Every year, it seems, Federal Reserve Chairman Ben Bernanke gives a commencement speech, and every year, the occasion provides him with a rare opportunity to venture far beyond his usual monetary policy-speak. This year, he mentions robots and lasers!
In the nice commencement speech Bernanke delivered this morning at Bard College at Simon's Rock, in Massachusetts, he tackles one of the most interesting and important economic questions of the moment: Is the era of rapid economic advancement over, or do America and the world have more days ahead of quickly improving living standards. The first argument has been articulated by Tyler Cowen in his book "The Great Stagnation," which argues that the low-hanging fruit of economic growth has now been consumed, and by Robert J. Gordon, both of whose work Bernanke cites in a footnote to the published speech.
The chairman acknowledges the apparent case for the great stagnation by comparing life during his own childhood 50 years ago with ordinary life 50 years before that:
Fifty years ago, in 1963, I was a nine-year-old growing up in a middle-class home in a small town in South Carolina. As a way of getting a handle on the recent pace of economic change, it's interesting to ask how my family's everyday life back then differed from that of a typical family today. Well, if I think about it, I could quickly come up with the Internet, cellphones, and microwave ovens as important conveniences that most of your families have today that my family lacked 50 years ago. Health care has improved some since I was young; indeed, life expectancy at birth in the United States has risen from 70 years in 1963 to 78 years today, although some of this improvement is probably due to better nutrition and generally higher levels of income rather than advances in medicine alone. Nevertheless, though my memory may be selective, it doesn't seem to me that the differences in daily life between then and now are all that large. Heating, air conditioning, cooking, and sanitation in my childhood were not all that different from today. We had a dishwasher, a washing machine, and a dryer. My family owned a comfortable car with air conditioning and a radio, and the experience of commercial flight was much like today but without the long security lines. For entertainment, we did not have the Internet or video games, as I mentioned, but we had plenty of books, radio, musical recordings, and a color TV (although, I must acknowledge, the colors were garish and there were many fewer channels to choose from).
The comparison of the world of 1963 with that of today suggests quite substantial but perhaps not transformative economic change since then. But now let's run this thought experiment back another 50 years, to 1913 (the year the Federal Reserve was created by the Congress, by the way), and compare how my grandparents and your great-grandparents lived with how my family lived in 1963. Life in 1913 was simply much harder for most Americans than it would be later in the century. Many people worked long hours at dangerous, dirty, and exhausting jobs--up to 60 hours per week in manufacturing, for example, and even more in agriculture. Housework involved a great deal of drudgery; refrigerators, freezers, vacuum cleaners, electric stoves, and washing machines were not in general use, which should not be terribly surprising since most urban households, and virtually all rural households, were not yet wired for electricity. In the entertainment sphere, Americans did not yet have access to commercial radio broadcasts and movies would be silent for another decade and a half. Some people had telephones, but no long-distance service was available. In transportation, in 1913 Henry Ford was just beginning the mass production of the Model T automobile, railroads were powered by steam, and regular commercial air travel was quite a few years away. Importantly, life expectancy at birth in 1913 was only 53 years, reflecting not only the state of medical science at the time--infection-fighting antibiotics and vaccines for many deadly diseases would not be developed for several more decades--but also deficiencies in sanitation and nutrition. This was quite a different world than the one in which I grew up in 1963 or in which we live today.
Bernanke goes on to explain why, despite that apparent downshift in the pace of advances in standard of living, he remains a techno-optimist.
First, future innovations are, by definition, unknowable, and times of weakness tend to bring out an unfortunate pessimism. Bernanke quotes John Maynard Keynes's prediction in 1930, when pessimism was at a high-water mark, that income per person would be four to eight times as large a century later; the United States is on track to meet that projection. (Though it's probably not meant this way, one can read the invocation of Keynes's long-term thinking on the economy as a subtle rebuke of Niall Ferguson, the Harvard professor who a few weeks ago argued that Keynes was indifferent to the long term because he was gay and had no children).
Second, the full impact of new technologies takes time to be realized, and by that standard, the IT revolution is quite young. Bernanke notes in particular that in health care, the use of information technology to deliver better, cheaper, faster care is only in its infancy:
A strong case can be made that the modernization of health-care IT systems would lead to better-coordinated, more effective, and less costly patient care than we have today, including greater responsiveness of medical practice to the latest research findings. Robots, lasers, and other advanced technologies are improving surgical outcomes, and artificial intelligence systems are being used to improve diagnoses and chart courses of treatment. Perhaps even more revolutionary is the trend toward so-called personalized medicine, which would tailor medical treatments for each patient based on information drawn from that individual's genetic code. Taken together, such advances could lead to another jump in life expectancy and improved health at older ages.
Third, the opening up of the developing world means that far more people, with far greater capacity to communicate with each other, are at work trying to solve humanity's problems than in the past. Researchers in China and India now have access to the same information as their counterparts in the West, and ideas they generate spread rapidly. That means there is more raw brainpower being devoted to innovation, as well as greater capacity for good ideas to reach around the globe.
Add it all up, and Bernanke is in the techno-optimist crowd -- though he clearly needs to give a follow-up speech to spell out in greater detail what he thinks will happen when the robots take all our jobs.