Why There’s a Tech Slowdown

There’s an article at the MIT Technology Review, yet another one spurred by Robert J. Gordon’s book, The Rise and Fall of American Growth, on the stalling growth in American productivity:

Growth since 1970? “Simultaneously dazzling and disappointing.” Think the PC and the Internet are important? Compare them with the dramatic decline in infant mortality, or the effect that indoor plumbing had on living conditions. And the explosion of inventions and resulting economic progress that happened during the special century are unlikely to be seen again, Gordon argues in a new book, The Rise and Fall of American Growth. Life at the beginning of the 100-year period was characterized by “household drudgery, darkness, isolation, and early death,” he writes. By 1970, American lives had totally changed. “The economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could happen only once,” he writes.

The book attempts to directly refute the views of those Gordon calls “techno optimists,” who think we’re in the midst of great digital innovations that will redefine our economy and sharply improve the way we live. Nonsense, he says. Just look at the economic data; there is no evidence that such a transformation is occurring.

Let me suggest in bullet form a few operating thoughts for consideration:

• We’ve picked the low-hanging fruit.
• There have been very few basic technological discoveries since 1940. Practically everything has been an elaboration on existing technology. That is very unlike the period 1870-1940.
• Improvements in productivity don’t come out of nowhere. They’re the result of investment.
• Investment and consumption are not identical.
• Investment comes in two forms: business investment and government investment. There have been shortfalls in both for at least 15 years.
• World War II resulted in an enormous amount of investment in technological development.
• So did the computer revolution.
• There is no reason to believe that technological development proceeds linearly with respect to investment. Twice as much investment doesn’t necessarily produce twice as much development. It may take ten times as much investment to produce the next major technological breakthroughs.

I’d also point out that the federal government’s track record with mass engineering projects, e.g. the space program, is pretty good in terms of being an investment rather than consumption. Dream no small dreams.