Brink Lindsey predicts a slowdown of economic growth, even if we innovate more

Brink’s new paper is here, here is one excerpt:

Consider the four constituent elements of economic growth tracked by conventional growth accounting: (1) growth in labor participation, or annual hours worked per capita; (2) growth in labor quality, or the skill level of the workforce; (3) growth in capital deepening, or the amount of physical capital invested per worker; and (4) growth in so-called total factor productivity, or output per unit of quality-adjusted labor and capital. Over the course of the 20th century, these various components fluctuated in their contributions to overall growth. The fluctuations, however, tended to offset each other, so that weakness in one element was compensated for by strength in another. In the 21st century, this pattern of offsetting fluctuations has come to a halt as all growth components have fallen off simultaneously.

The simultaneous weakening of all the components of economic growth does not mean that slow growth is inevitable from here on out. The trends for one or more of them could reverse direction tomorrow. Nevertheless, it is difficult to resist the conclusion that the conditions for growth are less favorable than they used to be. In other words, growth is getting harder.

Brink offers further remarks here.  On October 29, at noon, I’ll be doing a Cato Forum with Brink on this paper.

Comments

I agree that growth is going to slow down at some point in the future. After all, no matter what we do the earth is eventually going to get sucked into the black hole at the center of our galaxy. I can't see this as being a good thing for growth, no matter how many windows get broken in the process.

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'growth in labor participation, or annual hours worked per capita'

This is, to use a German term, 'suspekt' - efficiency is not considered at all.

It's #4...........or efficiency may be something completely different to "output per unit of quality-adjusted labor and capital".

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A German term??

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I suggest that "economic growth tracked by conventional growth accounting" might be an obsolete concept if people increasingly measure their utility by, say, happiness. Economic growth may need to be redefined. There's more to life than money.

Very crucial consideration. Just consider how much of GDP is not used efficiently to increase life satisfaction.

Imagine, in contrast, a potential technology that would allow you to feel instant bliss without addiction or tolerance-building. As intense as the worst pain you've ever felt, except that it feels exquisite rather than excruciating. Imagine it can be switched on and off like an mp3 player. At the financial cost of an mp3 player.

Sure, it's science fiction now, but there's nothing obviously scientifically wrong with the idea. Now compare it to what people are currently doing with their time and resources. If our goal is to maximize life satisfaction, there is considerable potential for growth. You can even combine it with a large population, since you no longer need much physical stuff to have an excellent quality of life.

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Growth is a concern because policy-makers have leveraged productivity to the hilt. Future tax bases will not support these obligations.

Increased immigration is bound to impact factors (2) and (3) negatively, so no surprise here. I would think an aging population will drag down all four measures as well.

Somewhat related, my observation of younger workers is that they have no intention of putting in extraordinary amounts of time, and no amount of money you can offer them will change that. Life is too short to spend most of it at work, much less when a substantial percentage of that time is just to fund the government's transfer payments.

"Growth is a concern because policy-makers have leveraged productivity to the hilt."

Extremely well put.

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Younger workers will put in the hours if the work is meaningful or intrinsicly interesting. Unfortunately, most jobs today are neither interesting (audit and compliance - yay!) nor meaningful (e.g. high frequency trading or squeezing more ads into Twitter feeds). That's not to say there aren't interesting jobs out there - but they are rare. I know very few people who enjoy their jobs.

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I'll be offering an alternative take on this issue at the WW School at Princeton next week, with a presentation entitled "Oil and Economic Growth: A Supply-Constrained View".

Economists are welcome.

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Innovation can deal with at least three of these - 4 total factor productivity obviously, but 1 and 2 as well with AI.

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I assume that is national rather than world growth.

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Brink is making a logical error of comparing the last 13 years to the last 100 years, and saying they are equal and I'm afraid TC is just sticking to his guns since his book was a best seller. Sad. Reminds of the US Patent Office commissioner who supposedly said 100+ years ago, "everything that can be invented has been invented". Well then came modern physics. The Great Stagnation is a result of the US not fostering innovation but instead making rent seeking a preferred activity. There's money being a gatekeeper, like a finance middleman, or doctor, or lawyer (dividing up the pie, keeping granny alive, both of which don't really add to GDP), but no real money in science, as anybody who has worked in science knows.

How can you lump doctors with finance douches and lawyers? The doctor improves health so people can be more productive, consume and contribute to GDP. Finance douches, accountants and lawyers simply carve pies.

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I thought Brink got kicked out of Cato? They took him back?

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