Is technological progress slowing down? It's a plausible theory. As Paul Krugman once pointed out, households went from cooling food with ice brought by horse-drawn carriages and not even having access to radio or electricity in 1918 to having electric power, refrigerators and TVs (and probably a car too) in 1957. Between 1957 and today, though, we went from having TVs, refrigerators, and cars to having…slightly better TVs, refrigerators and cars. What gives? We were promised jetpacks!
It's a puzzle, one that Tyler Cowen has argued might mean slower productivity growth for years to come (though he's backed off that claim a bit) and which has Northwestern economist Robert Gordon arguing that the U.S. economy could stop growing altogether in the not-too-distant future. But it's always been hard to measure the slowdown quantitatively. Qualitative comparisons — does 2013 feel as different from 1963 as 1963 feels from 1913? — are easy, but how do you actually measure if progress is slowing down? You can look at patents to measure innovation, but with patent trolling getting more and more common, the reliability of that metric is really doubtful.
A new measure, hidden within Wednesday's GDP release out of the Bureau Economic Analysis, finally gives us a look. BEA has always measured private, non-residential fixed investment — that is, the amount that companies spend on things like tools, equipment, and factories; capital, in other words. But now it's breaking out private investment in "intellectual property products," which measures spending on both research and development and "entertainment, artistic, and literary originals" — that is, new creative products. That's a much better measure of how much we're spending on innovative products and culture than, say, patent data. And it suggests that the "Great Stagnation" that Cowen and Gordon warn of may indeed be happening:
The data is very noisy, quarter-to-quarter, but some overall trends are observable. The growth rate increased steadily between 1969 to the early 1980s, and stayed at that high plateau through the end of the 1990s. IP investment was growing a significant amount, quarter after quarter, year after year. From the looks of it, there was only one quarter (Q4 1993) that saw negative growth between Q3 1980 and Q2 2001, and even then the drop was trivially small (0.1 percent).
Then, around the turn of the millennium, something changed. The average growth rate dropped significantly around 2000 and stayed low thereafter. We're at a new plateau, but a much lower one than we experienced in the 1980s and 1990s. That could be the great stagnation, right before our very eyes.