Transcript Response to Comments on The Rise and Fall of American Growth

Response to Comments on
The Rise and Fall of American
Growth
Robert J. Gordon
Northwestern University
AEA Session
San Francisco, January 3, 2016
Central Themes of the Book
• Economic growth is not continuous
• 1870-1970 was a special century
– Freed households from an unremitting daily
grind of painful manual labor, household
drudgery, darkness, isolation, and early death
• Special because progress spanned so
many dimensions
• Progress since 1970 substantial but
across fewer dimensions (EICT)
The Three Eras of Productivity
Growth
The Middle Period Has Triple the
TFP Growth
Approach to Interpreting
the Standard of Living
• Well-being depends on market goods
combined with household production and
leisure
– minus the disutility from work.
– Reduced hours, discomfort, physical difficulty
• Understatement of rise in standard of living
due to consumer surplus omitted from GDP
• Omissions were more important in the
special century than since 1970
• Examples
Looking Ahead to the Future
• Forecasts look ahead 25 years, 2015-2040
• Future pace of productivity change
extrapolates relevant part of the past
• Headwinds subtract the effects of:
– Inequality
– Education
– Demography
– Fiscal (increase in debt/GDP; aging population)
Trend in Labor Productivity Growth
Starting in 1953
Summary of the Forecasts
2.5
1920-2014
2015-2040
2.26
2.11
2.0
1.82
1.69
Percent
1.5
1.20
1.0
0.80
0.5
0.40
0.30
0.0
Output per Hour
Source: Data underlying Table 18-4.
Output per Person
Median Output per
Person
Disposable Median
Income Per Person
Reactions: Starting with
Ben Friedman
• Rich and nuanced reaction from a broad
historical perspective
• Calls attention to the hopefulness of Francis
Weyland – what blessings God will bestow
– View forward from 1837 and 2016
• Qualification:
– “No new advances” will replicate Great
Inventions
Ben Friedman and the Future
• Contrast between my future of reduced pace
of technological change and headwinds
• Vs. Brynjolfsson-McAfee “techno-optimism”
• Technical change vs. jobs
• My view: robots and AI are important but
evolving very slowly
• Robot quote
The Other Reactions:
In Chronological Order
• Acemoglu – Moscona – Robinson
(A-M-R) concerns the 19th century
• Crafts focuses on 1920-1950
• Clark looks to the future
A-M-R on the Endogeneity of
Technical Change
• Taxes, R&D subsidies, property rights, patent
laws, educational system, competition policy
• Future vs. past depends on these institutions
• Book is criticized for neglecting these
underlying factors, but:
– Attention to patent system, costs vs. U.K.
– Differs by treating timing of inventions as
spontaneous
– Future: opportunities for innovation, not
institutions
Crafts on 1920-50
• Table 1. Valuation of increased life
expectancy and reduced hours of work adds
to peak growth in 1929-50
• His research project, new estimates for
education reduce TFP growth 1899-1947 by
0.3. Reallocation within sectors.
Understanding TFP to be applauded.
The Great Depression and WW II
• The book credits New Deal policies and WWII
for the great leap in TFP 1930-1950
• Unions, higher wages, reduced hours,
infrastructure investment
• WWII: Learning by doing, 2X machine tools
• Crafts: no infrastructure or private R&D
WWII
– But, government R&D, “big inch pipeline”
Clark on the Future
• Clark agrees with the book’s technopessimism
• But he gives the book too much credit; his
view of the future is complementary but
different
• My reasons for skepticism:
– Big impacts of IR#3 are in the past
– Evolutionary progress of robots and AI
Clark’s Reasons for Future
Pessimism
• Dominant and growing share of production in
the services, not amenable to automation
• “A surprising share of current jobs are the
timeless ones of the pre-industrial economy”
• 1960-2007 half of industries have negative
TFP growth
• Stunning: >80% corporate R&D in industries
with only 5% of value added
• ICT: Declining share and growth rate
Conclusion
• The book and its themes remain intact
• The special century, the smaller impact of the
digital revolution, the time skewness of
mismeasurement
• Future pessimism: Smaller technological
opportunities combined with headwinds
• Despite its pessimism about the future, the
book chronicles a joyous cavalcade of
progress since 1870
• Join me for the book-signing, PUP booth