our spending from goods to services, this pulled down aggregate productivity growth, which is just a weighted average of productivity growth across different industries.... Baumol.... Labor is necessary to produce goods, but it is not part of the product itself. The person who assembled your fuel injector doesn’t have to be there for you to drive your car. On the other hand, for services labor is part of the product... you need to interact with a doctor, or lawyer, or waiter, or personal trainer, or financial advisor, or teacher.... It isn’t some kind of failure that service productivity growth is low, it is rather an inherent feature of those kinds of activities.... Choices born of success had the unintended consequence of putting a drag on the growth rate in the 21st century...


#noted #2019-10-11

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