Robert Gordon’s sequel paper on the great stagnation

by on February 18, 2014 at 6:49 am in Economics, History, Science, Web/Tech | Permalink

You will find his NBER paper here, in which he responds to critics and outlines his core argument that U.S. growth is doomed to be slow and subpar for a long time to come.  There is no point in summarizing this already-familiar debate, so let’s cut straight to the chase:

1. I agree with a great deal of this paper, to say the least, especially when it is compared to previous mainstream opinion on these topics.  My favorite parts are his discussions of how multi-faceted were the waves of earlier progress starting in the 19th century, compared to some of the more recent and weaker tech revolutions.  That said, in some key ways this piece falls short of meeting the standards of reasoned argumentation.

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 then declares 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.

3. There is a key passage on p.26: “My forecast of 1.3 percent annual total-economy productivity growth in the future does not require any foresight beyond suggesting that the past 40 years are a more relevant benchmark of feasible productivity growth than the 80 years of before 1972.”  Fair enough, but how about looking at the last 120 years or last 120,000 years for that matter?  The overall pattern is lots of pauses, followed by eventual new bursts of progress.  That’s no proof of a future subsequent burst of progress, but so far history is not on the side of the long-term tech pessimists.  It may be on the side of the short-term tech pessimists, at least for a while.  Gordon, in 2003, wrote rather wisely: “But is it possible to be so sure which decades into the past are relevant for predictions…”

4. Gordon doesn’t know much about the literature on driverless vehicles and their potential, and yet he escalates his rhetoric to the point of giving the reader the impression that he approaches the entire question of tech progress with simple irritation: “This category of future progress is demoted to last place because it offers benefits that are so minor [compared to cars]…”

5. Advances in the biosciences are dismissed in two short paragraphs.  For sure, I am myself somewhat in tune with the pessimistic perspective here.  I think these advances were way over-promised and still may take longer than people think.  Still, Gordon doesn’t offer any argument.  His first sentence of that brief section says it all: “Future advances in medicine related to the genome have already proved to be disappointing.”  This is a simple confusion of past and future tense.

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

7. Gordon still fails to credit the originators of the growth slowdown idea, as applied to contemporary times, namely Michael Mandel and Peter Thiel.  The first sentence of his paper reads: “A controversy about the future of U.S. economic growth was ignited by my paper released in late summer 2012.”  I would add, perhaps with a bit of peevishness, that a lot of the actual debate was kicked off by my own The Great Stagnation, published in January of 2011 and which was covered and commented on extensively.  (And which by the way was dedicated to Mandel and Thiel, as well as citing them.)  And if I did not credit Gordon more aggressively at that time, it is because I was all too well aware of his 2003 essay, “Exploding Productivity Growth,” the contents of which I do not need to relate any further but if you wish read at the link.

Gordon would do well to reflect a little more deeply on how and why he has changed his mind over the last ten years and what this implies for when a bit more agnosticism would be appropriate.

Addendum: I agree with Kevin Drum.  Matt Yglesias comments too.

weareastrangemonkey February 18, 2014 at 7:22 am

“I would add, perhaps with a bit of peevishness, that a lot of the actual debate was kicked off by my own The Great Stagnation, published in January of 2011 and which was covered and commented on extensively”

I would be more than a little peeved. Gordon has copied other people’s ideas (yours, Mandel’s and Thiel’s) and then hasn’t cited them because they weren’t published in journals. I think something similar has happened to Sumner wrt NGDP targeting. It makes me peeved and I’m not the person being ripped off.

SteveT February 18, 2014 at 6:51 pm

Gordon’s not the only one. The new book “Second Machine Age” does not even mention Martin Ford’s “The Lights in the Tunnel” which was out in 2009 and explained all about automation and jobs. Brynjolfsson et Al did mention the book in their little 2011 ebook (which means they read it and pretty much copied it), but not in their new book. Seems very rude to me.

Bill February 18, 2014 at 7:51 pm

Gordon has been writing on this theme for a long time, so I would question who is borrowing from whom.

ummm February 18, 2014 at 7:23 am

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

It is common among the gloomers to dismiss the productivity gains wrought by technology. The good news is our stagnation is over. Other countries are stagnating but the USA is running victory laps. Emerging markets held so much promise in the early 2000’s an they have been the last to recover, having been knocked down a peg in 2008 and again in 2011 & 2013-present. Technological progress is moving towards miniaturization with fewer workers, compared to the over-sized public work projects of the last century. Things such as apps, payment processing, social media, biotechnology, cloud computing, victual currencies, and on-demand entertainment.

cfh February 18, 2014 at 9:06 am

Victual currencies? Like Bitecoin?

Just another MR Commentor February 18, 2014 at 9:21 am

Yes, this is without a doubt going to be one of the most important areas of growth going forward. It’s really not hyperbole to say Bitcoin is one of mankinds greatest inventions.

ummm February 18, 2014 at 10:02 am

It will rank up there pretty high. this currency will change the world if it hasn’t already

Z February 18, 2014 at 9:55 am

+1

Classic.

Rahul February 18, 2014 at 9:10 am

I’m optimistic about technology in general but I just don’t think drones or 3D printing are going to be the key revolutions. Historically the technologies which mesmerize the popular imagination (e.g. robots, biotech, AI, flying cars, teleportation) are rarely the ones that truly deliver (in proportion).

Stuff like fracking, optic fiber, shale gas, packet switched networks or horizontal oil well drilling were hardly ever the “cool” technologies media & pundits talked about but in terms of actual impact are probably far stronger.

ummm February 18, 2014 at 9:23 am

Predictions involving macro sized technologies (flying car, robots, human teleportation) seem to ave a poorer track record than progress making existing things smaller and faster. The commercial jet airplane, for example, hasn’t changed much since the 60’s whereas computers have gotten smaller and faster. Same for automobiles which are pretty much unchanged except for extra features.

Rahul February 18, 2014 at 9:29 am

Isn’t that a side-effect of the fact that Moore’s law applies to semiconductors but not, say, jet engine blades.

chuck martel February 18, 2014 at 12:33 pm

Airplanes and automobiles have changed dramatically in both design and operation because of computers. Neither would be much like what they are now without semi-conductor technology.

Benjamin Cole February 18, 2014 at 7:29 am

Well, call me an old fogey, but my mouth is just agape at recent innovations. And there are now serious R&D labs not only in North America, but Europe and Asia. And all of this innovation and R&D is spread now instantly by the web.

I can stand in a field in Thailand and send a full color photograph and text to London and Los Angeles on my smartphone, or read more on any topic than I could possibly want to, or participate in a discussion on this blog.

In the last few years shale oil become viable, totally altering the global energy outlook, meanwhile lithium batteries are improving at about a rate that should about double capacity in 10 years. Biofuels, while not strictly commercial today, may have put a ceiling on oil prices around $100 a barrel.

It is difficult to measure productivity and quality of life—Los Angeles 40 years ago was a smog pit. You could see the smog looking across the street. Today the air is 95 percent cleaner. What is that worth? It is fantastic progress, I can tell you that. It has not been captured in productivity figures.

My guess is that there are tremendous improvements to be had in health care, but we have to change the idea that one always has to see a doctor. It may be someday one will visit a machine (identity verified by eyescan), pee in a cup and and pour it in the machine, have blood extracted and analyzed, and maybe talk to someone on a video. Only rare illnesses will need doctors, or actual surgery. This will be difficult, as we think about doctors as shamans.

It we can embrace euthanasia for the elderly and terminally ill, we will be able to radically reduce health care costs and boost productivity for the whole sector. The one good idea in Obamacare is the much-maligned “death panels.” There should be death panels on steroids.

I predict much higher productivity going forward.

CBBB February 18, 2014 at 8:19 am

What is with you an euthanasia in the comments? Man, some people on this site are just one-issue weirdos constanty banging on about the same thing.

derek February 18, 2014 at 10:38 am

Progress to some always means killing off the undesirables.

I’m amazed at how many healthy and very active 80+ year olds there are.

Chris S February 18, 2014 at 5:07 pm

1. Survival bias. The weak, sickly or reckless don’t make it to 80s in large numbers.

2. Availability bias. Spry 80 year olds are out being spry and spotted. Bedridden 80 year olds are all at home under their blankets watching Matlock.

msgkings February 18, 2014 at 6:25 pm

It’s not either of those 80+ year olds we’re discussing…an 80 year old in bed at home isn’t costing Medicare that much. But an 80 year old hooked to machines for 6 months before dying when they could have just died 6 months earlier? We gotta do something about who pays for that…

Benjamin Cole February 18, 2014 at 10:51 pm

CBBB–

1. Consider the rising percentages of GDP consumed by health care.
2. Consider the demographics of the USA.
3. Consider the ever-increasing ability to keep people “alive.”

Then tell me if a frank and open discussion of euthanasia is not only desirable, but compelling….one that “libertarians” are loath to engage in now, as it is not PC….maybe Tyler Cowan will wrestle with this topic in the future, but probably not….

Keith February 18, 2014 at 10:21 pm

“There should be death panels on steroids.”
You first.

Benjamin Cole February 18, 2014 at 10:55 pm

If I am 84, terminally ill, bed-bound, and costing my family $7,000 a day…show me the opiates, and bring it on.

msgkings February 18, 2014 at 10:58 pm

To Ben Cole: exactly right.

msgkings February 18, 2014 at 10:58 pm

Except you’re not costing your family $7000/day, you’re costing the whole country.

msgkings February 18, 2014 at 10:57 pm

Dude, what’s the argument against not having all of us foot the bill to keep people hooked to machines for months and months with no hope of improvement in a hospital bed? If I’m like that someday, I’ll be glad to ‘go first’ and my health care directive says so.

If people want that for themselves or loved ones, after a certain amount of time they gotta pay for it themselves. It’s kind of common sense.

Benjamin Cole February 19, 2014 at 2:26 am

msgkings–

You are correct–today a terminally ill elderly person is kept “alive” courtesy of taxpayers. I meant that most people, if they had to foot the bill, would choose very comfortable and cheap (opiates are cheap) accelerated termination.

American “libertarians” never want to address this basic issue of euthanasia.

Don’t even get me started on polygamy, gay marriage, prostitution, gambling, racial discrimination by private businesses, sexual harassment in the workplace….

I am a libertarian. But like free speech, I concede not every libertarian result is edifying. I choose libertarianism for the freedom. It comes with warts.

What we get from George Mason is candy-coated libertarianism. GOP’ers who want to smoke pot.

And no discussions about euthanasia.

Turkey Vulture February 18, 2014 at 7:33 am

The world is very different from when I was a kid. I am reading and commenting on something with people from all over the world from my phone, which I carry around in my pocket.

john personna February 18, 2014 at 10:54 am

Absolutely, and I think the economists are looking in the wrong places. I mean, what is this “driverless car” nonsense when:

The filing also reveals that King’s games [Candy Crush] were installed on mobile devices more than 76m times in December 2013 alone, and played around 1bn times a day that month.

Do economists have a productivity myopia, at a time when consumption is increasingly disconnected? I mean, Flappy Bird was written in a few days and captured the world … in a classic example of random seeded cumulative advantage.

(I would also claim that such games are consumers of cognitive surplus, which has a bright and a dark side to it.)

Turkeys Vulture February 18, 2014 at 4:09 pm

Yeah I can’t say it’s all positive what the kids do with their phones today. But it sure has changed how we live. I am 29. I spend most of my waking hours using stuff that didnt exist, or only existed for a tiny minority, when I was little.

Max Factor February 18, 2014 at 5:15 pm

Do you prefer the current world or the world when you were little? I prefer the world from when I was little.

john personna February 18, 2014 at 5:17 pm

When I was little we didn’t know we shouldn’t eat too much lake trout, that there was mercury even there.

msgkings February 18, 2014 at 6:26 pm

Anyone who doesn’t wish they could just be 5 years old again isn’t really thinking about it. Talk about heaven…

Turkey Vulture February 18, 2014 at 9:44 pm

I think I prefer the current world. Increased general prosperity and productivity mean I can work a lot less and still live a good life. Sure, I waste my time on the internet and playing with my phone sometimes, and have devastated my attention span, but that’s on me.

And it’s neat to have so much access to so much knowledge. I remember when I was maybe 10 my dad was going to take us to the library so we could use the internet, which we had never used before. I spent all the time leading up to us getting there thinking of all the stuff I wanted to look up (though I didn’t write it down, never have been much of a note-taker). Whenever I want to sit back and reflect on it, I can feel something like that same simple joy.

So really I guess I’d prefer to be little again, but just in this world.

We couldn’t eat trout out of one of the lakes near me growing up. Looks like the recommendations are even more severe now: no fish at all for pregnant women or children, only one meal a month of trout, and four a month of any other fish.

Age Of Doubt February 18, 2014 at 7:55 am

“one’s own failure to imagine shouldn’t imply a very firm conclusion about impossibilities”

Brilliantly worded. Economists should be careful when they negatively prognosticate. We know that Fed pessimism or optimism can move billions of dollars. If enough influential economists say it’s pointless to invest in innovation, because no one is innovating, then that’s going to be a self-fulfilling prophecy.

Ray Lopez February 18, 2014 at 8:00 am

Do economists have that much clout that CEOs would pay attention to their pessimism? If enough of them said innovation was over, the CEOs would believe it? Perhaps but doubtful.

As for point #7 – the credit for “Great Stagnation” – I think it belongs to some science reporters well over a decade ago, who I recall in the late 1990s said this about science (that making breakthroughs was tougher than ever). Whether this subset of the “Great Stagnation” thesis deserves mention for priority purposes I don’t know.

ummm February 18, 2014 at 8:48 am

Economists tend to be more optimistic and accurate than pseudo economists like Talleb and Schiff

john personna February 18, 2014 at 10:56 am

I think readers of Taleb fell in two groups. The foolish, and non-economists, said “no way!” The smart and better economists only say “nothing new here.”

The smart and better are not making predictions.

Benjamin Cole February 18, 2014 at 8:20 am

BTW, we saw good productivity in the latest reported quarter.
From BLS 2/6/14
Unit labor costs in nonfarm businesses decreased 1.6 percent in the
fourth quarter of 2013, as the 3.2 percent increase in productivity
was larger than a 1.5 percent increase in hourly compensation. Unit
labor costs fell 1.3 percent over the last four quarters. (See table
A.)

–30–

Okay, unit labor costs are falling, commodities are dead, and there is global competition in most markets.

And the Fed is worried about inflation? How?

ummm February 18, 2014 at 8:49 am

I think the fed is still worried about deflation but for the usual suspects hyperinflation is always around the corner.

rayward February 18, 2014 at 8:53 am

The one constant we can depend on is change. Of course an economy skewed toward finance, especially one with a preference for speculation over investment in plant and equipment, is likely to experience low rates of return on capital and low rates of economic growth. But such an economy contains the seeds for growth; all that’s needed is a trigger. The question is how much pain the trigger will cause in the short run. And that depends on the trigger. Excessive levels of inequality and the financialization of the economy that correlates with it are self-correcting, absent intervention. That’s the lesson of history. Unfortunately, the correction causes so much pain that intervention is the likely scenario – until politics determines that it isn’t. The alternative to self-correction was suggested years ago by an economist now dead. It’s possible that the big change on the horizon, the retirement of all those baby boomers, could provide the political will to adopt measures that will provide the same relief as self-correction but with much less pain, or pain less widely shared. That was also the suggestion of that dead economist. Gordon is wrong to be so pessimistic about future economic growth. Change is coming. The question is how painful will it be.

Brian Donohue February 18, 2014 at 9:09 am

“so far history is not on the side of the long-term tech pessimists. It may be on the side of the short-term tech pessimists, at least for a while.”

History is always on the side of short-term pessimists. Perhaps the fruits of this anxiety is why long-term pessimists are always wrong.

msgkings February 18, 2014 at 6:28 pm

Nicely put.

Petroleum Engineering student at NTNU February 18, 2014 at 9:18 am

I am wondering if Tyler Cowen was much influenced by Vaclav Smil, Bill Gates favorite author, when he really started to think about the great stagnation. Smil have mentioned several times in his books, especially in “Creating the Twentieth Century” and “Transforming the Twentieth Century” how the world today is really just a reflection of many innovations from the period 1876 to 1914. Look at energy for instance, where are our new prime movers?

Gordon should have given more credit due to Tyler and Thiel, but too any serious student of technical history, AKA Smil,the stagnation therory is hardly novel, just an observable fact. Too me Tyler seems to be the only economist really,to appreciate a really obvious condition, which many engineers and scientist take more as a fact of life, than a fitting theme for a book. Come on Tyler, give an answer, did Smil inspire you for your great stagnation?

Tyler Cowen February 18, 2014 at 9:31 am

No, I read Smil afterwards but am a big fan.

Just another MR Commentor February 18, 2014 at 9:58 am

It’s dissapointing that Tyler Cowen is a fan of Smil because Smil seens to have gone senile in his old age and has been writing a lot of “environmental” trash recently such as

http://www.amazon.ca/Harvesting-Biosphere-What-Taken-Nature/dp/026201856X/ref=sr_1_1?ie=UTF8&qid=1392735244&sr=8-1&keywords=Smil

He fully buys into the global warming hoax and simply cannot understand that the select subset of humans who matter are on the verge of almost completely disconnecting from any Earthly needs

Presto February 18, 2014 at 10:38 am

Thanks for brightening my day :)

ladderff February 18, 2014 at 10:53 am

Care to elaborate on your last clause?

Just another MR Commentor February 18, 2014 at 11:08 am

Over the next 25 years we will see a complete collapse in the living standards of the majority of the population down to more appropriate levels given their actual usefulness. This will free up a lot of resources which were “predicted” to be consumed. New technologies such as lab grown meats will reduce reliance on agriculture. Further into the future we can look forward to personality uploads and virtual worlds making the current world largely irrelevant.

Nick Bostrom is my avatar February 18, 2014 at 12:23 pm

We’re already there mate.

Max Factor February 18, 2014 at 1:44 pm

The virtual world is beginning to sound like the best alternative to TC’s beantopias and serfdom.

Who knows, with enough legalized marijuana, 24-7 NFL football, low cost trailers in the midwest, free wifi, virtual worlds and 3D food maybe it will all work out well in the end.

Chris S February 18, 2014 at 5:16 pm

@Max Throw in telepresence porn and you’re there.

Bill February 18, 2014 at 7:52 pm

Gordon has been writing on this for a long time, so I do not understand the claim that he is borrowing from Tyler.

Matt February 18, 2014 at 9:34 am

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

Gordon and Brynjolfsson were part of a panel discussion at the last ASSA meeting. Gordon challenged Brynjolfsson to think about every person he interacted with between departing his home and arriving at the conference, and to say how many of them could be replaced by machines. Clearly, Gordon thought the answer was “very few.” But Brynjolfsson took up Gordon’s challenge and began listing interactions that had already been replaced: he checked into the airport remotely with his smartphone, booked a cab with uber, went to the automated checkout line at the airport CVS, made a reservation for dinner with OpenTable, etc., etc. He had more, but I that’s all I remember.

collin February 18, 2014 at 10:05 am

I am with Kevin Drum and I believe we way over simplify history of innovation in the later 19th century. Take for instance that by ~1880 the basics of indoor plumbing (Krugman’s favorite innovation) was fairly well understood and yet even by 1960 there were still ~10% of Americans that did not have indoor plumbing. That means the biggest innovation can take 80 years for global penetration and compare that to say 45 years of the internet or 35 years of solar panels or say 30 years of cell phone technology.

It takes a much longer for innovations to take shape across the globe than we give credit for.

Chris S February 18, 2014 at 5:17 pm

I have no idea why it took until 1880 to make a toilet with a trap.

Joe Smith February 18, 2014 at 5:48 pm

Because you need a large number of houses hooked up to a supply of water and a sewer system before there is a sufficient market to justify invention and manufacture.

I think indoor plumbing as we know it was really a follow on development from the drop in the price of steel after 1860.

Turkey Vulture February 18, 2014 at 9:49 pm

Yep. There’s innovation, and then there’s that innovation mattering for a large swath of humanity. There can be a long time between the two.

Sir Barken Hyena February 18, 2014 at 10:18 am

The innovations are delivering growth in forms that our 19th Century economics can’t see.

msgkings February 18, 2014 at 6:36 pm

Oooh, nice one. Great point.

bryan willman February 18, 2014 at 10:38 am

bingo.

so a very great deal of output (enough to saturate any one person) is distributed for “free” with all of the drudge work done by machines. and how does this show in productivity numbers?

some number of great web content creators work for free – how does that show in productivity numbers?

and again – do not think “use a robot to automatically do the same thing” instead think “use computers and networks to do a different thing”
the REAL leap will be when be you do not check in for your flight via cell phone but instead do the whole damn trip by teleconference.

too many people are thinking about robot riveters when the next wave will be carbon fiber parts that grow themselves in a garden.

Axa February 18, 2014 at 11:05 am

So, a milking robot is not a walking one that milks cows using its robotic hands to mimic the movements made by humans in the last centuries?

bryan willman February 18, 2014 at 3:58 pm

any actual milking machine i’ve seen was a specific machine, and they did not walk about or do anything other suck milk from the udders of cows.

i suppose you could have a humanoid robot farm hand to guide the cows into the stalls and do the milking…

but I also suppose you could breed a plant that emitted “cow’s milk” into a pipe, and be done milking parlors, cows, and pasteurs…

Steven Kopits February 18, 2014 at 10:55 am

I consider the oil angle on all this in my presentation at Columbia University Center on Global Energy Policy, with my talk entitled “Oil and the Economy: A Supply-Constrained View”

Basic overview of oil supply developments: min 11-17. Why peak oil still matters.

Oil and GDP: from 53″17s to 54″10s. This a rushed presentation, but it touches some of the key points.

The outlook for oil company strategy: 58″55s-1’02”. That’s the shape of the industry to come. Although this was part of the Q&A, in retrospect I considered this one of the more interesting parts of the talk.

http://energypolicy.columbia.edu/events-calendar/global-oil-market-forecasting-main-approaches-key-drivers

john personna February 18, 2014 at 11:03 am

As I say above, I think MR has become too much “driverless car” and not enough “Flappy Bird.” The action is elsewhere.

prior_approval February 18, 2014 at 11:22 am

Like the latest Mercatus Center research? This blog is not an end to itself, after all.

Though it isn’t exactly a vanity web site – Prof. Cowen already has one, using the best possible SEO conventions.

john personna February 18, 2014 at 11:36 am

(1) maybe I need a link to this research, but (2) sub-optimal answer.

The best would have been a defense that driverless cars say more and will shape the future economy more than “people disappearing into low power devices.”

Joe Smith February 18, 2014 at 11:05 am

Gordon’s 2012 paper was a piece of crap.

Joe Smith February 18, 2014 at 11:10 am

I think you underestimate the potential for bio-sciences. Cures for common diseases (addiction, depression, diabetes, heart disease, cancer, Alzheimers) may not increase GDP very much but they would sure produce huge amounts of consumer surplus.

The real constraint on growth seems to be the cost of energy. A break through in that bottle neck would change the game completely.

john personna February 18, 2014 at 11:16 am

Agree on GDP. I did a chemistry degree and a computer science career. I think starting now I’d love the microbiome stuff. I think it has huge scientific potential (and is a roadblock to moon are mars colonies!). Just the same though, we are looking for consumer demand? How much more yogurt can I buy?

On energy, we certainly seem to be gravitating towards fascination with low-power devices. Flappy Bird is not motocross, and makes lower total system demands, generate less total GDP.

Keith February 18, 2014 at 10:27 pm

I started my career in biosciences but left because the field is stagnant. Even the human genome has had a limited impact on human health. I am very disappointed in the field, and I am embarrassed at how much taxpayer money scientists like me spent for very little payoff. Maybe the payoff is just around the corner, but I doubt it.

derek February 18, 2014 at 11:24 am

The great stagnation is more about social and institutional dysfunction than anything else. A few things in the past while give us a hint.

Volkswagen plant turned down the UAW unionization push, with the employer encouraging unionization. Good heavens, these workers can read. They know that a hidebound bureaucratized workplace run by a bunch of stupid union flacks means unemployment. But 30’s era legislation enforces an unproductive union management structure. A more flexible arrangement that is non confrontational and geared to solving problems rather than political grandstanding is eminently possible, easy even with means of communication, but the US Federal Government stands in the way.

Bank of America finds out through a study that it is more ‘productive’ to let people have coffee breaks together. Bank of America would not exist in a free market, they would have been out of business, and their massive cross market operation dream would have disappeared without taxpayer funds and a handy printing press backed Fed. Smaller more manageable businesses would be more nimble and capable of managing people.

Previous to Obama and the general euphoria and disconnect from reality that came over the political landscape, there was serious talk about how impossible it was to maintain large complicated nation states due to technological advances empowering smaller groups. The only way to run, for example a nation wide health care system is to stop innovation. The legislation did just that, taxing medical device manufacturers, and trying to set up a gate keeper to prevent new ideas. The FDA goes out of it’s way to dampen innovation. The US Federal Government infrastructure spending, instead of using it’s enormous power and resources to connect people set up an expensive and intrusive system to listen to everyone, putting backdoors into encryption mechanisms and communication devices. It’s all about centralizing power, which will create stagnation, by design.

We’ve been here before.

Just another MR Commentor February 18, 2014 at 11:40 am

Some interesting comments here but I find it very amazing and very very very sad that there are people out there who still pretend that top banks were “bailed out”. In a single, poorly throughout sentence you simply dismiss a company led by some of the most brilliant human beings to ever walk the planet.

TMC February 18, 2014 at 11:57 am

Agreed. Bank of America would just respond to different incentives.

ummm February 18, 2014 at 12:06 pm

Bailouts for too big to fail and free market capitalism are compatible

Joe Smith February 18, 2014 at 1:59 pm

“The great stagnation is more about social and institutional dysfunction than anything else.”

No. Limited natural resources – in particular oil – is playing a role. The twentieth century had huge productivity gains as we exploited the one time advances of the nineteenth century; particularly: cheap steel, scientific chemistry, internal combustion engines and electricity. We are not likely to ever again see a period of such rapid technological advance.

Just another MR Commentor February 18, 2014 at 2:07 pm

Nonsense, Bitcoin and other virtual currencies themselves are going to be one of the greatest advances of mankind finally destroying the traditional nation-state and restrictive government. With the government completely out of the way we will ready to embark on a technological and scientific revolution that will put the past 1000 years to shame. People like you lack imagination and are not worth and like 90% of our current population probably will not be invited to participate in this new future.

Joe Smith February 18, 2014 at 2:42 pm

That’s just a Libertarian wet dream. If Libertarians could create a parallel society they would have done so by now. Even in your fantasy – what happens to the 90%, do they just somehow magically disappear off the face of the earth?

Bitcoin is a Ponzi scheme and is going to end badly.

CBBB February 18, 2014 at 2:46 pm

what happens to the 90%, do they just somehow magically disappear off the face of the earth?

They would be lucky if they could. Unfortunately for them it will be a painful process of adjustment, to say the least, as humanity finally breaks free of the mediocre majority. But virtual currencies and virtual worlds are absolutely the future.

Joe Smith February 18, 2014 at 4:22 pm

“They would be lucky if they could. ”

Do you understand that you are insane?

Max Factor February 18, 2014 at 5:16 pm

“Do you understand that you are insane?”

LOL

Sir Barken Hyena February 18, 2014 at 6:17 pm

Once, just once, I would like those who say Bitcoin is a Ponzi scheme to stoop to providing at least some rationale for this silly belief.

You just disappointed me again, but it’s not too late!

Joe Smith February 18, 2014 at 11:30 am

Matt Yglesias falls into the trap of assuming that a computer that is twice as powerful is twice as useful. I’ve been doing some computer programming since the early 1970s. My home computer (I5 chip 8 gigs of Ram two terabytes of disk) is about ten thousand times as powerful at approximately 1/5,000 the cost of the IBM 370 I started on. My home computer is not 50 Million times as useful as that IBM. Since we always pick the most useful applications first (low hanging fruit) it is inevitable that the usefulness of computers actually rises sub-linearly with increasing power – perhaps even just logarithmically. or slower.

mb February 18, 2014 at 11:54 am

Your point is a good one, usefulness of computers increases far slower than raw computing power. However, the functional dependence is discontinuous. Application suddenly become possible and widespread after a certain threshold in technology is passed. Speech recognition in cars/cell phones is a good example.

Joe Smith February 18, 2014 at 12:16 pm

“However, the functional dependence is discontinuous.”

Sure, for individual functions there can be a threshold and discontinuity but when you aggregate all of the different uses of computers the overall “usefulness” is not going to show threshold effects very often. The fact that it takes years for a new technology to become widespread further smooths out the effects.

mb February 18, 2014 at 12:36 pm

I am not so sure — I think threshold effects are very common at every scale. For example, the usage of smart phones has exploded in the last few years. A lot of that had to do with advances in miniaturization and communications.

Of course, I am not implying that these functions are actually discontinuous, rather that the gradients are very large at certain technological points.

mulp February 18, 2014 at 1:46 pm

Given you must be paying a lot more per month for your mobile communication, perhaps a $1 per day for newspapers and magazines is now $3-5 per day, are your mobile communication benefits three times greater. Do you get three times the understanding, comprehension, insight today compared to 1990?

After all, smart phones are only about communication, and speed costs. Has making decisions faster by smart phone resulted in roads and bridges being built far cheaper? Has GPS and other auto electronics made it possible to use the same $1B in investment in highways handle three times as much traffic before the $1B is used up – depreciation?

Just another MR Commentor February 18, 2014 at 1:56 pm

Has making decisions faster by smart phone resulted in roads and bridges being built far cheaper?

The need for roads and bridges is only due to the failure of government. If resources were allocated properly all productive people could afford to hire or buy helicopters for their commutes. It is only because government insists of extracting wealth and giving it to the unproductive that travel by road continues to be necessary for many people.

Chris S February 18, 2014 at 5:24 pm

1. “twice as powerful” shouldn’t get anyone out of bed in technology. Processing power is on a log(10) scale. One or two orders of magnitude are required for any interesting changes.

2. Your home computer is vastly, uncomparably more useful than that gigantic IBM 370 because it is connected to a giant, global network that most everyone participates in. Its just a node in a distributed computer that is ten thousand orders of magnitude more useful.

Sir Barken Hyena February 18, 2014 at 6:20 pm

“My home computer is not 50 Million times as useful as that IBM.”

Indeed, it’s worth far more useful than even that, since that IBM was a computing monad and your new computer is part of a vast and expanding network that no amount of computing power could duplicate.

Steve Sailer February 18, 2014 at 8:15 pm

“Gordon still fails to credit the originators of the growth slowdown idea”

The “Dude, Where’s My Flying Car?” example has been around for longer than the movie. I put it into a presentation I made for an executive around 1995, and it didn’t seem terribly novel or insightful back then.

Behemot February 19, 2014 at 4:11 am

1994:

Behemot buys a phone card for $10 dollars which is supposed to last for 400 minutes but expires after 3 crappy quality twenty minute conversations. He goes and buys The Economist, Financial Times and the weekly from the “old country” at the newsagent ($10). Behemot buys a CD of his favourite musician ($10). He buys US News Best XXX Schools ($10). He Fedexes his graduate school application ($10, at least). Behemot uses his travel agent to buy a plane ticket to Behemotland (travel agent takes $50 dollar cut).

2014:

Behemot uses Skype and can actually see his loved ones ($0). He reads The Economist and 50 other newspapers/blogs online ($0). Behemot listens to his favourite musician on Youtube ($0). He does his graduate school research online ($0). He submits his application online ($0). Behemot buys a plane ticket to Behemotland online (travel agent is now a landscaping professional: his cut is $0).

If this isn’t progress, I don’t know what is.

Gregor Macdonald February 19, 2014 at 1:29 pm

I can’t find anything in Gordon’s view that is not derivative of already formulated projections from the ecological economics discipline, or even folks like Peter Thiel. We’ve had the data for some time on the relationship between natural resource inputs and economic output, and also the slower impact rate of technological advances in the 2H of the 20thC vs the 1H of the 20thC, and the 2H of the 19C. I fail to see why Gordon’s voice has become the touchstone view for slow growth when the case for slow growth is better made by others, and has been made for some time. Gordon seems late to the case. Though, I suppose if you cloistered in mainstream economics it seems fresh and original.

stan February 19, 2014 at 4:50 pm

Experts are no better at predicting the future than dart-throwing chimps. — Philip Tetlock

http://www.cato-unbound.org/2011/07/11/dan-gardner-philip-tetlock/overcoming-our-aversion-acknowledging-our-ignorance

nike air max 95 March 13, 2014 at 4:40 am

BEIJING, Feb. 21 (Xinhua) — A Beijing-based Tibetology scholar has criticized the Dalai Lama’s Friday meeting with U.S. President Barack Obama in the White House, saying it was another “anti-China farce.” “Once again, the Dalai Lama slipped into the White House Map Room for a so-called ‘unofficial meeting’ with Obama. This was another farce against China,” said Lian Xiangmin, a researcher with the China Tibetology Research Center, in a signed article.

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