The most depressing economist is out with another big downer

 


Northwestern University professor Robert Gordon -- who gave us a downer in 2012 on the question "Is U.S. Economic Growth Over?" --  is out with a new, depressing paper. This time Gordon  takes aim at the so-called techno-optimists, such as the authors of the new book "The Second Machine Age," who claim that technological growth is accelerating.

Gordon disagrees, saying that we shouldn't expect technology to dramatically improve economic performance over the coming half-century. In fact, he argues that the productivity slowdown began long ago, in essence because the wide availability of computers or cell phones still is not nearly as transformative for society as electricity or cars have been.

While real U.S. gross domestic product grew at an average of 2 percent pear year, Gordon estimates the pace will be much slower over the next 50 years. That's because the economy faces four key headwinds: the retirement of the baby boomer generation; stagnating educational attainment; inequality; and rising national debt. Together, he argues, these trends will deplete -- and have already begun to deplete -- the pool of educated workers with higher incomes to spend, dampening growth.

Techno-optimists remind us that much of the innovation that originates in the U.S. travels around the world with blazing speed through purchases of smart phones and the software that has been developed for them. But other countries can have the free lunch of enjoying American innovation including thousands of smart-phone apps without being saddled with American socio-economic decay, poor educational test scores, massive student debt, high school drop-outs, rising poverty together with explosive growth of incomes at the very top, and the need to reform entitlement programs that are in trouble in part because the U.S. has refused to make medical care a right of citizenship. Today we can only guess which nations will replace the U.S. and remove it from its potential position of leadership due both to the size of its population and its world-leadng real GDP per capita.

Gordon uses this chart to show that we're already experiencing the slowdown:


Gordon's arguments have hardly gone unchallenged. Economist Tyler Cowen, who agrees with much of what Gordon has to say, offers a few interesting critiques.

2. The single biggest question is how much the United States will be able to draw upon innovation from other countries, over the next say 40 years. Gordon doesn’t discuss this in a serious way. The rest of his paper simply lists a bunch of pessimistic factors (valid worries, I might add) and declaring he can’t think of anything else that might turn them around. Maybe that should shift your “p,” but one’s own failure to imagine shouldn’t imply a very firm conclusion about impossibilities.

6. Gordon significantly underestimates already existing advances in software, automation, robotics and related technologies.

As does political blogger Kevin Drum, commenting specifically on Gordon's skepticism about advances in robotics:

This is an embarrassingly bad argument. I can somehow imagine a circa-1870 version of Gordon arguing that all this folderol about electricity is ridiculous. Why, we've been studying electricity for over a century, and what do we have to show for it? Some clunky batteries, the telegraph, a few arc lamps with limited use, and a steady supply of techno-optimist inventors who keep telling us that any day now they'll invent a practical generator that will replace steam engines and change the world. Don't believe it, folks.

Zachary A. Goldfarb is a staff writer covering the White House, focusing on President Obama’s economic, financial and fiscal policy.
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