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The Princeton Economic History of the Western World #70
The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War
How America's high standard of living came to be and why future growth is under threat
In the century after the Civil War, an economic revolution improved the American standard of living in ways previously unimaginable. Electric lighting, indoor plumbing, motor vehicles, air travel, and television transformed households and workplaces. But has that era of unprecedented growth come to an end? Weaving together a vivid narrative, historical anecdotes, and economic analysis, The Rise and Fall of American Growth challenges the view that economic growth will continue unabated, and demonstrates that the life-altering scale of innovations between 1870 and 1970 cannot be repeated. Gordon contends that the nation's productivity growth will be further held back by the headwinds of rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government, and that we must find new solutions. A critical voice in the most pressing debates of our time, The Rise and Fall of American Growth is at once a tribute to a century of radical change and a harbinger of tougher times to come.
In the century after the Civil War, an economic revolution improved the American standard of living in ways previously unimaginable. Electric lighting, indoor plumbing, motor vehicles, air travel, and television transformed households and workplaces. But has that era of unprecedented growth come to an end? Weaving together a vivid narrative, historical anecdotes, and economic analysis, The Rise and Fall of American Growth challenges the view that economic growth will continue unabated, and demonstrates that the life-altering scale of innovations between 1870 and 1970 cannot be repeated. Gordon contends that the nation's productivity growth will be further held back by the headwinds of rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government, and that we must find new solutions. A critical voice in the most pressing debates of our time, The Rise and Fall of American Growth is at once a tribute to a century of radical change and a harbinger of tougher times to come.
784 pages, Hardcover
First published January 26, 2016
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June 28, 2017
I was a bit worried in starting this that it might prove boring given this book is the size of a fat brick and has a title that hints at content so potentially boring that it could put a person hopped up on boatload of amphetamines running around the house worried about the murderer at their doorstep to sleep.
But nope. I thought this was totally excellent. A great and informative read, well-crafted, beautifully argued. The exploration of history, documentation of technological and economic evolution and analysis was topnotch. Most of the book is documentation of technology and connection to economic growth/standard of living/productivity in the US from 1870 to current times. Told in an accessible historical narrative fashion.
I'll reduce Gordon's argument to the bare-bones but this does no justice to his analysis: basically we have nailed a lot of the low-hanging technological fruit and are reaching a point of diminishing returns - ie we are investing higher and higher rates into research and are getting smaller and smaller returns on this investment. You could say he is a bit of a techno-pessimist. I don't 100% agree with it but I think there is a lot of substance there, the counter is that we are pretty early in the digital revolution and it is hard to know how much it will potentially increase productivity. I find myself trending towards Gordon's position but I can't really say, only time will tell. Betting against innovation is usually a losing bet, at least in the last 200 years, but the transformational technologies like electricity, combustion engine, things like that can only be discovered once. And once they are discovered you can refine them and increase efficiencies but after a certain amount of time you can only improve/refine existing technologies so much. Hence the question is how many more paradigm-shifting technological innovations are out there on the impact-level of electricity? and another question is how much resource investment will it take to unlock them?
The end part of the book was very good. It showcased Gordon's analysis of contemporary US situation and policy ideas to help improve productivity and standard of living, or at least temper the headwinds our society faces. I align with most of his policy ideas, they strike me as sensible and would likely be tools that would help do damage control. I was very happy that he hit hard on the subject of inequality and how this threatens social fabric and long-term strength of our economy. Not much talk on environmental crisis although it is mentioned. Recognized as a potential huge drain, and instead of pouring resources into building things up we will be pouring resources into containing this problem and damage we are causing. I've said it before but I think if you break the environment, at a large enough scale, you break economies and stoke instability. Maybe that's too simple but that's how I see it.
In the end I jibe with a lot of what he has to say and I share a large part of his pessimism in regards to long-term economic outlook. We are facing huge crises but I think we are going to have our hands tied in terms of tackling the problems given that we are in very bad fiscal positions and totally overleveraged at federal, (many, not all) state, city levels coupled with individual debt. Not a good recipe. We would need a lot of productivity increases to be able to grow our way out of these fiscal problems and I do not think this will happen and even if it could be done it would likely prove even more devastating for the environment (which would manifest in its own varying economic costs). Gordon considers the strong economic growth rate in the period of 45-72 an aberration, I'm right there with him. So I think we are locked into a bit of a tricky situation. Plus our government is not thinking long-term, avoiding all hard decisions, and shunning most of the policies (many suggested by Gordon) that I think would help put us in a better position to contain damage and improve the situation.
Anyways. A+ book. Regardless of whether you agree with Gordon's conclusions it is worth the read. He makes a strong argument and he is well-grounded in the research and has impressive depth and breadth in knowledge of economy and history. Time will tell if his predictions prove ballpark correct.
I'd like to read the work of Gordon's Northwestern econ colleague Joel Mokyr. He is more of a techno-optimist and his position runs counter to Gordon's assessments. But I think reading Mokyr will give me a better sense of the opposing side's argument even if I'm not really on board (who knows maybe I will change my thinking!).
But nope. I thought this was totally excellent. A great and informative read, well-crafted, beautifully argued. The exploration of history, documentation of technological and economic evolution and analysis was topnotch. Most of the book is documentation of technology and connection to economic growth/standard of living/productivity in the US from 1870 to current times. Told in an accessible historical narrative fashion.
I'll reduce Gordon's argument to the bare-bones but this does no justice to his analysis: basically we have nailed a lot of the low-hanging technological fruit and are reaching a point of diminishing returns - ie we are investing higher and higher rates into research and are getting smaller and smaller returns on this investment. You could say he is a bit of a techno-pessimist. I don't 100% agree with it but I think there is a lot of substance there, the counter is that we are pretty early in the digital revolution and it is hard to know how much it will potentially increase productivity. I find myself trending towards Gordon's position but I can't really say, only time will tell. Betting against innovation is usually a losing bet, at least in the last 200 years, but the transformational technologies like electricity, combustion engine, things like that can only be discovered once. And once they are discovered you can refine them and increase efficiencies but after a certain amount of time you can only improve/refine existing technologies so much. Hence the question is how many more paradigm-shifting technological innovations are out there on the impact-level of electricity? and another question is how much resource investment will it take to unlock them?
The end part of the book was very good. It showcased Gordon's analysis of contemporary US situation and policy ideas to help improve productivity and standard of living, or at least temper the headwinds our society faces. I align with most of his policy ideas, they strike me as sensible and would likely be tools that would help do damage control. I was very happy that he hit hard on the subject of inequality and how this threatens social fabric and long-term strength of our economy. Not much talk on environmental crisis although it is mentioned. Recognized as a potential huge drain, and instead of pouring resources into building things up we will be pouring resources into containing this problem and damage we are causing. I've said it before but I think if you break the environment, at a large enough scale, you break economies and stoke instability. Maybe that's too simple but that's how I see it.
In the end I jibe with a lot of what he has to say and I share a large part of his pessimism in regards to long-term economic outlook. We are facing huge crises but I think we are going to have our hands tied in terms of tackling the problems given that we are in very bad fiscal positions and totally overleveraged at federal, (many, not all) state, city levels coupled with individual debt. Not a good recipe. We would need a lot of productivity increases to be able to grow our way out of these fiscal problems and I do not think this will happen and even if it could be done it would likely prove even more devastating for the environment (which would manifest in its own varying economic costs). Gordon considers the strong economic growth rate in the period of 45-72 an aberration, I'm right there with him. So I think we are locked into a bit of a tricky situation. Plus our government is not thinking long-term, avoiding all hard decisions, and shunning most of the policies (many suggested by Gordon) that I think would help put us in a better position to contain damage and improve the situation.
Anyways. A+ book. Regardless of whether you agree with Gordon's conclusions it is worth the read. He makes a strong argument and he is well-grounded in the research and has impressive depth and breadth in knowledge of economy and history. Time will tell if his predictions prove ballpark correct.
I'd like to read the work of Gordon's Northwestern econ colleague Joel Mokyr. He is more of a techno-optimist and his position runs counter to Gordon's assessments. But I think reading Mokyr will give me a better sense of the opposing side's argument even if I'm not really on board (who knows maybe I will change my thinking!).
October 6, 2017
The most remarkable thing about this look at economic development in the United States since 1870 are two things: the size of the book, and the fact that it is readable. While size and subject are intimidating, the writing style is friendly and accessible, even to non-economists, and one comes to see the advantages of having all this information in one book rather than in several. Published in 2016 by Princeton University Press, this work must be a source of pride among those who worked on it. It is has real weight.
Since I concentrated my efforts on conclusions rather than proofs, I only skimmed this Hummer-of-a-tome, but I found that each chapter had something useful, surprising, and remarkable about it. What Gordon is saying can have startling implications for how we look at the next forty years economically-speaking. His forecasts will matter to how we construct public policy, e.g., growth will continue to decline, wealth inequalities will continue to increase. Even if he is only showing us the outcomes of what we have wrought intentionally or not, he helps us to envision what comes next.
As his title foretells, Gordon tries to explain the extraordinary rise in productivity from 1928-1950 and its decline from the 1950-2014 by saying that big innovations along with education and WWII spurred a growth we haven’t seen since, and that even the technological revolution in the early 1990s did not produce as large a change in productivity as earlier innovations like railroads, cars, immigration, financial instruments, women in the marketplace, etc.
What I like about Gordon’s writing is that he proposes we use basic economic theory to explain certain observable phenomenon, like the upsurge in labor productivity in the 1920-1950 interval.
Gordon's explanation for the American Great Leap Forward in economic terms was the Great Depression and World War II. The New Deal was the result of the Great Depression, raising real wages and a shrinkage in weekly work hours. Substitution from labor to capital as a result of real wage increase is evident in the data on private equipment investment. Additionally, the reorganization of business after the drop in profits and output increased efficiencies not realized to that time. The effects of a war economy on top of these changes is clear.
What really struck me about Gordon’s charts and graphs is how closely productivity and growth aligned with the entry of women into the marketplace in significant numbers, and how, when they retreated to fuel the baby boom, growth subsided. Know it is only a factor, but just sayin’…maybe we should let women run the country and the economy for awhile 👧🏽 and see what happens. There is no question there would be changes in how we do business.
Ultimately Gordon is not prescriptive except to say that we should be putting much more money into preschool education than we are currently doing, given its proven benefits. We could also basically ‘brain drain’ the rest of the world through immigration policy, if we wanted. That idea makes me uncomfortable, but so does the irrational immigration policy we have been pursuing for the past two administrations. The immigration policies of the current administration do not bear discussion.
Paul Krugman reviews Robert Gordon.
Since I concentrated my efforts on conclusions rather than proofs, I only skimmed this Hummer-of-a-tome, but I found that each chapter had something useful, surprising, and remarkable about it. What Gordon is saying can have startling implications for how we look at the next forty years economically-speaking. His forecasts will matter to how we construct public policy, e.g., growth will continue to decline, wealth inequalities will continue to increase. Even if he is only showing us the outcomes of what we have wrought intentionally or not, he helps us to envision what comes next.
As his title foretells, Gordon tries to explain the extraordinary rise in productivity from 1928-1950 and its decline from the 1950-2014 by saying that big innovations along with education and WWII spurred a growth we haven’t seen since, and that even the technological revolution in the early 1990s did not produce as large a change in productivity as earlier innovations like railroads, cars, immigration, financial instruments, women in the marketplace, etc.
What I like about Gordon’s writing is that he proposes we use basic economic theory to explain certain observable phenomenon, like the upsurge in labor productivity in the 1920-1950 interval.
"In a competitive market, the marginal product of labor equals the real wage, and economists have shown that labor’s marginal product under specified conditions is the share of labor in total incomes times output per hour. If the income share of labor remains constant, then the growth rate of the real wage should be equal to that of labor's average product, the same thing as labor productivity. Could an increase in real wages have caused, directly or indirectly, the upsurge in labor productivity that occurred between the 1920s and 1950s?"We should really be looking at the need to increase real wages now, to solve issues of productivity and growth, taxes and national income, income inequalities and budget deficits. I believe even Republican small-government adherents will be shocked at what increased wages will unleash in the cash-starved labor economy. A corporation's profitability will be affected, but there is plenty of fat in the wage system that can be cut. We can’t force corporations to flatten their pay scales to increase payments at the lower end of wage scale and decrease payments at the top, but we can, and have, used tax policy and other inducements to curb the worst tendencies.
Gordon's explanation for the American Great Leap Forward in economic terms was the Great Depression and World War II. The New Deal was the result of the Great Depression, raising real wages and a shrinkage in weekly work hours. Substitution from labor to capital as a result of real wage increase is evident in the data on private equipment investment. Additionally, the reorganization of business after the drop in profits and output increased efficiencies not realized to that time. The effects of a war economy on top of these changes is clear.
What really struck me about Gordon’s charts and graphs is how closely productivity and growth aligned with the entry of women into the marketplace in significant numbers, and how, when they retreated to fuel the baby boom, growth subsided. Know it is only a factor, but just sayin’…maybe we should let women run the country and the economy for awhile 👧🏽 and see what happens. There is no question there would be changes in how we do business.
Ultimately Gordon is not prescriptive except to say that we should be putting much more money into preschool education than we are currently doing, given its proven benefits. We could also basically ‘brain drain’ the rest of the world through immigration policy, if we wanted. That idea makes me uncomfortable, but so does the irrational immigration policy we have been pursuing for the past two administrations. The immigration policies of the current administration do not bear discussion.
Paul Krugman reviews Robert Gordon.
October 7, 2017
This book is an economic history of the "American Standard of Living" from 1870 to 2010. It is hard to concisely list the hesitations that came to mind in tackling a substantial book that had this agenda on offer. First, what is meant by "economic history"? How does it balance economics and history? How do data issues fit in? What kind of analysis is provided? Lots of data analysis and modeling? Is there a grand narrative? Second, what is meant by the "American Standard of Living"? I can look up what is included in whatever measures are used but how does that relate to how people lived in 1870? Or 1910? Or 1970? These sorts of questions occupy whole sectors of commentary in the media and people discuss them all the time - and very few people agree on many of the fundamentals. Third, why the time period? I may be picky but it struck me as a bit broad, but then again why not include the 1860s? Anything important happen then? Fourth, what is the point of this? What types of policy prescriptions is the author pushing and how much of the book will be prescriptive? Finally, how much of a slog will this be? Academics are not known for their style and brevity and a book like this is no doubt based on quite of few prior studies published in journals. String a bunch of economics papers together without much editing and a book will transform itself into a slog in a hurry.
After a few chapters, all of my concerns were quickly and effectively addressed and I realized what a really good book this is. The author is an accomplished economist and historian. He uses economic analysis but also realizes the issues in making any judgments about how people lived from the economic data. He has thought long and hard about how economics and history fit together. He is also telling a general story - and a powerful one. The overall story is that the US experienced an amazing period of economic growth - and improvement in the standard of living - between 1870 and 1970, but after that growth rates declined and improvements in the standard of living slowed or stagnated. If one tries to put a finger on what constitutes the American standard of living, one finds that on most important dimensions life is not materially better that it was in 1970 and that in some areas it has arguably declined. Why? You will need to read the book, but Gordon presents detailed arguments and backs them up with lots of data and analysis. The analytic content is well handled, however. Charts and graphs are well explained and tables are not too complex. If these features really bother a reader, then this is perhaps not the right book for that reader.
This book and its conclusions fit into a broader discussion that the growth associated with the US tech sectors, while no doubt important, has been overhyped and that the impact of the Internet and PCs and smartphones has not yet been comparable to the changes in standard of living brought about by the telephone, radio, automobile, airplane, indoor plumbing, and air conditioning. As Gordon acknowledges, technological changes reach their greatest impact after a sometimes substantial time lag, so the impact of tech may still come. His point is that it has not done so yet and does not appear to be close to doing so soon. I am sympathetic with his point of view re the over promising and under delivering of the tech sector. A response to this may be that the value of tech is not reflected in the GDP statistics - attempting to reduce such claims to data problems. Part of the brilliance of Gordon's book is that he would acknowledge the data problem although then claiming that if anything the data problem is much greater for prior innovative waves than for the current one - a point that strengthens his general arguments.
Gordon's book also fits into current debates on inequality. The key way to see this is to not that low growth is critical for Piketty's arguments about the growth and continuity of inequality. Gordon sees the current widening of inequality in the US as a headwind that will reduce future growth prospects.
Gordon's policy prescriptions are limited and reasonable. He identified a limited set of causal problems that are working to reduce growth and then review current prescriptions against those problems. He does not fall victim to the need to keep writing additional chapters even when an author has run out of anything novel to say.
Finally, book is well written and edited. The overall structure of his book makes sense and chapters are reasonable in lengh, with a considerate number of places where the reader gets to take a short break while the author sums up where the argument is and where he is going. This makes long dense books a bit easier to work through and thus enhanced my standard of living a small bit.
This is a very fine book that may not be for everyone but is well worth the effort.
After a few chapters, all of my concerns were quickly and effectively addressed and I realized what a really good book this is. The author is an accomplished economist and historian. He uses economic analysis but also realizes the issues in making any judgments about how people lived from the economic data. He has thought long and hard about how economics and history fit together. He is also telling a general story - and a powerful one. The overall story is that the US experienced an amazing period of economic growth - and improvement in the standard of living - between 1870 and 1970, but after that growth rates declined and improvements in the standard of living slowed or stagnated. If one tries to put a finger on what constitutes the American standard of living, one finds that on most important dimensions life is not materially better that it was in 1970 and that in some areas it has arguably declined. Why? You will need to read the book, but Gordon presents detailed arguments and backs them up with lots of data and analysis. The analytic content is well handled, however. Charts and graphs are well explained and tables are not too complex. If these features really bother a reader, then this is perhaps not the right book for that reader.
This book and its conclusions fit into a broader discussion that the growth associated with the US tech sectors, while no doubt important, has been overhyped and that the impact of the Internet and PCs and smartphones has not yet been comparable to the changes in standard of living brought about by the telephone, radio, automobile, airplane, indoor plumbing, and air conditioning. As Gordon acknowledges, technological changes reach their greatest impact after a sometimes substantial time lag, so the impact of tech may still come. His point is that it has not done so yet and does not appear to be close to doing so soon. I am sympathetic with his point of view re the over promising and under delivering of the tech sector. A response to this may be that the value of tech is not reflected in the GDP statistics - attempting to reduce such claims to data problems. Part of the brilliance of Gordon's book is that he would acknowledge the data problem although then claiming that if anything the data problem is much greater for prior innovative waves than for the current one - a point that strengthens his general arguments.
Gordon's book also fits into current debates on inequality. The key way to see this is to not that low growth is critical for Piketty's arguments about the growth and continuity of inequality. Gordon sees the current widening of inequality in the US as a headwind that will reduce future growth prospects.
Gordon's policy prescriptions are limited and reasonable. He identified a limited set of causal problems that are working to reduce growth and then review current prescriptions against those problems. He does not fall victim to the need to keep writing additional chapters even when an author has run out of anything novel to say.
Finally, book is well written and edited. The overall structure of his book makes sense and chapters are reasonable in lengh, with a considerate number of places where the reader gets to take a short break while the author sums up where the argument is and where he is going. This makes long dense books a bit easier to work through and thus enhanced my standard of living a small bit.
This is a very fine book that may not be for everyone but is well worth the effort.
February 25, 2017
This book is just not very good. I was excited to read The Rise and Fall of American Growth; it was extensively and positively reviewed and it promised to illuminate an important topic by giving extended, specific analysis. In particular, I wanted to learn about changes in productivity over time. Instead, I first got an interminable, plodding exposition, which repeated commonly known facts ad nauseum for its first 600 pages. But I soldiered on, knowing that the last 100 pages were analysis of current problems and of future productivity. I should have cut my losses—those last 100 pages are exemplars of rank illogic and incoherence. It didn’t end there, either—the book is then, at the last, capped by shrill, unsupported demands that America ingest a massive dose of insufferable and, at best, non-effective, leftist nostrums, considerably more pernicious than the 19th Century patent medicines the author unoriginally decries. When I finished this book, I had to drink a fifth of cheap whiskey just to dull the pain, but now that the hangover is gone, I am rousing myself to write this review.
I will say one thing for this book—the reader can be in no doubt what the themes of the book are, because they are explicitly announced. Over, and over, and over. Thus, we can state with certainty that the book’s major theme is, roughly, that from 1870 until 1940, inventions of various types created existential leaps forward in Americans’ standard of living, only some of which are captured in standard economic measures. From 1940 until 1970, such improvements were slower and more incremental, although this was masked by certain structural tendencies that increased productivity based on earlier events, such that most people see this period as a period of greater advancement than the earlier period, even though it was not. Finally, since 1970, growth and improvement has been much slower—a trend the authors expect to continue into the indefinite future, techno-optimists be damned.
All this could easily have been said in 100 pages. But it wasn’t, so I am here to condense it for you. The author, Robert Gordon, is an elderly economist whose primary focus is macroeconomics. He begins with both a summary of his book and with a basic overview of relevant economics concepts on which he relies, notably the calculation of GDP, total factor productivity (TFP), and the difference between output per person and output per hour. It is also here that he introduces a second constantly repeated theme, that that GDP does not account for all increases in the standard of living, so-called “quality bias.” I will grant that all this is easy to read and clearly organized.
Gordon then turns to describing life in 1870, both by statistics and anecdote. This is also where the insufferable repetition begins. We are, for example, treated multiple times within the span of a few pages to the exact same quote about dilution of milk. Once would have been sufficient. I lost track of the times that Gordon points out that GDP increases do not capture that nobody today has to clean up human and animal waste. Which is certainly true, but one reference would have been enough. Some of this is interesting, or would have been in ten pages, though none of it is new to anyone even moderately well-informed about history. Gordon next focuses on improvements made on the world of 1870 during the next seventy years, including in food, clothing, energy, electrification, communication, transportation and medicine. The sole fairly original point made here is that while we focus on antibiotics, the real advances in reducing mortality, particularly infant mortality, occurred earlier, due to increased sanitation and the implementation of other responses to the Pasteur germ theory. (He offensively uses the phrase “A Generation of Midgets” as a chapter subheading; I am surprised that for such lack of celebration of diversity and inclusion he has not been dismissed from his post at Northwestern.) This goes on for nine chapters and more than 300 pages; at the end of each chapter the chapter is didactically summarized (in fact, you could read only those summaries with some profit).
The occasional errors and frequent kneejerk ideological asides start to show up here, too. For example, Gordon ascribes the “quantum leap in the amount of reading” after 1870 to cheaper paper, but mostly to “the government provision of free public libraries.” This is ignorance. As of 1930, more than half (around 2,000) of the free public libraries were Carnegie libraries; and most of the rest were created by other private philanthropy (although ongoing funding was usually a local government responsibility). This may not seem important, but we will see how this more-government-is-always-awesome attitude of Gordon’s ultimately destroys his analysis. And ideological “tells” appear—for example, Gordon concludes his chapter on improvements in medical care prior to 1940 by moaning that “The most important negative feature of American exceptionalism was the inability of the political system to adopt universal health insurance, defined as insurance that is a right of citizenship.” Bismarck did it, says Gordon, why couldn’t we? Of course, this is not “a failure of the political system” but something rejected, over and over again, for more than a hundred years, by the American people, despite the demands of their betters.
After a summary between sections pretentiously labeled “Entr’acte,” Gordon turns to the “Midcentury Shift from Revolution to Evolution.” Basically, for another 200 pages, covering 1940 to today, and breaking that into the periods until 1970 and until today, Gordon covers the same areas as in the earlier section, but with the focus on how improvements were not as great. Thus, instead of a momentous shift to varied, refrigerated food, we got fast food. Instead of a shift to “networked” (via electricity, sewer, etc.—I think use of this term is supposed to be clever) homes we got more, but cheaper, and no bigger until recently, homes. But generally, until 1970 or so, there was a “narrowing scope of progress.” And he notes “the year 1970 marks a distinct break point between faster and slower growth.” He notes that the key is finding why productivity decreased around 1970, while keeping in mind that when productivity falls, it is by definition from some combination of lower output per person and fewer hours worked per person.
Gordon notes in this section that dishwashers improved living conditions, and there was incremental improvement thereafter, “a steady improvement in the basic function of getting the dishes clean.” He utterly fails to note that aggressive government regulations to supposedly help the environment and reduce energy usage have caused a massive backtrack in that basic function, such that no modern dishwasher gets dishes clean in anything like a dishwasher of, say, 1995. This, and other blind spots, are the first clue that Gordon is not even going to consider whether the slowdown, even stoppage, of improvement and productivity post-1970 might have something to do with hugely expanded and intrusive government regulation beginning at precisely that point in time.
Gordon then turns to “The Sources of Faster and Slower Growth.” Here he explores the seeming paradox that while real improvements slowed after 1940, productivity growth was at its maximum in the 1950s. He ascribes this to the Depression and World War Two—to, roughly, the effects, delayed by the Depression and accelerated (and largely caused) by massive capital investment during the war, partially hidden by being characterized as government spending. Moreover, it was only in the 1950s that some of the benefits of prior innovation, such as electrification, really were reflected in output statistics.
He next turns to asking, and mostly answering negatively, “Can The Future Match the Great Innovations of the Past?” He correctly notes that “every source of growth can be reduced to the role of innovation and technological change,” and ascribes much of this to individual entrepreneurs who are willing to take risks. Neither here nor later does he suggest that he understands that government, both directly through choking regulation and indirectly through defects like permitting excess litigation, can easily squash that willingness to take risks. “Entrepreneurs contribute to economic growth far more than the narrow word ‘innovation’ can convey.” This section is somewhat confused, though, since Gordon, like most academics, doesn’t actually understand entrepreneurship. He measures entrepreneurship by patent issuance. But that makes little sense—most successful entrepreneurs rely not on intellectual property, but on their drive and their own skills, and of those skills, the most important is simply the ability to get things done—many things, constantly, without fail. Most people simply can’t do that, and most people can’t take the mental pressure necessary to be a successful entrepreneur. I know this from personal experience. Thus patents are totally irrelevant to these characteristics that really drive success, and what really makes a successful entrepreneur is actually opaque to Gordon, as it is to most or all academics. And, critically, the amount of government regulation substantially affects an entrepreneur’s willingness and ability to put forth the effort necessary to succeed, which problem as I say Gordon completely misses.
As far as the future, Gordon rejects the idea that massive, unforeseeable changes will come from unforeseen inventions. He thinks that the general outline of future inventions is clear, and it is very much incremental, contrary to what the techno-optimists say. Gordon rejects that 3D printing will revolutionize industry, but points out that it will probably never be used for mass production, rather just for one-off manufacture. He rejects (as I do) the idea that artificial intelligence will ever be used for all that much, and points out that both AI and big data are almost exclusively used for marketing purposes, and therefore increase productivity little or not at all. Similarly, TFP has grown not at all in response to the smartphone and smart tablet (and as to the earlier first impact of computers, which was positive, Gordon points out that computers “between 1974 and 1994 . . . masked an even more severe slowdown in productivity growth than would have otherwise occurred in the rest of the economy.”) He points out that even if driverless cars do come about, they will not likely increase productivity, but merely allow people more leisure time (and he points out that most truck drivers help load and unload at stores, etc., thus making driverless trucks less attractive than they appear). Ultimately, Gordon does not deny that there is innovation in various areas—he simply ruins the techno-optimist party by pointing out that none of it is increasing, or is likely to increase, productivity. Nor is there any reason to think this will change, despite vague promises to the contrary from techno-optimists. We have heard for decades that somehow Something Big will upend the system and allow tremendous growth. Maybe, but there is no evidence that will happen, and after all, hope is not a plan.
Finally, Gordon talks about the “headwinds” he thinks will keep American growth slow, and which have slowed growth since 1970. This is where it all goes off the rails. While he names and briefly discusses various headwinds, he very clearly thinks that the only relevant headwind is “inequality,” the only one he discusses at length. In fact, this whole ultimate chapter is titled “Inequality and the Other Headwinds,” and the epigraph is a quote about inequality.
Gordon drones on and on about inequality, telling us it is “blowing at gale force,” focusing on inequality of income (though he does touch, for a sentence or two, on inequality of assets). Bizarrely, at NO POINT AT ALL does he tell us why inequality retards growth. I read all this, twice, and literally have no idea what Gordon’s argument is; there are a lot of charts and no argument or discussion as to why any of this slows growth. And the book is sprinkled with related virtue signaling statements such as that during World War Two, “The reduction in the economic distance between the least well-off and the rest of the population significantly lifted everyone’s sense of well-being.” There is no evidence given for this statement. It is apparently just supposed to be obvious that inequality is the source of all our economic problems. This is a spiritual belief, or a cultural one, not an economic argument.
As he maunders on about inequality, relying heavily on Thomas Piketty, Gordon does acknowledge that “recent criticism of [Piketty’s] and Census Bureau data has complained that they reflect only market income and ignore the effect of taxes and transfers.” This is obviously an enormous failing, and Gordon treats the criticism as true (it’s not just “taxes and transfers,” though—Piketty et al. also ignore noncash employer payments, income from most home sales, and the presence of multiple earners in a home when discussing household income). So Gordon revises his analysis of inequality accordingly, thus undercutting much of his argument—an effect he then ignores. After that he goes on his merry way, alleging without discussion that what matters is median income growth rather than average income growth, the measure he’s previously used throughout the book. Why, the reader is never told, nor is the reader told why any of this matters to growth.
Income inequality may be a problem for many reasons—but Gordon does not even attempt to demonstrate that impact on growth is one of them, and given that’s his major “headwind,” that’s a big problem for his book. One wonders where his editors were. Presumably they were entranced by the topicality of his focus, and therefore ignored the huge hole at its heart. Too bad—being told to return to the drafting table at this point might have saved Gordon’s book.
Even within his discussion of inequality, and leaving aside that he does not relate it competently to the theme of his book, Gordon makes numerous errors. One is that he fails to understand or acknowledge that the individuals in various income groupings change extremely rapidly. The composition of the “rich” and the “poor” changes continuously, and many actual people who are “poor” at one point in their lives are “rich” later. As Thomas Sowell has pointed out, “To say, as [Piketty] does . . . that ‘the upper decile is truly a world unto itself’ is to fly in the face of the fact that most American households—53 percent—are in the top decile at some point in their lives, usually in their older years. . . . This is not even ‘class warfare,’ but confusion between social classes and age cohorts. . . . . Even the vaunted ‘top one percent,’ so often discussed in the media, is a level reached by 11 percent of Americans at some point in their lives.” But Gordon treats all income groups as composed of static individuals, which, even if he tried to and could demonstrate that inequality affected growth, would erode his analysis of inequality. Another, less critical but indicative, error is his treatment of unions. He repeatedly refers to some states as “nonunion right-to-work,” and implies unions are forbidden in such states, when anyone who’s even modestly well-informed knows right-to-work laws don’t make anything nonunion, they merely prohibit requiring joining a union being made a condition of employment. Again—these are problems that could have been fixed with a decent editor.
Now, it may well be that inequality is a real problem, either in general or as related to growth. This is especially true to the extent that inequality of income is caused by inequality of opportunity, rather than inequality of talent or effort. It is true (though Gordon ignores it) that economic mobility in America has decreased over the past few decades, to now be lower than some areas of Europe. This suggests that equality of opportunity has decreased, and is perhaps related to the decline in entrepreneurship Gordon mentions. There is a strong argument that the “clerisy,” the upper American classes, has geographically and intellectually largely separated from the rest of America, and that this is problematic both economically and culturally (and is obviously related to the rise of Trump). Forced “diversity” in many industries; that is, taking from the excellent who achieve and giving unearned rewards to the undeserving based on their immutable characteristics, exacerbates this problem. To get at this, a cultural analysis is necessary, along with real statistics, not Piketty-type cherry-picked statistics. But about all this, there is silence in this book. For Gordon, inequality is just an excuse to demand the government forcibly redistribute money, which is supposed to, in some undefined way, increase American growth. This reminds me of the famous South Park Underpants Gnomes, who have a foolproof way to get rich. Namely: Step 1. Collect underpants. Step 2. ????? Step 3. PROFIT!!!! Substitute “reduce inequality” for “collect underpants” and “increase growth” for “PROFIT” and you will have the core of this book.
On I slogged, but I found (no longer to my surprise) that when he gets to his other “headwinds” Gordon is little better. They include education, demographics, and government debt. And then, of course, to add to the predictable tedium from which the reader is suffering, he adds global warming, globalization, and environmental pollution (by which he means global warming, presumably by effectively citing it twice emphasizing how au courant he is).
With respect to education, he says, in essence, that we have reached diminishing returns to education (and then he wholly erroneously equates spending per pupil with educational attainment, bemoans that “wealthy suburbs provide lavish facilities to their students,” and demands that the US “follow the lead of other nations in providing free preschool education,” all without any argument as to why these things are good or relevant). On demography, he says very little, but basically he says people are getting older and hours per person are therefore going down; he also mentions working-age people dropping out of the work force entirely, but falsely ascribes this to solely to their being “victims of deindustrialization.” Gordon then spends only three paragraphs on government debt, presumably because the problem he identifies with government debt is that it will have to be paid for by taxes, which will slow growth, and focusing on that might suggest that government could be a problem. Then he calls for a large carbon tax, naturally, to meet government debt, because everyone knows that carbon taxes have no negative impacts. Like unicorns whose bodily wastes are rainbows, according to Gordon, a carbon tax is a magical balm for all that ails society.
But then Gordon does say, briefly, that the lower classes have broken down socially (even quoting Charles Murray!), and ascribes part of inequality and stagnant income growth to this. However, he promptly drops this line of thought like a hot potato, and does not mention it at all in his earlier lengthy screed on inequality, even though it may largely explain the supposed problem he identifies. It’s like he felt obliged to acknowledge one elephant in the room (the other, totally unacknowledged, elephant being government regulation choking the life out of the economy), but didn’t want to highlight it in any way.
[Review continued as first comment.]
I will say one thing for this book—the reader can be in no doubt what the themes of the book are, because they are explicitly announced. Over, and over, and over. Thus, we can state with certainty that the book’s major theme is, roughly, that from 1870 until 1940, inventions of various types created existential leaps forward in Americans’ standard of living, only some of which are captured in standard economic measures. From 1940 until 1970, such improvements were slower and more incremental, although this was masked by certain structural tendencies that increased productivity based on earlier events, such that most people see this period as a period of greater advancement than the earlier period, even though it was not. Finally, since 1970, growth and improvement has been much slower—a trend the authors expect to continue into the indefinite future, techno-optimists be damned.
All this could easily have been said in 100 pages. But it wasn’t, so I am here to condense it for you. The author, Robert Gordon, is an elderly economist whose primary focus is macroeconomics. He begins with both a summary of his book and with a basic overview of relevant economics concepts on which he relies, notably the calculation of GDP, total factor productivity (TFP), and the difference between output per person and output per hour. It is also here that he introduces a second constantly repeated theme, that that GDP does not account for all increases in the standard of living, so-called “quality bias.” I will grant that all this is easy to read and clearly organized.
Gordon then turns to describing life in 1870, both by statistics and anecdote. This is also where the insufferable repetition begins. We are, for example, treated multiple times within the span of a few pages to the exact same quote about dilution of milk. Once would have been sufficient. I lost track of the times that Gordon points out that GDP increases do not capture that nobody today has to clean up human and animal waste. Which is certainly true, but one reference would have been enough. Some of this is interesting, or would have been in ten pages, though none of it is new to anyone even moderately well-informed about history. Gordon next focuses on improvements made on the world of 1870 during the next seventy years, including in food, clothing, energy, electrification, communication, transportation and medicine. The sole fairly original point made here is that while we focus on antibiotics, the real advances in reducing mortality, particularly infant mortality, occurred earlier, due to increased sanitation and the implementation of other responses to the Pasteur germ theory. (He offensively uses the phrase “A Generation of Midgets” as a chapter subheading; I am surprised that for such lack of celebration of diversity and inclusion he has not been dismissed from his post at Northwestern.) This goes on for nine chapters and more than 300 pages; at the end of each chapter the chapter is didactically summarized (in fact, you could read only those summaries with some profit).
The occasional errors and frequent kneejerk ideological asides start to show up here, too. For example, Gordon ascribes the “quantum leap in the amount of reading” after 1870 to cheaper paper, but mostly to “the government provision of free public libraries.” This is ignorance. As of 1930, more than half (around 2,000) of the free public libraries were Carnegie libraries; and most of the rest were created by other private philanthropy (although ongoing funding was usually a local government responsibility). This may not seem important, but we will see how this more-government-is-always-awesome attitude of Gordon’s ultimately destroys his analysis. And ideological “tells” appear—for example, Gordon concludes his chapter on improvements in medical care prior to 1940 by moaning that “The most important negative feature of American exceptionalism was the inability of the political system to adopt universal health insurance, defined as insurance that is a right of citizenship.” Bismarck did it, says Gordon, why couldn’t we? Of course, this is not “a failure of the political system” but something rejected, over and over again, for more than a hundred years, by the American people, despite the demands of their betters.
After a summary between sections pretentiously labeled “Entr’acte,” Gordon turns to the “Midcentury Shift from Revolution to Evolution.” Basically, for another 200 pages, covering 1940 to today, and breaking that into the periods until 1970 and until today, Gordon covers the same areas as in the earlier section, but with the focus on how improvements were not as great. Thus, instead of a momentous shift to varied, refrigerated food, we got fast food. Instead of a shift to “networked” (via electricity, sewer, etc.—I think use of this term is supposed to be clever) homes we got more, but cheaper, and no bigger until recently, homes. But generally, until 1970 or so, there was a “narrowing scope of progress.” And he notes “the year 1970 marks a distinct break point between faster and slower growth.” He notes that the key is finding why productivity decreased around 1970, while keeping in mind that when productivity falls, it is by definition from some combination of lower output per person and fewer hours worked per person.
Gordon notes in this section that dishwashers improved living conditions, and there was incremental improvement thereafter, “a steady improvement in the basic function of getting the dishes clean.” He utterly fails to note that aggressive government regulations to supposedly help the environment and reduce energy usage have caused a massive backtrack in that basic function, such that no modern dishwasher gets dishes clean in anything like a dishwasher of, say, 1995. This, and other blind spots, are the first clue that Gordon is not even going to consider whether the slowdown, even stoppage, of improvement and productivity post-1970 might have something to do with hugely expanded and intrusive government regulation beginning at precisely that point in time.
Gordon then turns to “The Sources of Faster and Slower Growth.” Here he explores the seeming paradox that while real improvements slowed after 1940, productivity growth was at its maximum in the 1950s. He ascribes this to the Depression and World War Two—to, roughly, the effects, delayed by the Depression and accelerated (and largely caused) by massive capital investment during the war, partially hidden by being characterized as government spending. Moreover, it was only in the 1950s that some of the benefits of prior innovation, such as electrification, really were reflected in output statistics.
He next turns to asking, and mostly answering negatively, “Can The Future Match the Great Innovations of the Past?” He correctly notes that “every source of growth can be reduced to the role of innovation and technological change,” and ascribes much of this to individual entrepreneurs who are willing to take risks. Neither here nor later does he suggest that he understands that government, both directly through choking regulation and indirectly through defects like permitting excess litigation, can easily squash that willingness to take risks. “Entrepreneurs contribute to economic growth far more than the narrow word ‘innovation’ can convey.” This section is somewhat confused, though, since Gordon, like most academics, doesn’t actually understand entrepreneurship. He measures entrepreneurship by patent issuance. But that makes little sense—most successful entrepreneurs rely not on intellectual property, but on their drive and their own skills, and of those skills, the most important is simply the ability to get things done—many things, constantly, without fail. Most people simply can’t do that, and most people can’t take the mental pressure necessary to be a successful entrepreneur. I know this from personal experience. Thus patents are totally irrelevant to these characteristics that really drive success, and what really makes a successful entrepreneur is actually opaque to Gordon, as it is to most or all academics. And, critically, the amount of government regulation substantially affects an entrepreneur’s willingness and ability to put forth the effort necessary to succeed, which problem as I say Gordon completely misses.
As far as the future, Gordon rejects the idea that massive, unforeseeable changes will come from unforeseen inventions. He thinks that the general outline of future inventions is clear, and it is very much incremental, contrary to what the techno-optimists say. Gordon rejects that 3D printing will revolutionize industry, but points out that it will probably never be used for mass production, rather just for one-off manufacture. He rejects (as I do) the idea that artificial intelligence will ever be used for all that much, and points out that both AI and big data are almost exclusively used for marketing purposes, and therefore increase productivity little or not at all. Similarly, TFP has grown not at all in response to the smartphone and smart tablet (and as to the earlier first impact of computers, which was positive, Gordon points out that computers “between 1974 and 1994 . . . masked an even more severe slowdown in productivity growth than would have otherwise occurred in the rest of the economy.”) He points out that even if driverless cars do come about, they will not likely increase productivity, but merely allow people more leisure time (and he points out that most truck drivers help load and unload at stores, etc., thus making driverless trucks less attractive than they appear). Ultimately, Gordon does not deny that there is innovation in various areas—he simply ruins the techno-optimist party by pointing out that none of it is increasing, or is likely to increase, productivity. Nor is there any reason to think this will change, despite vague promises to the contrary from techno-optimists. We have heard for decades that somehow Something Big will upend the system and allow tremendous growth. Maybe, but there is no evidence that will happen, and after all, hope is not a plan.
Finally, Gordon talks about the “headwinds” he thinks will keep American growth slow, and which have slowed growth since 1970. This is where it all goes off the rails. While he names and briefly discusses various headwinds, he very clearly thinks that the only relevant headwind is “inequality,” the only one he discusses at length. In fact, this whole ultimate chapter is titled “Inequality and the Other Headwinds,” and the epigraph is a quote about inequality.
Gordon drones on and on about inequality, telling us it is “blowing at gale force,” focusing on inequality of income (though he does touch, for a sentence or two, on inequality of assets). Bizarrely, at NO POINT AT ALL does he tell us why inequality retards growth. I read all this, twice, and literally have no idea what Gordon’s argument is; there are a lot of charts and no argument or discussion as to why any of this slows growth. And the book is sprinkled with related virtue signaling statements such as that during World War Two, “The reduction in the economic distance between the least well-off and the rest of the population significantly lifted everyone’s sense of well-being.” There is no evidence given for this statement. It is apparently just supposed to be obvious that inequality is the source of all our economic problems. This is a spiritual belief, or a cultural one, not an economic argument.
As he maunders on about inequality, relying heavily on Thomas Piketty, Gordon does acknowledge that “recent criticism of [Piketty’s] and Census Bureau data has complained that they reflect only market income and ignore the effect of taxes and transfers.” This is obviously an enormous failing, and Gordon treats the criticism as true (it’s not just “taxes and transfers,” though—Piketty et al. also ignore noncash employer payments, income from most home sales, and the presence of multiple earners in a home when discussing household income). So Gordon revises his analysis of inequality accordingly, thus undercutting much of his argument—an effect he then ignores. After that he goes on his merry way, alleging without discussion that what matters is median income growth rather than average income growth, the measure he’s previously used throughout the book. Why, the reader is never told, nor is the reader told why any of this matters to growth.
Income inequality may be a problem for many reasons—but Gordon does not even attempt to demonstrate that impact on growth is one of them, and given that’s his major “headwind,” that’s a big problem for his book. One wonders where his editors were. Presumably they were entranced by the topicality of his focus, and therefore ignored the huge hole at its heart. Too bad—being told to return to the drafting table at this point might have saved Gordon’s book.
Even within his discussion of inequality, and leaving aside that he does not relate it competently to the theme of his book, Gordon makes numerous errors. One is that he fails to understand or acknowledge that the individuals in various income groupings change extremely rapidly. The composition of the “rich” and the “poor” changes continuously, and many actual people who are “poor” at one point in their lives are “rich” later. As Thomas Sowell has pointed out, “To say, as [Piketty] does . . . that ‘the upper decile is truly a world unto itself’ is to fly in the face of the fact that most American households—53 percent—are in the top decile at some point in their lives, usually in their older years. . . . This is not even ‘class warfare,’ but confusion between social classes and age cohorts. . . . . Even the vaunted ‘top one percent,’ so often discussed in the media, is a level reached by 11 percent of Americans at some point in their lives.” But Gordon treats all income groups as composed of static individuals, which, even if he tried to and could demonstrate that inequality affected growth, would erode his analysis of inequality. Another, less critical but indicative, error is his treatment of unions. He repeatedly refers to some states as “nonunion right-to-work,” and implies unions are forbidden in such states, when anyone who’s even modestly well-informed knows right-to-work laws don’t make anything nonunion, they merely prohibit requiring joining a union being made a condition of employment. Again—these are problems that could have been fixed with a decent editor.
Now, it may well be that inequality is a real problem, either in general or as related to growth. This is especially true to the extent that inequality of income is caused by inequality of opportunity, rather than inequality of talent or effort. It is true (though Gordon ignores it) that economic mobility in America has decreased over the past few decades, to now be lower than some areas of Europe. This suggests that equality of opportunity has decreased, and is perhaps related to the decline in entrepreneurship Gordon mentions. There is a strong argument that the “clerisy,” the upper American classes, has geographically and intellectually largely separated from the rest of America, and that this is problematic both economically and culturally (and is obviously related to the rise of Trump). Forced “diversity” in many industries; that is, taking from the excellent who achieve and giving unearned rewards to the undeserving based on their immutable characteristics, exacerbates this problem. To get at this, a cultural analysis is necessary, along with real statistics, not Piketty-type cherry-picked statistics. But about all this, there is silence in this book. For Gordon, inequality is just an excuse to demand the government forcibly redistribute money, which is supposed to, in some undefined way, increase American growth. This reminds me of the famous South Park Underpants Gnomes, who have a foolproof way to get rich. Namely: Step 1. Collect underpants. Step 2. ????? Step 3. PROFIT!!!! Substitute “reduce inequality” for “collect underpants” and “increase growth” for “PROFIT” and you will have the core of this book.
On I slogged, but I found (no longer to my surprise) that when he gets to his other “headwinds” Gordon is little better. They include education, demographics, and government debt. And then, of course, to add to the predictable tedium from which the reader is suffering, he adds global warming, globalization, and environmental pollution (by which he means global warming, presumably by effectively citing it twice emphasizing how au courant he is).
With respect to education, he says, in essence, that we have reached diminishing returns to education (and then he wholly erroneously equates spending per pupil with educational attainment, bemoans that “wealthy suburbs provide lavish facilities to their students,” and demands that the US “follow the lead of other nations in providing free preschool education,” all without any argument as to why these things are good or relevant). On demography, he says very little, but basically he says people are getting older and hours per person are therefore going down; he also mentions working-age people dropping out of the work force entirely, but falsely ascribes this to solely to their being “victims of deindustrialization.” Gordon then spends only three paragraphs on government debt, presumably because the problem he identifies with government debt is that it will have to be paid for by taxes, which will slow growth, and focusing on that might suggest that government could be a problem. Then he calls for a large carbon tax, naturally, to meet government debt, because everyone knows that carbon taxes have no negative impacts. Like unicorns whose bodily wastes are rainbows, according to Gordon, a carbon tax is a magical balm for all that ails society.
But then Gordon does say, briefly, that the lower classes have broken down socially (even quoting Charles Murray!), and ascribes part of inequality and stagnant income growth to this. However, he promptly drops this line of thought like a hot potato, and does not mention it at all in his earlier lengthy screed on inequality, even though it may largely explain the supposed problem he identifies. It’s like he felt obliged to acknowledge one elephant in the room (the other, totally unacknowledged, elephant being government regulation choking the life out of the economy), but didn’t want to highlight it in any way.
[Review continued as first comment.]
April 17, 2017
The author had me at indoor toilets. Our standard and quality of life have gotten better since 1870. Any improvement to the quality of today's toilets dwarfs in comparison to the initial move from the privy to today's homes with running water and our other standard utilities. As the author quoted someone saying, "the best thing is to have God in your heart, the next best thing is to have electricity in your home".
I don't think there was one trend or quality of life improvement that the author spoke about for which I didn't already know most of the details. That made for a tedious book in so far as those familiar stories were being retold for me. The telegraph, railroad, child labor, cars replacing horses, computers, telephone, fast food, radio, TV, cable TV and so on are all stories that have already been told. He puts all the stories together and gives graphs and charts in order to give context and support his narrative.
He makes a convincing argument that the rate of the rate of growth (the second derivative) is slowing down. That the statistics that we use to measure growth doesn't always capture our improvements in standard of living correctly. The current growth rate is slower in today's decade than in the recent decades. These are things that I already knew intuitively, but he shows it with numbers and reasonable interpretation of the data.
The author is very good at explaining what it all means and coming up with the right analogies. I appreciated those parts of the book, but unfortunately I had to wade through familiar stories to get to those gems. He makes the point that "progress without innovation is like stacking old wooden plows on top of wooden plows", meaning for standard of living to progress new things must be invented or discovered. The author was more pessimist about future growth then I would be, but that's just a matter of opinion because the future can always surprise.
I think the gems appear in this book when the author went beyond the narrative. He mentioned, for example, as he was talking about changes in our eating habits that manufacturing and the factory haven't disappeared in America, but that the fast food restaurant is what has replaced it. I thought that provided an interesting way of considering the phenomenon.
The author also wrote each chapter such that he would tell you why he's talking about the chapter, go into detail about the innovations, and then at the end of the chapter tell you why it was relevant to the overall book. That's a very good way to write a book.
The narrator did a great job. I recommend listening to this one instead of reading it for those who don't mind visualizing tables and graphs as their being presented because the narrator had an ability to make the dry tables and the narrative seem more interesting than a physical book would have.
I don't think there was one trend or quality of life improvement that the author spoke about for which I didn't already know most of the details. That made for a tedious book in so far as those familiar stories were being retold for me. The telegraph, railroad, child labor, cars replacing horses, computers, telephone, fast food, radio, TV, cable TV and so on are all stories that have already been told. He puts all the stories together and gives graphs and charts in order to give context and support his narrative.
He makes a convincing argument that the rate of the rate of growth (the second derivative) is slowing down. That the statistics that we use to measure growth doesn't always capture our improvements in standard of living correctly. The current growth rate is slower in today's decade than in the recent decades. These are things that I already knew intuitively, but he shows it with numbers and reasonable interpretation of the data.
The author is very good at explaining what it all means and coming up with the right analogies. I appreciated those parts of the book, but unfortunately I had to wade through familiar stories to get to those gems. He makes the point that "progress without innovation is like stacking old wooden plows on top of wooden plows", meaning for standard of living to progress new things must be invented or discovered. The author was more pessimist about future growth then I would be, but that's just a matter of opinion because the future can always surprise.
I think the gems appear in this book when the author went beyond the narrative. He mentioned, for example, as he was talking about changes in our eating habits that manufacturing and the factory haven't disappeared in America, but that the fast food restaurant is what has replaced it. I thought that provided an interesting way of considering the phenomenon.
The author also wrote each chapter such that he would tell you why he's talking about the chapter, go into detail about the innovations, and then at the end of the chapter tell you why it was relevant to the overall book. That's a very good way to write a book.
The narrator did a great job. I recommend listening to this one instead of reading it for those who don't mind visualizing tables and graphs as their being presented because the narrator had an ability to make the dry tables and the narrative seem more interesting than a physical book would have.
December 31, 2019
I will equate this to a Monty Python movie. I can quote most/many of the funniest lines from several movies, I find the quotes frequently relevant although probably not to the people I am attempting to amuse. The problem with Monty Python is that I never really want to watch the movie from start to finish. The quotes and sketches are great but the general "story" is mostly kind of dull. Possibly you have guessed what I am now about to say about The Rise and Fall....
The information this book contains is extremely useful and powerful, the story that wraps around those facts less so. Unlike other non-fiction I have read lately, Capital in the Twenty-First Century and Evicted: Poverty and Profit in the American City, the data is all this book has. I truly was fascinated by the transformation of how people lived from 1870-1920. I never gave much thought to how much refrigeration, indoor plumbing and electricity affected lives, sure I knew intellectually that these were some of the greatest inventions ever, but the way they affected day to day life was fascinating. After that interesting period, I found myself skipping to the graphs and reading the paragraphs around them to understand what they represented, that method ended up skipping much of the book which I don't exactly miss.
The graphs, data and conclusion were well worth the read but this isn't a book I am likely to recommend to anyone except a politician who needs an economic platform. Not political at all but loads of data to craft decent policies. I found Capital and Evicted had some very good story telling to go along with mountains of well researched data, this was a borderline textbook.
The information this book contains is extremely useful and powerful, the story that wraps around those facts less so. Unlike other non-fiction I have read lately, Capital in the Twenty-First Century and Evicted: Poverty and Profit in the American City, the data is all this book has. I truly was fascinated by the transformation of how people lived from 1870-1920. I never gave much thought to how much refrigeration, indoor plumbing and electricity affected lives, sure I knew intellectually that these were some of the greatest inventions ever, but the way they affected day to day life was fascinating. After that interesting period, I found myself skipping to the graphs and reading the paragraphs around them to understand what they represented, that method ended up skipping much of the book which I don't exactly miss.
The graphs, data and conclusion were well worth the read but this isn't a book I am likely to recommend to anyone except a politician who needs an economic platform. Not political at all but loads of data to craft decent policies. I found Capital and Evicted had some very good story telling to go along with mountains of well researched data, this was a borderline textbook.
August 28, 2023
Forty-five years ago Jackson Browne wrote the lyrics "In '69 I was 21 and I called the road my own. I don't know how that road became the one I'm on." It may be that the changes that made Browne's road unrecognizable as the enthusiasm of youth faded were nothing more extraordinary than the maturation that most of us go through in our third decade of life, however Robert Gordon maintains that the American economy went through changes at about the same time that made its path significantly different from the one it had followed for the previous century.
The premise of this book is that 1870-1970 was the "Golden Century" of the American economy, made possible by a plethora of technological advances from the airplane to indoor plumbing that were either invented or fully developed during that period. He provides a sometimes mind-numbing collection of dates and diffusion rates and other numbers to prove his case, as well as some memorable factoids (in 1930 78% of the automobiles in the world were in the US). The only problem with much of this technological development was that it not repeatable. By 1970 practically everybody had a TV, refrigerator and central heating, as well as many other things that nobody had in 1870. As a result, the rate of economic growth stagnated as Jackson and I and the rest of our generation waited for our flying cars to be available. There was a little blip of economic growth in the late '90s as everybody went online, but once we began spending most of our day responding to email, the stagnation returned.
Professor Gordon ends his book with some recommendations for improving economic productivity, but even he concedes that adoption of all of them would not come close to restoring the "Golden Century". Since almost all of his recommendations are considered anathema by the Republican Party, implementation in the near future would appear to be unlikely.
Lots of charts and graphs make this book interesting for the non-mathphobic, even if you get the feeling that much of the information is being repeated over this 600-page tome.
The premise of this book is that 1870-1970 was the "Golden Century" of the American economy, made possible by a plethora of technological advances from the airplane to indoor plumbing that were either invented or fully developed during that period. He provides a sometimes mind-numbing collection of dates and diffusion rates and other numbers to prove his case, as well as some memorable factoids (in 1930 78% of the automobiles in the world were in the US). The only problem with much of this technological development was that it not repeatable. By 1970 practically everybody had a TV, refrigerator and central heating, as well as many other things that nobody had in 1870. As a result, the rate of economic growth stagnated as Jackson and I and the rest of our generation waited for our flying cars to be available. There was a little blip of economic growth in the late '90s as everybody went online, but once we began spending most of our day responding to email, the stagnation returned.
Professor Gordon ends his book with some recommendations for improving economic productivity, but even he concedes that adoption of all of them would not come close to restoring the "Golden Century". Since almost all of his recommendations are considered anathema by the Republican Party, implementation in the near future would appear to be unlikely.
Lots of charts and graphs make this book interesting for the non-mathphobic, even if you get the feeling that much of the information is being repeated over this 600-page tome.
December 13, 2020
One of the few debates between economists that has reached a non-specialist audience over the last five years is that between the so-called “techno optimists” and “techno pessimists”. Techno optimists such as Erik Brynjolfsson and Andrew McAfee claim that technologies such as machine learning have the potential to become “general purpose technologies” that will be as transformative as the steam engine and electricity once were.
Robert Gordon is probably the most famous of the techno pessimists, who claim that there are fundamental reasons for the slowdown in productivity growth observed in the US since the early 1970s, and that it is very unlikely that the underlying causes will change in the foreseeable future, if ever. (see https://www.goodreads.com/review/show... on this issue)
Although Gordon’s book entirely focuses on the US, it does contain masses of insights that are generally valid, and it makes the book well worth reading even if you are not American.
Some key points in the book are:
• The key driving force behind economic growth is technical change, not the accumulation of capital ("Without technical change, capital accumulation would amount to piling wooden plows on top of existing wooden plows" Evsey Domar) -
• The years between 1870 and 1940 were an unbelievably innovative period, with inventions that improved daily lives beyond recognition: plumbed water, electricity, washing machines, refrigerators, air conditioning, telephone, cars.
• Changes in real GDP underestimate the impact of those changes on wellbeing - by a lot (one example given by Gordon is the monotony of meals if you are limited to locally produced seasonal vegetables and fruit – refrigeration in transport and storage has fundamentally changed the quality of our diets)
• Once this potential was realised, the scope for inventions with a similar impact on daily lives was greatly reduced (“plumbing and flushed toilets could only be invented once”).
• Since the 1970s, the only areas of live where developed countries have known improvements that are comparable to what happened between 1870 and 1940 are entertainment and communication.
• Gordon himself admits that innovation is still happening; his key argument is that the impact on our daily lives is less dramatic than the impact of the innovations of the past. To paraphrase Robert Gordon: if you think that smartphones are more transformative than air conditioning and washing machines, it is because you never had to wash your clothes by hand in sweltering heat.
Gordon’s book is an encyclopedic illustration of these points. This ambition to be exhaustive has the great merit that no one can accuse Gordon of cherry picking his evidence. But it is also the book Achilles heel: it is an extremely long read (it took me something like six weeks to finish the book), and, at times, rather tiresome. Although the topic is something that should not just be of interest to economic historians, the thoroughness of the treatment may be off putting.
Nevertheless, this is essential reading for anyone who wants to put our current difficulties and challenges in perspective, and who wants to understand just by how much human lives have improved over the last 150 years. This book is the best remedy against nostalgia for “the good old days”.
In the remainder of this review, I touch on some topics that I found particularly interesting.
How we dealt with the Covid19 pandemic may prove Gordon wrong
Gordon’s asked: "what has had the biggest impact on human welfare, the flush toilet or the Internet?". to illustrate his points that the breakthroughs with the biggest impact were behind us. Since the pandemic, this question is no longer a rhetorical one.
While it is pretty obvious that a lockdown without flush toilets wouldn't be very comfortable or hygienic, it is also clear that the Internet contributes to a large extent to making the lockdown viable from a social point of view. It has also helped us to avoid the stark choice between a complete collapse of economic activity and not slowing down the spread of the virus. This is probably the point where we all come to appreciate how much the Internet has changed our lives without us taking notice.
Thanks to ICT, logistical processes have been reorganised in a record time (Gordon’s statement that "Categories of personal consumption expenditures that felt little effect from the ICT revolution were the purchase of food for consumption and away from home" didn't age well.).
And the speed with which new vaccines have been developed also demonstrates that spectacular advances in medicine are still possible.
The measurement of changes in quality
One of the fundamental problems in time series of economic aggregates like GDP is that, through time, it's not just relative prices that change, but also the overall price level (deflation or inflation). In order to compare apples in 1920 with apples in 2020, economic statisticians recalculate GDP "at constant prices" - thus, with prices in a base year. What the people are not always aware of, is that there are truckloads of issues with this approach, especially in the long run.
For instance, new goods and services are usually included in the price basket with a serious lag compared to their introduction. Gordon repeatedly points out that this leads to a serious underestimate of real changes in living standards. Cars and videorecorders were for instance only included in the price basket long after the most spectacular improvements in price and quality took place. As a result, official GDP figures will never capture the impact of those initial improvements that turned them into viable mass consumption items.
Another challenge are changes in quality. Whatever your grandparents are telling you, Gordon gives rather convincing arguments that quality for most consumer goods has steadily improved over time. Thus, a general increase in the price level reflects at least partly the effect of an overall improvement in quality. Thus, again, this is a point where changes in GDP "at constant prices" will underestimate real changes in living standards. (In his academic work, Gordon has contributed to the measurement of quality adjusted price indices for specific goods, so he knows very well what he’s talking about).
Advances in clean technologies
Some of the most spectacular advances of the last decade are in the field of clean technologies: renewable energy and storage. Now, that's obviously a very good thing. As the Bloomberg columnist Noah Smith recently wrote, "This is going to do a lot to help stop climate change and make civilization sustainable. That in and of itself is a form of unmeasured productivity growth."
Well, that depends on how you define growth. Gordon points out that if you look at the improvement in the quality of cars since the 1970s, a lot is about elements (safety, the environment) that are good for society but not always for the driver.
In other words, these are technological developments that are good for human welfare, but that are not captured in the market values of goods. This is a limitation of GDP that is well known to everyone who has ever had a good introduction to macroeconomics. You can have a GDP of (purely hypothetical figures) 30 000 EURO per capita where everyone is free to pollute, or one of 25 000 per capita where there exist regulations that limit pollution.
Which one would you prefer? This is not something that can be answered in the abstract. It depends on how you value (as a society) the market goods you can buy versus (very real) costs of pollution. The important thing to keep in mind that slowdowns in the growth of GDP that result from the regulation of pollution are not necessarily a bad thing. GDP is an indicator, and it is an important one. But it does not reflect everything that matters.
Three specific points about environmental innovation in the transport sector
People are rightly concerned about the environmental consequences of first generation biofuels in transport. But the zero generation was even worse. In 1900, one quarter of American grain output was eaten by horses. The excrements left by horses and the evacuation of their cadavers were a major issue of urban hygiene in the late nineteenth century.
It is often discussed in the literature on energy transitions how the transition from sail ships to steamships took decades. But the transition from horse drawn streetcars to electrified streetcars took just 12 years. Railways revolutionized intercity travel almost instantaneously, but barely affected intracity travel, or the isolation of rural households. Railways were complements to horse travel and thus lead to an increase in the demand for horses for urban travel.
There's one mass consumption good for which quality adjusted price indices have existed for a long time (at least in the US): cars. That's remarkable enough in its own right, but here's a second issue: this adjustment also includes government-mandated changes in quality. Some of them (safety belts) have obvious private benefits - but the adjustment in the price index also takes into account emission standards. In other words, all the technological changes that were required to meet emission standards (and that came as a cost to consumers) were treated as improvements in quality that benefited the consumer rather than society at large. This really shows once again how careful you have to be in the interpretation of figures whose meaning may appear obvious. The construction of statistics involves a lot of human value judgements.
There’s more to the 1930s and 1940s than the Great Depression and the war
One thing that is also really amazing, and completely runs against what we would expect, is that the period of the Great Depression was a decade of breathtaking product innovation and improvements in productivity. What was lacking was the aggregate demand for the goods that could potentially be produced.
It took the Second World War to translate these changes in potential growth into actual growth, and not just because the war was a Keynesian stimulus that "even conservatives would approve of".
The war boosted the productive capacity of the US beyond recognition. Between 1940 and 1945, the number of machine tools in the US doubled. In that period, the federal government purchased productive equipment that corresponded to 50% of the privately owned capital stock in 1941. The war thus led to a massive expansion of the capital stock in the US.
In Gordon’s words: "in 1942-45, the production genius of the United States... stretched its imagination to perform feats never imagined, but after imagination took over and the wartime goals were achieved, the economy did not forget"
The television s as a tool for emancipation
Some people may lament the impact of television on more "elevated" types of spending one's leisure time, but one thing that is undoubtedly true is that television has led to a decrease in inequality in consumption without decreasing inequality in income: once a person has made the initial expense of buying a television set, a person that is poor in income can consume exactly the same programs as a billionaire. Gordon also highlights how important television was for black people in the American south: it was one leisure activity they couldn't be excluded from.
This is one of the reasons why discussions about inequality should not stop with the evolution of income inequality, but should also look at the evolution of inequality in consumption.
Robert Gordon is probably the most famous of the techno pessimists, who claim that there are fundamental reasons for the slowdown in productivity growth observed in the US since the early 1970s, and that it is very unlikely that the underlying causes will change in the foreseeable future, if ever. (see https://www.goodreads.com/review/show... on this issue)
Although Gordon’s book entirely focuses on the US, it does contain masses of insights that are generally valid, and it makes the book well worth reading even if you are not American.
Some key points in the book are:
• The key driving force behind economic growth is technical change, not the accumulation of capital ("Without technical change, capital accumulation would amount to piling wooden plows on top of existing wooden plows" Evsey Domar) -
• The years between 1870 and 1940 were an unbelievably innovative period, with inventions that improved daily lives beyond recognition: plumbed water, electricity, washing machines, refrigerators, air conditioning, telephone, cars.
• Changes in real GDP underestimate the impact of those changes on wellbeing - by a lot (one example given by Gordon is the monotony of meals if you are limited to locally produced seasonal vegetables and fruit – refrigeration in transport and storage has fundamentally changed the quality of our diets)
• Once this potential was realised, the scope for inventions with a similar impact on daily lives was greatly reduced (“plumbing and flushed toilets could only be invented once”).
• Since the 1970s, the only areas of live where developed countries have known improvements that are comparable to what happened between 1870 and 1940 are entertainment and communication.
• Gordon himself admits that innovation is still happening; his key argument is that the impact on our daily lives is less dramatic than the impact of the innovations of the past. To paraphrase Robert Gordon: if you think that smartphones are more transformative than air conditioning and washing machines, it is because you never had to wash your clothes by hand in sweltering heat.
Gordon’s book is an encyclopedic illustration of these points. This ambition to be exhaustive has the great merit that no one can accuse Gordon of cherry picking his evidence. But it is also the book Achilles heel: it is an extremely long read (it took me something like six weeks to finish the book), and, at times, rather tiresome. Although the topic is something that should not just be of interest to economic historians, the thoroughness of the treatment may be off putting.
Nevertheless, this is essential reading for anyone who wants to put our current difficulties and challenges in perspective, and who wants to understand just by how much human lives have improved over the last 150 years. This book is the best remedy against nostalgia for “the good old days”.
In the remainder of this review, I touch on some topics that I found particularly interesting.
How we dealt with the Covid19 pandemic may prove Gordon wrong
Gordon’s asked: "what has had the biggest impact on human welfare, the flush toilet or the Internet?". to illustrate his points that the breakthroughs with the biggest impact were behind us. Since the pandemic, this question is no longer a rhetorical one.
While it is pretty obvious that a lockdown without flush toilets wouldn't be very comfortable or hygienic, it is also clear that the Internet contributes to a large extent to making the lockdown viable from a social point of view. It has also helped us to avoid the stark choice between a complete collapse of economic activity and not slowing down the spread of the virus. This is probably the point where we all come to appreciate how much the Internet has changed our lives without us taking notice.
Thanks to ICT, logistical processes have been reorganised in a record time (Gordon’s statement that "Categories of personal consumption expenditures that felt little effect from the ICT revolution were the purchase of food for consumption and away from home" didn't age well.).
And the speed with which new vaccines have been developed also demonstrates that spectacular advances in medicine are still possible.
The measurement of changes in quality
One of the fundamental problems in time series of economic aggregates like GDP is that, through time, it's not just relative prices that change, but also the overall price level (deflation or inflation). In order to compare apples in 1920 with apples in 2020, economic statisticians recalculate GDP "at constant prices" - thus, with prices in a base year. What the people are not always aware of, is that there are truckloads of issues with this approach, especially in the long run.
For instance, new goods and services are usually included in the price basket with a serious lag compared to their introduction. Gordon repeatedly points out that this leads to a serious underestimate of real changes in living standards. Cars and videorecorders were for instance only included in the price basket long after the most spectacular improvements in price and quality took place. As a result, official GDP figures will never capture the impact of those initial improvements that turned them into viable mass consumption items.
Another challenge are changes in quality. Whatever your grandparents are telling you, Gordon gives rather convincing arguments that quality for most consumer goods has steadily improved over time. Thus, a general increase in the price level reflects at least partly the effect of an overall improvement in quality. Thus, again, this is a point where changes in GDP "at constant prices" will underestimate real changes in living standards. (In his academic work, Gordon has contributed to the measurement of quality adjusted price indices for specific goods, so he knows very well what he’s talking about).
Advances in clean technologies
Some of the most spectacular advances of the last decade are in the field of clean technologies: renewable energy and storage. Now, that's obviously a very good thing. As the Bloomberg columnist Noah Smith recently wrote, "This is going to do a lot to help stop climate change and make civilization sustainable. That in and of itself is a form of unmeasured productivity growth."
Well, that depends on how you define growth. Gordon points out that if you look at the improvement in the quality of cars since the 1970s, a lot is about elements (safety, the environment) that are good for society but not always for the driver.
In other words, these are technological developments that are good for human welfare, but that are not captured in the market values of goods. This is a limitation of GDP that is well known to everyone who has ever had a good introduction to macroeconomics. You can have a GDP of (purely hypothetical figures) 30 000 EURO per capita where everyone is free to pollute, or one of 25 000 per capita where there exist regulations that limit pollution.
Which one would you prefer? This is not something that can be answered in the abstract. It depends on how you value (as a society) the market goods you can buy versus (very real) costs of pollution. The important thing to keep in mind that slowdowns in the growth of GDP that result from the regulation of pollution are not necessarily a bad thing. GDP is an indicator, and it is an important one. But it does not reflect everything that matters.
Three specific points about environmental innovation in the transport sector
People are rightly concerned about the environmental consequences of first generation biofuels in transport. But the zero generation was even worse. In 1900, one quarter of American grain output was eaten by horses. The excrements left by horses and the evacuation of their cadavers were a major issue of urban hygiene in the late nineteenth century.
It is often discussed in the literature on energy transitions how the transition from sail ships to steamships took decades. But the transition from horse drawn streetcars to electrified streetcars took just 12 years. Railways revolutionized intercity travel almost instantaneously, but barely affected intracity travel, or the isolation of rural households. Railways were complements to horse travel and thus lead to an increase in the demand for horses for urban travel.
There's one mass consumption good for which quality adjusted price indices have existed for a long time (at least in the US): cars. That's remarkable enough in its own right, but here's a second issue: this adjustment also includes government-mandated changes in quality. Some of them (safety belts) have obvious private benefits - but the adjustment in the price index also takes into account emission standards. In other words, all the technological changes that were required to meet emission standards (and that came as a cost to consumers) were treated as improvements in quality that benefited the consumer rather than society at large. This really shows once again how careful you have to be in the interpretation of figures whose meaning may appear obvious. The construction of statistics involves a lot of human value judgements.
There’s more to the 1930s and 1940s than the Great Depression and the war
One thing that is also really amazing, and completely runs against what we would expect, is that the period of the Great Depression was a decade of breathtaking product innovation and improvements in productivity. What was lacking was the aggregate demand for the goods that could potentially be produced.
It took the Second World War to translate these changes in potential growth into actual growth, and not just because the war was a Keynesian stimulus that "even conservatives would approve of".
The war boosted the productive capacity of the US beyond recognition. Between 1940 and 1945, the number of machine tools in the US doubled. In that period, the federal government purchased productive equipment that corresponded to 50% of the privately owned capital stock in 1941. The war thus led to a massive expansion of the capital stock in the US.
In Gordon’s words: "in 1942-45, the production genius of the United States... stretched its imagination to perform feats never imagined, but after imagination took over and the wartime goals were achieved, the economy did not forget"
The television s as a tool for emancipation
Some people may lament the impact of television on more "elevated" types of spending one's leisure time, but one thing that is undoubtedly true is that television has led to a decrease in inequality in consumption without decreasing inequality in income: once a person has made the initial expense of buying a television set, a person that is poor in income can consume exactly the same programs as a billionaire. Gordon also highlights how important television was for black people in the American south: it was one leisure activity they couldn't be excluded from.
This is one of the reasons why discussions about inequality should not stop with the evolution of income inequality, but should also look at the evolution of inequality in consumption.
Want to read
September 26, 2021this is a big ass book.....
Factoids.....
Maily talks about the century 1870:to 1970
With gas motors no longer did the country need 1/4 of its agrigiculural land dedicated to feeding horses.
Transportation between 1830 to 1958 reach its 100% of transportation speed increase.
Elevators allowed skyscrapers.
Households in late 19 century spent half of family budget on food.
Mason Jars and canned meat
Medicine,waterworks,manufactured clothes,appliances,
Inventions after 1970 les special....
Factoids.....
Maily talks about the century 1870:to 1970
With gas motors no longer did the country need 1/4 of its agrigiculural land dedicated to feeding horses.
Transportation between 1830 to 1958 reach its 100% of transportation speed increase.
Elevators allowed skyscrapers.
Households in late 19 century spent half of family budget on food.
Mason Jars and canned meat
Medicine,waterworks,manufactured clothes,appliances,
Inventions after 1970 les special....
April 21, 2019
In almost every way, this is a 5-star book.
Why did I give it 4 stars?
Let's start with why this book is a must-read. Gordon challenged many of my priors, but he presents extremely persuasive evidence and arguments for the idea that the century between 1870 and 1970 was one-of-a-kind and probably not reproducible any time soon.
The argument is incredibly important because it ought to shape our expectations for what the world will look like in 20 to 50 years. And that is a world that won't be very much different to the one we already live in, at least as far as to how we live, except for wage and living standard regression for "non-cognitive" labor. (This latter phenomenon is already happening.)
When I first began studying economics, I learned from economists like Mises that the primary driver of economic growth was capital accumulation. The more capital the economy had, the more productive the labor force.
I learned later that this is wrong. There is a residual in productivity growth that increases in capital and labor can't explain, the Solow residual.
Gordon persuasively makes the case that it was this residual which explains why the century between 1870 and 1970 was so special and very difficult to reproduce. Indeed, it was during these 100 years that technologies like electricity, the engine, plumbing, central heating, radio, television, etc. were invented. Putting in perspective, and borrowing from Gordon, how we live today is very similar to how someone lived in 1940, but how someone lived in 1940 was a magnitude-worth of an improvement compared to how someone lived in 1870.
He argues, furthermore, that although the post-1970s have the internet, we've seen most of the productivity growth benefit of this invention already.
I'll come back to this.
There is a strong argument he makes that goes against conventional economic thinking. We learn in economics that as peoples' income grows, they start to substitute labor for leisure. The workday decreases because people don't need to work as much; at the margin, that extra hour of work is less valuable than that extra hour of leisure activities.
Gordon makes the case that the relationship is actually the opposite. Legislation that reduced work hours increased labor productivity because workers were happier.
Unfortunately, when it comes time to discuss this theory he only provides a handful of pages on it. There is no theoretical argument, just a lot of "musts." It's the type of argument someone makes when they just want you to accept it versus trying to prove it to you. His case here is very weak, which frustrated me because he had already done such a magnificent job of educating me and correcting many of my misconceptions. Here, however, he was unpersuasive and the argument came off as poorly thought out.
Relatedly, there is a part where he argues that high tariffs and low immigration may have improved living standards among workers because it kept wages high and protected profit margins.
Empirically, average tariff rates fell since the end of the war. In fact, they fell quite considerably. They were also low during the productivity spurt of the 90s, and immigration then was also high. The conclusion also conflicts with his reference to research by Ottaviano and Peri that shows that the downward pressure on wages is predominately concentrated on other immigrants. There are natural advantages natives have, such as being able to speak their own language fluently, they leverage in job markets.
Furthermore, outside of this small section, Gordon continues to make the case that technology was the main explanatory factor behind the productivity growth between 1870 and 1940. Why not leave it at that?
Productivity growth was especially fast between 1940 and 1970. That was an era we like to associate with union-dominated industries and strong regulations. Airlines were highly regulated, cabin space was bigger,* and there weren't any long airport lines! (It's not like post-9/11 security regulation isn't responsible for that.)
* The average quality of a passenger's experience decreased post-deregulation. The lowest rates have dropped since deregulation. By decreasing the average experience, airlines were able to provide the experience to three times the passengers, measured in miles.
Gordon admits that it took time for new inventions to impose themselves so systematically on the American standard of living. Once the automobile began mass production, it took off very quickly. But it took four decades for the first automobile to be mass produced. In fact, the history of the automobile was very tumultuous in the late 1880s, and like with self-driving cars today there were many people who were skeptical about the applicability of engine technology.
Furthermore, the spread of technology was uneven. Tenant farmers in the south, who were mostly African-Americans, did not get plumbing, central heating, and other luxuries that northern, midwestern, and western populations took for granted until relatively late.
The television also expanded very quickly into the American home once it began mass production. But this occurred in the 1940s. That's at least eight decades it took for the technological inventions of the mid- and late 19th century to materialize into the television.
It, therefore, is curious to me that Gordon makes the comment on the possible positive impact of high tariffs and low immigration, when the especially high productivity growth rate between the 40s and 70s could just as well be explained by technological latency.
The automobiles of the post-war were better and cheaper than those before the war. The government built the federal highway system and state governments followed. The television took off in the post-war, as did the LP's impact on the music industry. Commercial flight took off in the post-war. If Gordon's overall argument is to be believed, and I do believe it was highly persuasive, then it follows that it was the introduction of these technologies within the same general period of time that accounts for the especially high productivity growth between 1940 and 1970.
It's worth noting that Gordon mentions that by 1920 50% of the American population were immigrants or descendants of immigrants. Immigration to the U.S. begins increasing rapidly in 1850, by around 1900 15% of the U.S. population was foreign-born. In his closing chapter, where he provides several policy proposals, he also favors reducing barriers to immigration, although he states an explicit preference for high-skill immigrants.
Finally, although my priors on the subject have shifted considerably since reading the book, I am not totally convinced that we've seen the full productivity growth from the internet. Let me begin by admitting that Gordon's case is very strong, because the data does show a decrease in entrepreneurship and it's indisputable that apart from the internet modern inventions have yet to compare to things like clean, running water, modern medicine, air conditioning, television, air travel and basically everything invented between 1870 and 1970.
I agree that it doesn't look like we will achieve the same productivity growth between 1940 and 1970.
Still, there's a case to be made that just like the inventions of the 1870s took time to fully mature, the invention of the internet and, more importantly, its marriage with other ideas is still a work in progress and that we'll only truly know its impact in hindsight.
Gordon mentions several times how the mechanization of agriculture freed up labor for the production plants of the big city. This labor force transition, and then the one from industry to service, is very important in the story of American growth. Then why does Gordon downplay the labor force transition that automation will inevitably produce? He does talk about it, but he focuses on the fact that automation is likely to be complementary to labor, meaning that people will still have jobs. He does not focus on the types of jobs they'll have, which is a significant question given the magnitude of the two earlier labor force transitions in modern American history. It's likely to have an important impact on the standard of living, one way or the other.
Besides, the internet isn't just the internet. Social media is on the internet, but it's an industry of its own. And it has completely changed modern society. Just like radio and television brought the people closer to government, so does the internet. But, rather than just a method of feeding an image, whether via sound or picture, social media is dynamic. The people can engage back with the government now, and it's often ugly.
Yes, businesses incorporated computers, the internet, and internet marketing very quickly. But, for example, the multi-billion dollar (Google earned $24 billion in Q3 of 2018) ad industry is a phenomenon of the post-2000s. Google revenue in 2002 was 0.4 billion.
China placed a dental implant with a robotic arm. Dentists regularly use 3D printing now to make dental crowns in their office, reducing administrative, logistics, and time costs. A dental implant costs about $3,500 to place, on average. They are expensive and a luxury for the middle class. Technologies that lower costs can help reduce rates of edentulism. Research shows that smiles considered to be unattractive can lower income by 5% on average compared to the average smile.
VR technology can completely change how we experience audiovisual entertainment. Already, video game technology has changed the way we interact with entertainment. We're no longer getting passively fed with information, we're engaging with it. And VR will completely change that experience. It may also completely change industries like sports, an industry already now competing against an ever-growing e-sport industry. If you can sell millions of court-side experiences through VR, what does that mean for stadiums?
Drones and autonomous vehicles may cause us to go out to eat less and order-in more. That will free up time for other activities, making leisure time more efficient. Furthermore, in conjunction with improvements in online communication, the nature of work is slowly changing as well. It's common in cognitive jobs for employees to be able to work from home, even if its a few days a month. Four days a month turns a 5-day work week into a 4-day work week in the office and 1-day in your pajamas at home.
By themselves, these technologies will impact productivity marginally. My argument is that there's a good chance of many of these marginal impacts taking place over a specific period of time, similar to those that took place between 1940 and 1970. Of course, similar only in the effect of technological latency, for it still remains true that the internet alone does not match the scale of the inventions that took place prior to 1970. There is a case for a coming period of higher productivity growth, but it's not likely to match that of the post-war era.
I also think there's room for disagreement on some of his arguments for low future productivity growth. He mentions the decline in the quality of education. Education has declined, but only if you think education starts and stops at formal schooling. Couldn't it be that higher education has simply become too rigid and disconnected from the market to teach the skills the modern labor force needs for an increasingly digitized economy? This is one place where he understates the impact of the internet. Research shows that job interviewers in technological industries are increasingly favoring Coursera and similar education over traditional masters degrees.*
* http://blog.interviewing.io/lessons-f...
There are ways of making education more flexible and it's possible that universities, for whatever reason (administrative bloat), are losing the competition. But because traditional education is so entrenched in our culture the transition is taking a long time. Isn't it absurd that some people are paying $50,000+ for degrees without really considering the marketability of the skills they're learning?
The impact of these gradual changes in educational preferences, in the sense of the institutions which best serve the consumer, are left undiscussed.
Nevertheless, I agree with Gordon's proposal to publicly fund preschool. He's right that it's those early years that are most important to an individual's cognitive development. Preschool should be publicly funded. And you could make it an easy policy to swallow by taking money from higher education. If people think more money should go to higher education then future policy can deal with that. But, given the decreasing marginal impact of dollar spend on higher education, why not repurpose it to preschool where the returns will be much greater?
One suggestion Gordon doesn't discuss is the possibility of introducing tax incentives for companies to subsidize employee education. As someone who works in a technologically-oriented industry, marketing (and marketing automation), continuously learning is crucial for remaining competitive and raising my income. My traditional higher education was important because I chose quantitative economics precisely because I knew working with data and models would be crucial in the new economy. My first job was completely unrelated. I was a writer for an agency. I used the position to eventually jump to data analysis. Most of my learning for my progress was on the job. My traditional education now plays a very small roll, less than 1%. If my employer had an incentive to subsidize my on-the-job education (because general training suffers from externality problems -- whose to say you don't take that higher human capital to a competitor?) that would incentivize better education in the United States.
Other reasons Gordon gives for pessimism are powerful and most likely true. Market-based subsidization of education works great for industries where the skills are relevant. Many Americans are not in that sector, not yet. And many of those Americans are having problems finding jobs within their own sectors. Manufacturing output is not declining, but labor in manufacturing is. Gordon shows conclusively that for these Americans standards of living may decrease because of falling wages. Furthermore, these Americans are more likely to grow up in single-family homes, divorce themselves, use drugs, and go to prison. Prison and drug-use has barred a disproportionate number of low-income Americans from the job market.
There has to be a solution for bringing modern education to marginalized groups, in the same way that there had to be solutions implemented to bring the post-1870s technologies to the rural south after the 1940s.
Public preschool is one solution. A wider concept of public subsidization of higher education, shifting from traditional to internet-based options, may be another.
Overall, I quite enjoyed the book. If it was up to me, everyone would read it.
The main lesson, that technology is the main determinant of American productivity growth, is extremely well argued.
The reasons for pessimism about the future are also persuasive, even if not as persuasive. If Gordon is wrong in his outlook, it's a question of margin rather than theory.
Finally, his policy proposals are sensible and should be weighted fairly.
Why did I give it 4 stars?
Let's start with why this book is a must-read. Gordon challenged many of my priors, but he presents extremely persuasive evidence and arguments for the idea that the century between 1870 and 1970 was one-of-a-kind and probably not reproducible any time soon.
The argument is incredibly important because it ought to shape our expectations for what the world will look like in 20 to 50 years. And that is a world that won't be very much different to the one we already live in, at least as far as to how we live, except for wage and living standard regression for "non-cognitive" labor. (This latter phenomenon is already happening.)
When I first began studying economics, I learned from economists like Mises that the primary driver of economic growth was capital accumulation. The more capital the economy had, the more productive the labor force.
I learned later that this is wrong. There is a residual in productivity growth that increases in capital and labor can't explain, the Solow residual.
Gordon persuasively makes the case that it was this residual which explains why the century between 1870 and 1970 was so special and very difficult to reproduce. Indeed, it was during these 100 years that technologies like electricity, the engine, plumbing, central heating, radio, television, etc. were invented. Putting in perspective, and borrowing from Gordon, how we live today is very similar to how someone lived in 1940, but how someone lived in 1940 was a magnitude-worth of an improvement compared to how someone lived in 1870.
He argues, furthermore, that although the post-1970s have the internet, we've seen most of the productivity growth benefit of this invention already.
I'll come back to this.
There is a strong argument he makes that goes against conventional economic thinking. We learn in economics that as peoples' income grows, they start to substitute labor for leisure. The workday decreases because people don't need to work as much; at the margin, that extra hour of work is less valuable than that extra hour of leisure activities.
Gordon makes the case that the relationship is actually the opposite. Legislation that reduced work hours increased labor productivity because workers were happier.
Unfortunately, when it comes time to discuss this theory he only provides a handful of pages on it. There is no theoretical argument, just a lot of "musts." It's the type of argument someone makes when they just want you to accept it versus trying to prove it to you. His case here is very weak, which frustrated me because he had already done such a magnificent job of educating me and correcting many of my misconceptions. Here, however, he was unpersuasive and the argument came off as poorly thought out.
Relatedly, there is a part where he argues that high tariffs and low immigration may have improved living standards among workers because it kept wages high and protected profit margins.
Empirically, average tariff rates fell since the end of the war. In fact, they fell quite considerably. They were also low during the productivity spurt of the 90s, and immigration then was also high. The conclusion also conflicts with his reference to research by Ottaviano and Peri that shows that the downward pressure on wages is predominately concentrated on other immigrants. There are natural advantages natives have, such as being able to speak their own language fluently, they leverage in job markets.
Furthermore, outside of this small section, Gordon continues to make the case that technology was the main explanatory factor behind the productivity growth between 1870 and 1940. Why not leave it at that?
Productivity growth was especially fast between 1940 and 1970. That was an era we like to associate with union-dominated industries and strong regulations. Airlines were highly regulated, cabin space was bigger,* and there weren't any long airport lines! (It's not like post-9/11 security regulation isn't responsible for that.)
* The average quality of a passenger's experience decreased post-deregulation. The lowest rates have dropped since deregulation. By decreasing the average experience, airlines were able to provide the experience to three times the passengers, measured in miles.
Gordon admits that it took time for new inventions to impose themselves so systematically on the American standard of living. Once the automobile began mass production, it took off very quickly. But it took four decades for the first automobile to be mass produced. In fact, the history of the automobile was very tumultuous in the late 1880s, and like with self-driving cars today there were many people who were skeptical about the applicability of engine technology.
Furthermore, the spread of technology was uneven. Tenant farmers in the south, who were mostly African-Americans, did not get plumbing, central heating, and other luxuries that northern, midwestern, and western populations took for granted until relatively late.
The television also expanded very quickly into the American home once it began mass production. But this occurred in the 1940s. That's at least eight decades it took for the technological inventions of the mid- and late 19th century to materialize into the television.
It, therefore, is curious to me that Gordon makes the comment on the possible positive impact of high tariffs and low immigration, when the especially high productivity growth rate between the 40s and 70s could just as well be explained by technological latency.
The automobiles of the post-war were better and cheaper than those before the war. The government built the federal highway system and state governments followed. The television took off in the post-war, as did the LP's impact on the music industry. Commercial flight took off in the post-war. If Gordon's overall argument is to be believed, and I do believe it was highly persuasive, then it follows that it was the introduction of these technologies within the same general period of time that accounts for the especially high productivity growth between 1940 and 1970.
It's worth noting that Gordon mentions that by 1920 50% of the American population were immigrants or descendants of immigrants. Immigration to the U.S. begins increasing rapidly in 1850, by around 1900 15% of the U.S. population was foreign-born. In his closing chapter, where he provides several policy proposals, he also favors reducing barriers to immigration, although he states an explicit preference for high-skill immigrants.
Finally, although my priors on the subject have shifted considerably since reading the book, I am not totally convinced that we've seen the full productivity growth from the internet. Let me begin by admitting that Gordon's case is very strong, because the data does show a decrease in entrepreneurship and it's indisputable that apart from the internet modern inventions have yet to compare to things like clean, running water, modern medicine, air conditioning, television, air travel and basically everything invented between 1870 and 1970.
I agree that it doesn't look like we will achieve the same productivity growth between 1940 and 1970.
Still, there's a case to be made that just like the inventions of the 1870s took time to fully mature, the invention of the internet and, more importantly, its marriage with other ideas is still a work in progress and that we'll only truly know its impact in hindsight.
Gordon mentions several times how the mechanization of agriculture freed up labor for the production plants of the big city. This labor force transition, and then the one from industry to service, is very important in the story of American growth. Then why does Gordon downplay the labor force transition that automation will inevitably produce? He does talk about it, but he focuses on the fact that automation is likely to be complementary to labor, meaning that people will still have jobs. He does not focus on the types of jobs they'll have, which is a significant question given the magnitude of the two earlier labor force transitions in modern American history. It's likely to have an important impact on the standard of living, one way or the other.
Besides, the internet isn't just the internet. Social media is on the internet, but it's an industry of its own. And it has completely changed modern society. Just like radio and television brought the people closer to government, so does the internet. But, rather than just a method of feeding an image, whether via sound or picture, social media is dynamic. The people can engage back with the government now, and it's often ugly.
Yes, businesses incorporated computers, the internet, and internet marketing very quickly. But, for example, the multi-billion dollar (Google earned $24 billion in Q3 of 2018) ad industry is a phenomenon of the post-2000s. Google revenue in 2002 was 0.4 billion.
China placed a dental implant with a robotic arm. Dentists regularly use 3D printing now to make dental crowns in their office, reducing administrative, logistics, and time costs. A dental implant costs about $3,500 to place, on average. They are expensive and a luxury for the middle class. Technologies that lower costs can help reduce rates of edentulism. Research shows that smiles considered to be unattractive can lower income by 5% on average compared to the average smile.
VR technology can completely change how we experience audiovisual entertainment. Already, video game technology has changed the way we interact with entertainment. We're no longer getting passively fed with information, we're engaging with it. And VR will completely change that experience. It may also completely change industries like sports, an industry already now competing against an ever-growing e-sport industry. If you can sell millions of court-side experiences through VR, what does that mean for stadiums?
Drones and autonomous vehicles may cause us to go out to eat less and order-in more. That will free up time for other activities, making leisure time more efficient. Furthermore, in conjunction with improvements in online communication, the nature of work is slowly changing as well. It's common in cognitive jobs for employees to be able to work from home, even if its a few days a month. Four days a month turns a 5-day work week into a 4-day work week in the office and 1-day in your pajamas at home.
By themselves, these technologies will impact productivity marginally. My argument is that there's a good chance of many of these marginal impacts taking place over a specific period of time, similar to those that took place between 1940 and 1970. Of course, similar only in the effect of technological latency, for it still remains true that the internet alone does not match the scale of the inventions that took place prior to 1970. There is a case for a coming period of higher productivity growth, but it's not likely to match that of the post-war era.
I also think there's room for disagreement on some of his arguments for low future productivity growth. He mentions the decline in the quality of education. Education has declined, but only if you think education starts and stops at formal schooling. Couldn't it be that higher education has simply become too rigid and disconnected from the market to teach the skills the modern labor force needs for an increasingly digitized economy? This is one place where he understates the impact of the internet. Research shows that job interviewers in technological industries are increasingly favoring Coursera and similar education over traditional masters degrees.*
* http://blog.interviewing.io/lessons-f...
There are ways of making education more flexible and it's possible that universities, for whatever reason (administrative bloat), are losing the competition. But because traditional education is so entrenched in our culture the transition is taking a long time. Isn't it absurd that some people are paying $50,000+ for degrees without really considering the marketability of the skills they're learning?
The impact of these gradual changes in educational preferences, in the sense of the institutions which best serve the consumer, are left undiscussed.
Nevertheless, I agree with Gordon's proposal to publicly fund preschool. He's right that it's those early years that are most important to an individual's cognitive development. Preschool should be publicly funded. And you could make it an easy policy to swallow by taking money from higher education. If people think more money should go to higher education then future policy can deal with that. But, given the decreasing marginal impact of dollar spend on higher education, why not repurpose it to preschool where the returns will be much greater?
One suggestion Gordon doesn't discuss is the possibility of introducing tax incentives for companies to subsidize employee education. As someone who works in a technologically-oriented industry, marketing (and marketing automation), continuously learning is crucial for remaining competitive and raising my income. My traditional higher education was important because I chose quantitative economics precisely because I knew working with data and models would be crucial in the new economy. My first job was completely unrelated. I was a writer for an agency. I used the position to eventually jump to data analysis. Most of my learning for my progress was on the job. My traditional education now plays a very small roll, less than 1%. If my employer had an incentive to subsidize my on-the-job education (because general training suffers from externality problems -- whose to say you don't take that higher human capital to a competitor?) that would incentivize better education in the United States.
Other reasons Gordon gives for pessimism are powerful and most likely true. Market-based subsidization of education works great for industries where the skills are relevant. Many Americans are not in that sector, not yet. And many of those Americans are having problems finding jobs within their own sectors. Manufacturing output is not declining, but labor in manufacturing is. Gordon shows conclusively that for these Americans standards of living may decrease because of falling wages. Furthermore, these Americans are more likely to grow up in single-family homes, divorce themselves, use drugs, and go to prison. Prison and drug-use has barred a disproportionate number of low-income Americans from the job market.
There has to be a solution for bringing modern education to marginalized groups, in the same way that there had to be solutions implemented to bring the post-1870s technologies to the rural south after the 1940s.
Public preschool is one solution. A wider concept of public subsidization of higher education, shifting from traditional to internet-based options, may be another.
Overall, I quite enjoyed the book. If it was up to me, everyone would read it.
The main lesson, that technology is the main determinant of American productivity growth, is extremely well argued.
The reasons for pessimism about the future are also persuasive, even if not as persuasive. If Gordon is wrong in his outlook, it's a question of margin rather than theory.
Finally, his policy proposals are sensible and should be weighted fairly.
August 29, 2016
Thorough and fascinating. Basically, Picketty's Capital with examples. I think I don't fully agree that it is knowable whether we have game changing discoveries yet to come. Though I am convinced that it is unlikely.
June 3, 2017
This is an excellent book, and I fell into the trap of waiting a long time to write my GR review because I wanted to write a really good one, and now the book has receded in my memory a bit (and I didn't take good notes). However! It was a good enough book that I still have a pretty strong picture of the arguments in it.
Although Gordon doesn't phrase it as such, the main thing I think he is fighting against in this book is the assumption that the economy is an ergodic system. Roughly speaking, this assumption means that the system has the same probabilistic behavior over time, and that a sample in time contains dynamics that are representative of the whole. This is such a common assumption in economics that it is almost never even mentioned as such. Any time an economist estimates a model on some time series of data and uses that to generalize about the future, she is making this ergodic assumption. Because of the nature of economic data collection, we generally have data available only for the post-Depression or post-war period.
Gordon's argument is essentially that this is a dangerous and wrong assumption to make. He discourages us from assuming that economic growth is a continuous or time-homogeneous process, where we "can expect" some certain level of average growth per year. He makes this argument by taking a very detailed look at the history of concrete inventions from 1870 to the present. He uses a lot of detailed and creative data sources to do this (the Sears catalog plays an important role!).
A good summary of his arguments is available here:
https://www.lse.ac.uk/website-archive...
I won't go over them in detail because you can read them there, but very briefly: For most of recorded history economic growth was approximately zero. From the late eighteenth to early nineteenth century the "first industrial revolution" occurred, primarily characterized by the development of steam power. This was important for industry and started some major trends in motion, but didn't have a huge impact on most people's everyday lives. From 1870 to 1920, the "second industrial revolution" occurred, and this is the one that had the biggest impact on people's lives: the internal combustion engine, electrification, sewers and public health innovations. The impact of this second IR actually continued through about 1970 as inventions were refined and spread to more or less everyone in developed countries, with jet air travel and air conditioning being about the last echoes of this IR to make a big difference in people's lives. He recognizes that what some might call a "third IR" of computing and electronic networking occurred in the post-1970 era, but argues that it is not nearly as meaningful as the prior two.
His thesis is essentially that we tend to implicitly assume that the level of growth seen in the 1920-1970 era represents "normal behavior" for an industrial economy and therefore a level that we should generally expect and strive for, but that in fact, it was essentially a "one time dividend" based on the working out of some huge quality of life improvements that could only happen once. This is a bold argument but I think he makes a strong case for it. Although I found his regular use of the phrase "could only happen once" a little annoying, he does a good job of portraying what a complete revolution in ordinary living conditions was effected by these inventions. Moving from only being able to get light and heat by burning stuff (that you had to haul to your house) to getting electricity at the flip of a switch; similarly moving from (women) carrying water back and forth all day to getting it directly from the faucet (and being able to flush the toilet). Moving from horse power to the internal combustion engine. Essentially overcoming infant mortality. He makes a strong case that living in 1870 would seem unimaginably difficult to most of us, but that living in 1940 would seem more or less familiar.
Looking at the economic statistics, he shows that total factor productivity growth was unusually high in the 1920-1970 era, and has subsided since. There was a mild boost beginning in the 1990s that he argues represents the impact of the IT revolution, but this boost has already subsided and Gordon argues that the IT revolution has already run its course in terms of providing economic benefits to average people. He makes a very strong case against the argument that economic statistics do not sufficiently recognize benefits from modern technology--or rather affirms it, but argues that the omissions were far greater regarding technology from the second IR.
One key observation of Gordon's is that the impacts of technological development are generally forecast-able about 20-25 years out. This is because there tends to be a lag of about this length between discovery or proof of concept and the integration of the invention into everyday life or business practices. Based on the current state of technology, he argues that we should expect very low or stagnant growth over the next couple of decades (and he doesn't wish to conjecture further out than that). Reading over his discussion of medium-term technology trends, it felt hard to disagree with him--hard to think of anything on the horizon that could make as big of a difference in people's lives as the inventions of the second IR. (Of course, this is focused on people living in developed countries--there is quite a bit of improvement that could occur for people in developing countries, but that is a matter of distribution rather than of technology, and is in any case irrelevant for US growth.)
He talks specifically about several things that are currently hyped. I don't have the book in front of me but I think the Powerpoint I linked to mentions most of them. Self-driving cars are probably the most hyped one right now. He argues that they don't make a huge difference for consumers because you still have to be physically in the car; it's just a matter of being able to direct your attention elsewhere--which is nice, but not huge. He says that the more significant potential impact is in trucking, but that much of truckers' work is unloading, stocking, etc., things that are not likely to be replaced in the next couple of decades. He mentions 3-D printing and AI, but sees both as evolutionary or zero-sum developments. In terms of medical developments, it seems obvious that even something huge like curing cancer would not have nearly the impact of essentially curing infant mortality; he also points out that even in developed countries, much of health and mortality is distributional rather than technological, with the wealthy enjoying significantly longer life spans.
I tend to think that Gordon slightly underrates the importance of self-driving cars by not considering knock-on effects, but overall I basically agree with him. I do think they are likely to make it more feasible for most Americans to live without their own car at all. A car is a big expense for most families, although it's not clear to me how much of the savings from that is likely to be passed on to consumers. I also think it's likely to reshape our patterns of living, and make it relatively more attractive to live outside of a major metro area, because the commute will be less onerous, and perhaps this will ease the pressure on urban rents. However, one might have said the same thing about IT allowing remote work, and that hasn't had a significant effect.
It's an interesting exercise to brainstorm possible future developments that really could have as much impact on the lives of ordinary people in the developed world as the developments of the second IR did--whether or not the technology seems to be on the horizon. I found it quite difficult. Here are the candidates I came up with:
-A nearly costless energy source, such as nuclear fusion. (It's interesting to note that, while there is a lot of technological development going on in energy right now, most of it is geared toward ameliorating the bad impact of climate change rather than achieving a positive impact.) This would drastically reduce the cost of a lot of things. In some sense it still wouldn't change our lives that much, since we already have electrical power and just have to pay for it. I do think it would be a plausible candidate for reducing or removing the need for people to work full time, which would be a big change.
-A medical breakthrough that essentially defeats aging. This is the only health-related breakthrough (again, focused on the developed world) that I could think of that would be as significant as defeating infant mortality. Plenty of people are working on this right now, though it's not at all clear how feasible it will be. It's also worth noting that it's not at all clear that achieving this would end up being an unmitigated good; see lots of sci-fi books.
This is honestly about it. Depending on your perspective, this exercise may make you feel good about where we are today, or feel bad about how many of our current problems are political/distributional, and not really solvable with technology. What are the other things people might mention? I think space travel and colonization are cool but wouldn't really be that beneficial to people's lives, especially since even an earth ravaged by climate change would be much more habitable than Mars. AI gets hyped a lot, and futurists tend to put a lot of stock into the idea that super-intelligent AIs could come up with great ideas that we can't even conceive of, but it's hard for me to deal with that concretely. Improving recommendations or being a digital butler don't seem like that big of improvements to me.
I'm not sure exactly what the take-aways from the book should be. Certainly inventors should keep working on cool stuff and try to prove him wrong. (And there is plenty of good technological work to be done in combating climate change and extending benefits of already-existing innovations to the global poor.) I suppose the strongest case to be made is toward orientation of policy actors. Trump's budget has rightly gotten a lot of flak for rosy growth assumptions (and double-counting), but I think in general if budget plans were forced to assume a very limited baseline for near-term growth, policy orientation might change a lot (and inequality might appear to be a much larger issue). I also wonder how much Gordon's lessons would imply for financial stability. One can obviously argue that the early-2000s tech bubble stemmed in part from assuming that the IT revolution would have economic consequences of a similar magnitude to the second IR. Can something similar be said for the housing bubble and 2008 collapse? Might monetary policy have been different under a drastically reduced assumption on potential output? I would think yes. Policymakers do seem to be slowly coming around to this viewpoint; see for example the consistently lowering estimates of potential output growth (http://jwmason.org/slackwire/what-do-...).
It's telling to me that one of the stronger "contra" arguments to the book, by Tyler Cowen (http://marginalrevolution.com/margina...), essentially centered on the possibility that Gordon was underestimating the possibility of totally unforeseen breakthroughs--certainly not impossible, but notably not at all a defense of the importance of recent technological developments. (And note that Cowen sounded a lot of the same notes as Gordon in his extended essay "The Great Stagnation" several years earlier!)
Although Gordon doesn't phrase it as such, the main thing I think he is fighting against in this book is the assumption that the economy is an ergodic system. Roughly speaking, this assumption means that the system has the same probabilistic behavior over time, and that a sample in time contains dynamics that are representative of the whole. This is such a common assumption in economics that it is almost never even mentioned as such. Any time an economist estimates a model on some time series of data and uses that to generalize about the future, she is making this ergodic assumption. Because of the nature of economic data collection, we generally have data available only for the post-Depression or post-war period.
Gordon's argument is essentially that this is a dangerous and wrong assumption to make. He discourages us from assuming that economic growth is a continuous or time-homogeneous process, where we "can expect" some certain level of average growth per year. He makes this argument by taking a very detailed look at the history of concrete inventions from 1870 to the present. He uses a lot of detailed and creative data sources to do this (the Sears catalog plays an important role!).
A good summary of his arguments is available here:
https://www.lse.ac.uk/website-archive...
I won't go over them in detail because you can read them there, but very briefly: For most of recorded history economic growth was approximately zero. From the late eighteenth to early nineteenth century the "first industrial revolution" occurred, primarily characterized by the development of steam power. This was important for industry and started some major trends in motion, but didn't have a huge impact on most people's everyday lives. From 1870 to 1920, the "second industrial revolution" occurred, and this is the one that had the biggest impact on people's lives: the internal combustion engine, electrification, sewers and public health innovations. The impact of this second IR actually continued through about 1970 as inventions were refined and spread to more or less everyone in developed countries, with jet air travel and air conditioning being about the last echoes of this IR to make a big difference in people's lives. He recognizes that what some might call a "third IR" of computing and electronic networking occurred in the post-1970 era, but argues that it is not nearly as meaningful as the prior two.
His thesis is essentially that we tend to implicitly assume that the level of growth seen in the 1920-1970 era represents "normal behavior" for an industrial economy and therefore a level that we should generally expect and strive for, but that in fact, it was essentially a "one time dividend" based on the working out of some huge quality of life improvements that could only happen once. This is a bold argument but I think he makes a strong case for it. Although I found his regular use of the phrase "could only happen once" a little annoying, he does a good job of portraying what a complete revolution in ordinary living conditions was effected by these inventions. Moving from only being able to get light and heat by burning stuff (that you had to haul to your house) to getting electricity at the flip of a switch; similarly moving from (women) carrying water back and forth all day to getting it directly from the faucet (and being able to flush the toilet). Moving from horse power to the internal combustion engine. Essentially overcoming infant mortality. He makes a strong case that living in 1870 would seem unimaginably difficult to most of us, but that living in 1940 would seem more or less familiar.
Looking at the economic statistics, he shows that total factor productivity growth was unusually high in the 1920-1970 era, and has subsided since. There was a mild boost beginning in the 1990s that he argues represents the impact of the IT revolution, but this boost has already subsided and Gordon argues that the IT revolution has already run its course in terms of providing economic benefits to average people. He makes a very strong case against the argument that economic statistics do not sufficiently recognize benefits from modern technology--or rather affirms it, but argues that the omissions were far greater regarding technology from the second IR.
One key observation of Gordon's is that the impacts of technological development are generally forecast-able about 20-25 years out. This is because there tends to be a lag of about this length between discovery or proof of concept and the integration of the invention into everyday life or business practices. Based on the current state of technology, he argues that we should expect very low or stagnant growth over the next couple of decades (and he doesn't wish to conjecture further out than that). Reading over his discussion of medium-term technology trends, it felt hard to disagree with him--hard to think of anything on the horizon that could make as big of a difference in people's lives as the inventions of the second IR. (Of course, this is focused on people living in developed countries--there is quite a bit of improvement that could occur for people in developing countries, but that is a matter of distribution rather than of technology, and is in any case irrelevant for US growth.)
He talks specifically about several things that are currently hyped. I don't have the book in front of me but I think the Powerpoint I linked to mentions most of them. Self-driving cars are probably the most hyped one right now. He argues that they don't make a huge difference for consumers because you still have to be physically in the car; it's just a matter of being able to direct your attention elsewhere--which is nice, but not huge. He says that the more significant potential impact is in trucking, but that much of truckers' work is unloading, stocking, etc., things that are not likely to be replaced in the next couple of decades. He mentions 3-D printing and AI, but sees both as evolutionary or zero-sum developments. In terms of medical developments, it seems obvious that even something huge like curing cancer would not have nearly the impact of essentially curing infant mortality; he also points out that even in developed countries, much of health and mortality is distributional rather than technological, with the wealthy enjoying significantly longer life spans.
I tend to think that Gordon slightly underrates the importance of self-driving cars by not considering knock-on effects, but overall I basically agree with him. I do think they are likely to make it more feasible for most Americans to live without their own car at all. A car is a big expense for most families, although it's not clear to me how much of the savings from that is likely to be passed on to consumers. I also think it's likely to reshape our patterns of living, and make it relatively more attractive to live outside of a major metro area, because the commute will be less onerous, and perhaps this will ease the pressure on urban rents. However, one might have said the same thing about IT allowing remote work, and that hasn't had a significant effect.
It's an interesting exercise to brainstorm possible future developments that really could have as much impact on the lives of ordinary people in the developed world as the developments of the second IR did--whether or not the technology seems to be on the horizon. I found it quite difficult. Here are the candidates I came up with:
-A nearly costless energy source, such as nuclear fusion. (It's interesting to note that, while there is a lot of technological development going on in energy right now, most of it is geared toward ameliorating the bad impact of climate change rather than achieving a positive impact.) This would drastically reduce the cost of a lot of things. In some sense it still wouldn't change our lives that much, since we already have electrical power and just have to pay for it. I do think it would be a plausible candidate for reducing or removing the need for people to work full time, which would be a big change.
-A medical breakthrough that essentially defeats aging. This is the only health-related breakthrough (again, focused on the developed world) that I could think of that would be as significant as defeating infant mortality. Plenty of people are working on this right now, though it's not at all clear how feasible it will be. It's also worth noting that it's not at all clear that achieving this would end up being an unmitigated good; see lots of sci-fi books.
This is honestly about it. Depending on your perspective, this exercise may make you feel good about where we are today, or feel bad about how many of our current problems are political/distributional, and not really solvable with technology. What are the other things people might mention? I think space travel and colonization are cool but wouldn't really be that beneficial to people's lives, especially since even an earth ravaged by climate change would be much more habitable than Mars. AI gets hyped a lot, and futurists tend to put a lot of stock into the idea that super-intelligent AIs could come up with great ideas that we can't even conceive of, but it's hard for me to deal with that concretely. Improving recommendations or being a digital butler don't seem like that big of improvements to me.
I'm not sure exactly what the take-aways from the book should be. Certainly inventors should keep working on cool stuff and try to prove him wrong. (And there is plenty of good technological work to be done in combating climate change and extending benefits of already-existing innovations to the global poor.) I suppose the strongest case to be made is toward orientation of policy actors. Trump's budget has rightly gotten a lot of flak for rosy growth assumptions (and double-counting), but I think in general if budget plans were forced to assume a very limited baseline for near-term growth, policy orientation might change a lot (and inequality might appear to be a much larger issue). I also wonder how much Gordon's lessons would imply for financial stability. One can obviously argue that the early-2000s tech bubble stemmed in part from assuming that the IT revolution would have economic consequences of a similar magnitude to the second IR. Can something similar be said for the housing bubble and 2008 collapse? Might monetary policy have been different under a drastically reduced assumption on potential output? I would think yes. Policymakers do seem to be slowly coming around to this viewpoint; see for example the consistently lowering estimates of potential output growth (http://jwmason.org/slackwire/what-do-...).
It's telling to me that one of the stronger "contra" arguments to the book, by Tyler Cowen (http://marginalrevolution.com/margina...), essentially centered on the possibility that Gordon was underestimating the possibility of totally unforeseen breakthroughs--certainly not impossible, but notably not at all a defense of the importance of recent technological developments. (And note that Cowen sounded a lot of the same notes as Gordon in his extended essay "The Great Stagnation" several years earlier!)
Read
December 28, 2017 Robert Gordon details the revolutionary changes, inventions and discoveries, which greatly improved the American standards of living, the benefits of which, we still enjoy today. It tells the fascinating and in depth story of how people’s lives have transformed tremendously after the Civil War through the Industrial Revolution. Did you know that the streets used to be filled with literally tons of horse manure (and dead horses!) before the advent of the automobile? Or that when the refrigerated rail car was invented California growers shipped a new breed of lettuce called “iceberg” to the East coast? Along with these innovations however, Gordon’s concern is undeniable and contains a warning about how our growth has slowed and with it the potential for prosperity.
I highly recommend this book. – Wendy M.
I highly recommend this book. – Wendy M.
July 19, 2017
Behemoth of a book. Literally put dents in my chest, which wasn't cool. First take away is that it's extremely well researched and thorough.
Part I
The focus in Part I are products that once invented, create a storm of other inventions required to work around the first major advancement, in turn drastically improving the standard of living. His main direction revolve around this last point, that certain inventions drastically improved the lives of ordinary people. Inventions that improve people's variety, network, and transportation. Also he points out that the inventions in respect to real growth can happen only once, ever.
What is interesting is that once initial inventions became easier to produce, the products or services provided to the general population, became much cheaper. Nowadays, corporations pocket those profits instead of providing the benefit of "cheaper to produce thus cheaper to buy", to the consumer. But in the early 1900s, IPO'ing and trying to make quarterly earnings look good wasn't really a thing yet. Companies actually used to take care of their employees which resulted in higher productivity.
He also takes into account the effect on people's lives, for example the increased health care due to surrounding inventions, discoveries, and political movements. It's interesting that today's health care costs started in the early 1900s. Practitioners didn't believe in disease, so many quack doctors without training would provide care or lack there of. This inspired better education and higher prices for actual care. Segregated rooms also drive costs up to purchase privacy.
Another impact is the reduction of dangerous jobs, women in the workforce, and lower working hours per week as a result. The introduction of women in the workforce had a significant impact to increased productivity and growth.
Part II
This section is a transition to post 1940 in which experienced quick growth, but has begun to stagnate ever since, and that certain experienced areas of growth have not changed for a long time. What's interesting is the potential for the first reversal in lifespan in history due to fast foods and lack of activity in children. Clothing and housing experienced similar slowing performance. As house quality increases, so did the distance from downtown. Gordon describes various US cities and I'm able to picture them as he describes how they developed since WWII.
Next up is the automobile. Provided is a wealth of information regarding the impact of the car in society, and the interstate infrastructure. But growth slowed after the initial boom in 1970 and has plateaued. In my opinion, to change the interstate system you must make travel faster somehow. But that will require special safety standards. There are too many idiots driving nowadays. You must save people from their own stupidity, and save others from it.
For air travel, actually disagree with Gordon on his claim that no significant improvements were made to the speed or comfort of air travel. The Concorde was produced for speed of travel, but it proved to not be what the airline market was requiring. ATC would have to change as well and all other traffic would have to adjust routes around its speed. Thus turning airlines off and being more of a hassle. As for comfort, he did not update his information and stopped at the 777-300. The 787 began in 2001 and rolled out in 2007, so he had plenty of time to include it. It's order of magnitude better in comfort than other aluminum models with its carbon fiber barrels. Allows for more humidity in the cabin which means you won't feel like garbage or dehydrated after a flight. It's far smoother as well. Just a small snippet of improvements. Many technological risks were taken during development of this aircraft. For a book released in 2015, I feel this should have been included. But he likely had not flown on one, so he can't speak to it. It's also possible that no reliable historic data is available yet to produce a chart. Also, the 787 has opened up new routes that were before not available due to its increased fuel efficiency compared to previous aircraft.
His theme of air travel seems especially bitter and over emotional. That's surprising. For example, don't blame small airplane seats on lack of technology, instead blame capitalism since airlines are trying squeeze out as much profits as possible, even though the profits aren't with most passengers, its with cargo and business travelers.
Domestic airlines are the worst compared to foreign airlines. The US needs to allow these airlines to access cities in the US so they may force domestic airlines to compete and provide as good of service.
He also under estimates the importance of airline security saying simply that metal detectors are sufficient. Taking a step back in technology and becoming complacent in security would turn people off from traveling. New ideas for bringing dangerous items on board would be developed, thus making travel open to unsafe events. For example guns can be made from plastic in 3D printers now. Security should get smarter not just easier. All for the sanctity of growth. Not cool man. Prevention is key rather than reaction.
He then moves on to Communication, Computers and the Internet which experienced massive booms but plateaued. Apple's iPhone certainly seems like it has gotten stale in advancement and taking less risks. Apple seems more interested in growing their stock price and financialization rather than push the boundaries of technology despite what they say.
Computers have grown in capability but have seemed to stop since we require only so much personal storage and computing power. But I feel that should continue to grow as coding languages evolve.
The chapter on healthcare is very interesting. It's striking but not surprising that the US has far more health care costs than other major economies, but with half the care. Costs have risen and the working poor are not covered. Mostly due to dealing with insurance paperwork. The Affordable Care Act is extremely important, as was originally thought of surprisingly by Nixon. It's been modified during Obama's term, but remains complex. It would be frustrating to not be able to find a doctor that remains in your network. The initial principle is good but there are still holes to the support of the plan. Trump is going to make health care much worse as people will go uncovered.
It's disconcerning reading about healthcare in America, and it doesn't look to be getting better. I also find it hard to believe no cures exist for cancer. Research has been going on since the 70s and I hear about potential cures all the time. Who is stopping the advancement of these ideas? Instead of curing disease we are in the business of managing disease to make money. Sad. I need to read more about this subject.
I'm really happy to see that education was included here, and the rising cost of college education. College should be getting cheaper. He also touches a bit on the impact of women in the workforce during and after WWII. The gap in income between men and women is alarming, causing a decline of women in professional careers. To me this seems like a simple fix, but getting past egos is very difficult.
Part III
It's hard to argue with his use of the Total Factor Productivity (TFP) to graph the increase in growth through the 30s and 40s, and decrease into the 70s. TFP=output/(weighted average of labor and capital input). Output was higher than input, but what's interesting is that Great Depression was in the middle of this. He contributes the majority of the growth at that time to the war economy. Production during the war made people believe they could produce common goods. Also that the technological achievement of the war economy contributed to future innovation, as made famous by Henry Ford. Though the biggest contributor to growth in the 30s is that the period experienced the greatest amount of inventions and patents. Also advancement in production efficiency and the establishment of standards for tools and measurements to simplify output. Nice job Herbert Hoover!
The question is, what if the war didn't happen? Would we have experienced the same growth? The war economy was a great motivator for American growth, it's possible we would be not as advanced had war not motivated it.
Innovators are the reason for extreme change and they enable growth. They think outside the norm and take risks. Even if growth is stagnant, there will always be innovators who provide leaps forward. Who disrupt the norm. What's important is to maintain a culture that will foster these types of innovators, because you can't predict when they will surprise everyone.
I appreciate that he discusses the income inequality gap and the root causes. A comparison is done between the measurements of inequality of the CBO and Piketty. It is believed that Piketty did not take into account taxes and transfers, thus skewing his low income growth calculation as being too pessimistic. I look forward to reading Piketty's Capital finally.
He tags five reasons for inequality: decreasing unionization, rise of imports, immigration, automation, and decreasing minimum wage. I don't imagine tagging immigration as a reason for poor growth would be a popular subject. Also I believe that while I agree that immigrants performing jobs at a lower cost could be a reason, there are other immigrants that are extremely intelligent whom are responsible for innovation and previous growth. But I understand how it is considered. So to quote Bill Lumbergh in Office Space, "Yeahhhhhh....I'm not so sure about that right now. Mmmmkayyy."
Automation being considered is confusing because it's previously mentioned that automation is moving at a glacial pace. Seems contradictory.
The portion about education that shows the US is getting dumber and accepting it is disconcerting. Our schools are not rigorous enough and accept mediocrity. The rankings are embarrassing compared to the international community. While I understand the reduction in funds for public universities from the state, coupled with rising tuitions and debt, but how do we figure the decrease in good parenting? Why is it that I notice so many pushover parents nowadays? But I digress, I feel it plays a part when comparing education to the international community. It's staggering the impact of kids not having both parents around, which impacts their education level.
On to government debt, disposable income will decrease since baby boomers will be retiring and polulation growth has slowed.
Globalization (automotive industry taking advantage of right to work states) and the environment (technological upgrades to save the environment only) round out the decline growth headwinds. But this assumes globalization won't lead to competition and industries improving their technology, or environmental technology can't be part of growth at all. Some pessimistic assumption there. But it's very hard to argue against his analyses.
Postscript
Here I feel like he contradicts himself with his summary for reasons to be optimistic, for example immigration and not having as old of a population as other countries. He just mentioned these were reasons for poor growth. Also includes innovation and boasts pharmaceutical companies are spending in R&D? He literally says these are all sources of strength, did I miss something there?
Regardless, I particularly like his chart showing each issue and what policy changes could help make growth impacts. The most important factor mentioned many times is better preschool education; I completely agree with him.
I have much appreciation for the amount of research that went into this and yet it also is very easy to read. He could have reduced it to only the intros and conclusions to each chapter as he explains his points well in these sections. But alas, more info is better than less. I really enjoyed how each chapter broke down revolutionary inventions or policy changes. It was enjoyable to read about American economics and also American history at the same time. This is why it's so long, but worth it.
There are very few points that he's off on; I especially was not impressed with the section on air travel and airplane technology. Not enough research done there and too emotional.
Overall the book was impressive. It seems more of like a history book but does well sticking with the theme of growth with the incorporation of charts. I wish he would have went into Tesla's impending impact. Also about Elon and if he is able to get the hyper loop going, which will change public travel in my opinion to being popular. Would be interesting to read his updated version discussing the Trump administration's incredibly ignorant plans.
I noticed Paul Mokyr is the series editor for the Princeton Economic History of the Western World, but also a Northwestern professor like Gordon. I'm interested to read one of Mokyr's books as well.
Though, I'm glad to finally finish this one, it's quite long.
Part I
The focus in Part I are products that once invented, create a storm of other inventions required to work around the first major advancement, in turn drastically improving the standard of living. His main direction revolve around this last point, that certain inventions drastically improved the lives of ordinary people. Inventions that improve people's variety, network, and transportation. Also he points out that the inventions in respect to real growth can happen only once, ever.
What is interesting is that once initial inventions became easier to produce, the products or services provided to the general population, became much cheaper. Nowadays, corporations pocket those profits instead of providing the benefit of "cheaper to produce thus cheaper to buy", to the consumer. But in the early 1900s, IPO'ing and trying to make quarterly earnings look good wasn't really a thing yet. Companies actually used to take care of their employees which resulted in higher productivity.
He also takes into account the effect on people's lives, for example the increased health care due to surrounding inventions, discoveries, and political movements. It's interesting that today's health care costs started in the early 1900s. Practitioners didn't believe in disease, so many quack doctors without training would provide care or lack there of. This inspired better education and higher prices for actual care. Segregated rooms also drive costs up to purchase privacy.
Another impact is the reduction of dangerous jobs, women in the workforce, and lower working hours per week as a result. The introduction of women in the workforce had a significant impact to increased productivity and growth.
Part II
This section is a transition to post 1940 in which experienced quick growth, but has begun to stagnate ever since, and that certain experienced areas of growth have not changed for a long time. What's interesting is the potential for the first reversal in lifespan in history due to fast foods and lack of activity in children. Clothing and housing experienced similar slowing performance. As house quality increases, so did the distance from downtown. Gordon describes various US cities and I'm able to picture them as he describes how they developed since WWII.
Next up is the automobile. Provided is a wealth of information regarding the impact of the car in society, and the interstate infrastructure. But growth slowed after the initial boom in 1970 and has plateaued. In my opinion, to change the interstate system you must make travel faster somehow. But that will require special safety standards. There are too many idiots driving nowadays. You must save people from their own stupidity, and save others from it.
For air travel, actually disagree with Gordon on his claim that no significant improvements were made to the speed or comfort of air travel. The Concorde was produced for speed of travel, but it proved to not be what the airline market was requiring. ATC would have to change as well and all other traffic would have to adjust routes around its speed. Thus turning airlines off and being more of a hassle. As for comfort, he did not update his information and stopped at the 777-300. The 787 began in 2001 and rolled out in 2007, so he had plenty of time to include it. It's order of magnitude better in comfort than other aluminum models with its carbon fiber barrels. Allows for more humidity in the cabin which means you won't feel like garbage or dehydrated after a flight. It's far smoother as well. Just a small snippet of improvements. Many technological risks were taken during development of this aircraft. For a book released in 2015, I feel this should have been included. But he likely had not flown on one, so he can't speak to it. It's also possible that no reliable historic data is available yet to produce a chart. Also, the 787 has opened up new routes that were before not available due to its increased fuel efficiency compared to previous aircraft.
His theme of air travel seems especially bitter and over emotional. That's surprising. For example, don't blame small airplane seats on lack of technology, instead blame capitalism since airlines are trying squeeze out as much profits as possible, even though the profits aren't with most passengers, its with cargo and business travelers.
Domestic airlines are the worst compared to foreign airlines. The US needs to allow these airlines to access cities in the US so they may force domestic airlines to compete and provide as good of service.
He also under estimates the importance of airline security saying simply that metal detectors are sufficient. Taking a step back in technology and becoming complacent in security would turn people off from traveling. New ideas for bringing dangerous items on board would be developed, thus making travel open to unsafe events. For example guns can be made from plastic in 3D printers now. Security should get smarter not just easier. All for the sanctity of growth. Not cool man. Prevention is key rather than reaction.
He then moves on to Communication, Computers and the Internet which experienced massive booms but plateaued. Apple's iPhone certainly seems like it has gotten stale in advancement and taking less risks. Apple seems more interested in growing their stock price and financialization rather than push the boundaries of technology despite what they say.
Computers have grown in capability but have seemed to stop since we require only so much personal storage and computing power. But I feel that should continue to grow as coding languages evolve.
The chapter on healthcare is very interesting. It's striking but not surprising that the US has far more health care costs than other major economies, but with half the care. Costs have risen and the working poor are not covered. Mostly due to dealing with insurance paperwork. The Affordable Care Act is extremely important, as was originally thought of surprisingly by Nixon. It's been modified during Obama's term, but remains complex. It would be frustrating to not be able to find a doctor that remains in your network. The initial principle is good but there are still holes to the support of the plan. Trump is going to make health care much worse as people will go uncovered.
It's disconcerning reading about healthcare in America, and it doesn't look to be getting better. I also find it hard to believe no cures exist for cancer. Research has been going on since the 70s and I hear about potential cures all the time. Who is stopping the advancement of these ideas? Instead of curing disease we are in the business of managing disease to make money. Sad. I need to read more about this subject.
I'm really happy to see that education was included here, and the rising cost of college education. College should be getting cheaper. He also touches a bit on the impact of women in the workforce during and after WWII. The gap in income between men and women is alarming, causing a decline of women in professional careers. To me this seems like a simple fix, but getting past egos is very difficult.
Part III
It's hard to argue with his use of the Total Factor Productivity (TFP) to graph the increase in growth through the 30s and 40s, and decrease into the 70s. TFP=output/(weighted average of labor and capital input). Output was higher than input, but what's interesting is that Great Depression was in the middle of this. He contributes the majority of the growth at that time to the war economy. Production during the war made people believe they could produce common goods. Also that the technological achievement of the war economy contributed to future innovation, as made famous by Henry Ford. Though the biggest contributor to growth in the 30s is that the period experienced the greatest amount of inventions and patents. Also advancement in production efficiency and the establishment of standards for tools and measurements to simplify output. Nice job Herbert Hoover!
The question is, what if the war didn't happen? Would we have experienced the same growth? The war economy was a great motivator for American growth, it's possible we would be not as advanced had war not motivated it.
Innovators are the reason for extreme change and they enable growth. They think outside the norm and take risks. Even if growth is stagnant, there will always be innovators who provide leaps forward. Who disrupt the norm. What's important is to maintain a culture that will foster these types of innovators, because you can't predict when they will surprise everyone.
I appreciate that he discusses the income inequality gap and the root causes. A comparison is done between the measurements of inequality of the CBO and Piketty. It is believed that Piketty did not take into account taxes and transfers, thus skewing his low income growth calculation as being too pessimistic. I look forward to reading Piketty's Capital finally.
He tags five reasons for inequality: decreasing unionization, rise of imports, immigration, automation, and decreasing minimum wage. I don't imagine tagging immigration as a reason for poor growth would be a popular subject. Also I believe that while I agree that immigrants performing jobs at a lower cost could be a reason, there are other immigrants that are extremely intelligent whom are responsible for innovation and previous growth. But I understand how it is considered. So to quote Bill Lumbergh in Office Space, "Yeahhhhhh....I'm not so sure about that right now. Mmmmkayyy."
Automation being considered is confusing because it's previously mentioned that automation is moving at a glacial pace. Seems contradictory.
The portion about education that shows the US is getting dumber and accepting it is disconcerting. Our schools are not rigorous enough and accept mediocrity. The rankings are embarrassing compared to the international community. While I understand the reduction in funds for public universities from the state, coupled with rising tuitions and debt, but how do we figure the decrease in good parenting? Why is it that I notice so many pushover parents nowadays? But I digress, I feel it plays a part when comparing education to the international community. It's staggering the impact of kids not having both parents around, which impacts their education level.
On to government debt, disposable income will decrease since baby boomers will be retiring and polulation growth has slowed.
Globalization (automotive industry taking advantage of right to work states) and the environment (technological upgrades to save the environment only) round out the decline growth headwinds. But this assumes globalization won't lead to competition and industries improving their technology, or environmental technology can't be part of growth at all. Some pessimistic assumption there. But it's very hard to argue against his analyses.
Postscript
Here I feel like he contradicts himself with his summary for reasons to be optimistic, for example immigration and not having as old of a population as other countries. He just mentioned these were reasons for poor growth. Also includes innovation and boasts pharmaceutical companies are spending in R&D? He literally says these are all sources of strength, did I miss something there?
Regardless, I particularly like his chart showing each issue and what policy changes could help make growth impacts. The most important factor mentioned many times is better preschool education; I completely agree with him.
I have much appreciation for the amount of research that went into this and yet it also is very easy to read. He could have reduced it to only the intros and conclusions to each chapter as he explains his points well in these sections. But alas, more info is better than less. I really enjoyed how each chapter broke down revolutionary inventions or policy changes. It was enjoyable to read about American economics and also American history at the same time. This is why it's so long, but worth it.
There are very few points that he's off on; I especially was not impressed with the section on air travel and airplane technology. Not enough research done there and too emotional.
Overall the book was impressive. It seems more of like a history book but does well sticking with the theme of growth with the incorporation of charts. I wish he would have went into Tesla's impending impact. Also about Elon and if he is able to get the hyper loop going, which will change public travel in my opinion to being popular. Would be interesting to read his updated version discussing the Trump administration's incredibly ignorant plans.
I noticed Paul Mokyr is the series editor for the Princeton Economic History of the Western World, but also a Northwestern professor like Gordon. I'm interested to read one of Mokyr's books as well.
Though, I'm glad to finally finish this one, it's quite long.
May 27, 2020
Хорошо
- Детальный обзор развития США с 1870 по наши дни. Очень интересно было читать про уклад жизни и влияние на жизнь новых технологий.
- Несколько неплохих инсайтов. К примеру, благодаря второй мировой войне экономика США радикально увеличила производственные мощности и продуктивность труда. Пришлось научится выпускать один с��молет за час, а не за неделю. Эти изменения, конечно, сохранились и после войны.
- Великая депрессия тоже оказала позитивный эффект. Появился новый контракт с обществом.
- Хороший такой обзор изобретения и внедрения самых разных вещей. Где еще прочитаешь про внедрение ATM, сканеров штрихкодов, автомобилей, радио и центральной канализации в одной книге.
- Интересная общая идея о том, что темпы роста благосостояния были не очень быстрыми с 1870 по 1920, стремительными с 1920 по 1970, и медленными после. Замедление роста предсказывается и далее вплоть до 2050 года (с чем сложно согласится, об этом ниже).
Плохо
- СЛИШКОМ детальный обзор и слишком много цифр. Понятно, что автор проделал титаническую работу, но можно было большую половину цифр вынести в аппендикс, а не сыпать их на голову скучающего читателя. Графики объясняются неимоверно детально. Не ясно, зачем именно
- Полностью игнорируется влияние энергетики на прогресс. Это меня сильно удивило. Очевидно, что нахождение новых источников энергии (уголь -> нефть -> атомная энергия) просто обязано сказываться на прогрессе. Текущий прогресс во многом замедлился из-за отказа от атомной энергии и отсутствии новых прорывных источников (термоядерный синтез, к примеру). Кажется, что это рывок в развитии после 1950 отчасти и был обеспечен новой атомной энергетикой. В книге об этом ни слова.
- Последние главы достаточно детально пытаются обосновать, почему в ближайшие годы не будет взрывного роста. Аргументы насчет unknown unknowns отметаются категорически. Да, люди частенько слишком оптимистично смотрят на научно-технический прогресс, но надо признать что предсказание технологических прорывов слишком сложная задача. Практически никто не предвидел революцию в информационных технологиях. Так же я считаю практически никто не может предвидеть революцию в сфере биотехнологий или искусственного интеллекта. Может быть это и не произойдет в ближайшие 30 лет, но пессимизм автора книги все же раздражает.
- Детальный обзор развития США с 1870 по наши дни. Очень интересно было читать про уклад жизни и влияние на жизнь новых технологий.
- Несколько неплохих инсайтов. К примеру, благодаря второй мировой войне экономика США радикально увеличила производственные мощности и продуктивность труда. Пришлось научится выпускать один с��молет за час, а не за неделю. Эти изменения, конечно, сохранились и после войны.
- Великая депрессия тоже оказала позитивный эффект. Появился новый контракт с обществом.
- Хороший такой обзор изобретения и внедрения самых разных вещей. Где еще прочитаешь про внедрение ATM, сканеров штрихкодов, автомобилей, радио и центральной канализации в одной книге.
- Интересная общая идея о том, что темпы роста благосостояния были не очень быстрыми с 1870 по 1920, стремительными с 1920 по 1970, и медленными после. Замедление роста предсказывается и далее вплоть до 2050 года (с чем сложно согласится, об этом ниже).
Плохо
- СЛИШКОМ детальный обзор и слишком много цифр. Понятно, что автор проделал титаническую работу, но можно было большую половину цифр вынести в аппендикс, а не сыпать их на голову скучающего читателя. Графики объясняются неимоверно детально. Не ясно, зачем именно
- Полностью игнорируется влияние энергетики на прогресс. Это меня сильно удивило. Очевидно, что нахождение новых источников энергии (уголь -> нефть -> атомная энергия) просто обязано сказываться на прогрессе. Текущий прогресс во многом замедлился из-за отказа от атомной энергии и отсутствии новых прорывных источников (термоядерный синтез, к примеру). Кажется, что это рывок в развитии после 1950 отчасти и был обеспечен новой атомной энергетикой. В книге об этом ни слова.
- Последние главы достаточно детально пытаются обосновать, почему в ближайшие годы не будет взрывного роста. Аргументы насчет unknown unknowns отметаются категорически. Да, люди частенько слишком оптимистично смотрят на научно-технический прогресс, но надо признать что предсказание технологических прорывов слишком сложная задача. Практически никто не предвидел революцию в информационных технологиях. Так же я считаю практически никто не может предвидеть революцию в сфере биотехнологий или искусственного интеллекта. Может быть это и не произойдет в ближайшие 30 лет, но пессимизм автора книги все же раздражает.
January 7, 2021
This is an excellent book. You'll get most out of, if you've read a handful of more optimistic technologist's book, as he lays out many of his points as counter-arguments to their points. Optimists claim that we are not seeing the IT technology reflected in GDP just because it is flourishing our information lives. Then Gordon goes onto how that's been always the case and that phenomenon has nothing new in IT. He extensively discusses about the topics on how milk was often contaminated before the standardization and food poisoning was regular event before the invention of fridge. The first produced car was not equipped with frontshield or seatbelts either. Those safety improvement does not appear in GDP in the same way the internet's quality-of-life-improvement is argued as not being reflected.
It is truly a fun experience to read through the lives people had 100 years ago. People had to hustle for negotiation with local store owners every time until now-dying department stores came about 100 years ago. And urban pollution has been awlays there with horses killing people equally and spreading manure all over the place until our now-CO2 producing cars take over.
And what a true innovation it was to have running water, sewage and electricity to run through every household. We take it for granted. But they were life-changing at the time that freed away the centuries of our accustomed lifestyles. And it was all done in over one generation
I still have 3 major criticisms (because I love this book):
His main claim is American productivity started going up in 1870-1920, accelerated from 1920-1970, slow down from 1970-1994, slowly went up from 1994-2004, and slowed down again from 2004-2016. He mentions it'll continue to slow down in the near feture (~2040). There he mentions about the emerging technology such as gene editing and AI, where he dismisses them as non-impactfu. That happens in just over 5 pages. Come on. This book is 784 pages. This is unfair. Furthermore, he dismisses the role of AI as it being a simple advertisement optimization. But in 2020 today, DeepMind recently announced modeling protein structure, that will tangibly affect the real economy in drug development. It seems he has failed to assess the technological impact just 4 years ahead of the book.
I happened to read this book right after Energy and Civilization by Vaclav Smil. While Gordon starts his history from 1870 American growth, Smil notes the modern growth starting from 1770 England when James Watt invented the steam engine. In that longer and global analysis, you'll realize Gordon's timescale of IT too short. He shrugs its impact as trivial based on the previous 10 year data that happened to be slow. But looking at English modern history, the cycle goes through in the span of centuries. Concluding the technological impact just by analyzing the 10 year data is too shortsighted. At the end, I still prefer to follow the 50-year business cycle theory of technology lag.
Lastly, he does mention about the rising inequality. There he usess the word bottom 99% and bottom 90% interchangeably. I think he's intentionally trying to be provocative here. In fact, the lives of top 1%, top10%, top 50%, and top 90% would be different. Even if the income of university graduates are not growing, their income would be still significantly better than the highschools'. He's an economist. He should be able to identify the groups properly instead of splitting them up so conveniently. But it is concerning nevertheless the real income is not going up (declining for highschool graduates). I recommend you Future of Capitalism if you want to read into that topic with more political take.
It is truly a fun experience to read through the lives people had 100 years ago. People had to hustle for negotiation with local store owners every time until now-dying department stores came about 100 years ago. And urban pollution has been awlays there with horses killing people equally and spreading manure all over the place until our now-CO2 producing cars take over.
And what a true innovation it was to have running water, sewage and electricity to run through every household. We take it for granted. But they were life-changing at the time that freed away the centuries of our accustomed lifestyles. And it was all done in over one generation
I still have 3 major criticisms (because I love this book):
His main claim is American productivity started going up in 1870-1920, accelerated from 1920-1970, slow down from 1970-1994, slowly went up from 1994-2004, and slowed down again from 2004-2016. He mentions it'll continue to slow down in the near feture (~2040). There he mentions about the emerging technology such as gene editing and AI, where he dismisses them as non-impactfu. That happens in just over 5 pages. Come on. This book is 784 pages. This is unfair. Furthermore, he dismisses the role of AI as it being a simple advertisement optimization. But in 2020 today, DeepMind recently announced modeling protein structure, that will tangibly affect the real economy in drug development. It seems he has failed to assess the technological impact just 4 years ahead of the book.
I happened to read this book right after Energy and Civilization by Vaclav Smil. While Gordon starts his history from 1870 American growth, Smil notes the modern growth starting from 1770 England when James Watt invented the steam engine. In that longer and global analysis, you'll realize Gordon's timescale of IT too short. He shrugs its impact as trivial based on the previous 10 year data that happened to be slow. But looking at English modern history, the cycle goes through in the span of centuries. Concluding the technological impact just by analyzing the 10 year data is too shortsighted. At the end, I still prefer to follow the 50-year business cycle theory of technology lag.
Lastly, he does mention about the rising inequality. There he usess the word bottom 99% and bottom 90% interchangeably. I think he's intentionally trying to be provocative here. In fact, the lives of top 1%, top10%, top 50%, and top 90% would be different. Even if the income of university graduates are not growing, their income would be still significantly better than the highschools'. He's an economist. He should be able to identify the groups properly instead of splitting them up so conveniently. But it is concerning nevertheless the real income is not going up (declining for highschool graduates). I recommend you Future of Capitalism if you want to read into that topic with more political take.
December 22, 2016
This is a very extensively researched book. Gordon had combed through data stretching from the American Civil War period to the present age, to look at the rate of American economic growth. His conclusion, the best period is over, because the biggest transformation of modern life, such as electricity, clean water and sewage, railroads, automobiles, education and health care, had already happened and they can only happen once.
From his calculation, growth for the next few decades will be very slow because of the diminishing returns of innovation, and the 4 headwinds: inequality, education, demography (aging of society) and government debt (from social security and Medicare). He predicts that the bottom 90% will see further stagnation of standard of living.
His solution:
1. Decrease inequality by raising taxes at the top, close all loopholes (include taxing investment income the same way as earned income), cutting taxes at the bottom, and raise the minimum wage. Also to decrease incarceration and legalize all drugs (to save money on law enforcement, and earn taxes)!
2. Provide free early education, let the state take care of education rather than local government to reduce dependence on neighborhood income, and subsidize higher education (like Australia).
3. Counter aging of society by accepting immigration.
4. Tax reform plus carbon tax to decrease debt.
A must read of the year.
From his calculation, growth for the next few decades will be very slow because of the diminishing returns of innovation, and the 4 headwinds: inequality, education, demography (aging of society) and government debt (from social security and Medicare). He predicts that the bottom 90% will see further stagnation of standard of living.
His solution:
1. Decrease inequality by raising taxes at the top, close all loopholes (include taxing investment income the same way as earned income), cutting taxes at the bottom, and raise the minimum wage. Also to decrease incarceration and legalize all drugs (to save money on law enforcement, and earn taxes)!
2. Provide free early education, let the state take care of education rather than local government to reduce dependence on neighborhood income, and subsidize higher education (like Australia).
3. Counter aging of society by accepting immigration.
4. Tax reform plus carbon tax to decrease debt.
A must read of the year.
August 16, 2020
Das Kapital for home appliances.
A very important book that shows why the computer revolution cannot repeat the level of economic growth seen in the period from 1870-1970. Gordon’s key insight is that the rise or productivity during this period was driven by technical change that can only happen once — like the replacement of horses with motorized vehicles or lamps with electric light. Gordon shows how these changes affected almost every facet of daily life - in sharp contrast to the limited effects of computerization.
Gordon argues that we’ve already realized most of the productivity gains we can expect from computerization, and that since the mid 2000’s productivity has slowed to an extremely low level that is not likely to go up.
Gordon shows that during the period of 1870-1970, productivity increases raised the standard of living for the working class. But now, the low level of productivity is held back even further by rising income inequality - which erases almost any gains in productivity for the bottom 90 percent. A very stern warning from a mainstream economist.
A very important book that shows why the computer revolution cannot repeat the level of economic growth seen in the period from 1870-1970. Gordon’s key insight is that the rise or productivity during this period was driven by technical change that can only happen once — like the replacement of horses with motorized vehicles or lamps with electric light. Gordon shows how these changes affected almost every facet of daily life - in sharp contrast to the limited effects of computerization.
Gordon argues that we’ve already realized most of the productivity gains we can expect from computerization, and that since the mid 2000’s productivity has slowed to an extremely low level that is not likely to go up.
Gordon shows that during the period of 1870-1970, productivity increases raised the standard of living for the working class. But now, the low level of productivity is held back even further by rising income inequality - which erases almost any gains in productivity for the bottom 90 percent. A very stern warning from a mainstream economist.
January 21, 2016
The premise for this book is GREAT. Following history through growth of progress and innovation is a wonderful idea but the story begins to drag through the repetitive phrases to describe the innovations.
July 4, 2016
This author never seems to have met a piece of information he didn't want to include in his gargantuan book. The advancement of the humble calculator? You got four pages of it! AIDS? Yup! Jello? Uh-huh! How about tables, graphs and figures explained to its minutest point -- as if there wasn't, you know, an actual table, graph or figure there. Like a 'random facts friend', it's best to just treat it like an encyclopedia -- one in which you look for specific information -- rather than try to absorb the nonsensical information in one large gulp.
August 5, 2017
Wow.
I have to help you understand:
This is 47 years worth of a man's life.
It is, conclusively, a summarization of what Robert Gordon has accomplished academically over the course of his life.
In that respect, it is monumental.
I have to help you understand:
This is 47 years worth of a man's life.
It is, conclusively, a summarization of what Robert Gordon has accomplished academically over the course of his life.
In that respect, it is monumental.
May 2, 2019
TL;DR -- You see how much I thought just reading this thing? Doesn't matter how good or bad it is in the end, if it makes you think that much, it's worth reading. Plato's Republic is a terrible idea, but reading it can teach you a lot about yourself and your country. Totally recommend this.
~~~~~~~~~~
It's at least twice as long as it has any excuse to be. Especially due to frequent repetition, where most of the book just drives home how big a deal electricity/water/gas, roads, and most of all, refrigeration are. For me this was mostly a good thing.
There's never actually a defense of or explanation as to why GDP should be taken seriously, at all, despite the book spending its first 2/3rds pointing out how it fails to even do what it says on the tin.
On the plus, there's plenty reference to how the post-reconstruction South ran on a peonage equivalency of slavery, general suck in factories, the advantages of Mid-West during that time, all the government subsidies that backed railroads, and such. so, there's a broad amount of oft ignored info here.
Yet, various other basic Capitalism ideas getting an unexamined pass, when the guy can spend 60 pages talking about how much horse shit there use to be. As well as much real American behaviour, like piracy of British industrial inventions, as that is what put us into the industrial revolution at all, protectionist tariffs while refusing to recognize foreign patent and copyright, blatant corruption a la teapot dome, etc.
Look at the post 1970 break tho, especially starting 1985 or so, and tell me how that time period is most different economically from any other time in world history? There's suddenly a single, uncontested, world superpower, capable of and eager to colonise the economies of as much of the rest of the world as possible. Yet, does this focus on that, or whether or not the cell phone changed your life as much as getting to shit inside, behind closed doors, where the waste would go far away from you, and have heating and air conditioning in that room. I mean, yeah, that's a pretty damn hard feeling to beat man. But. . . c'mon. That doesn't make the changes now any the less, it just makes that a milestone we probably won't beat.
I like this book, but it is far from complete, and it's much longer than it needs to be to boot.
Gordon has some massive damn blind-spots as well:
First he never addresses the possibility that technology currently provides far greater potential for improvement than the real improvement it is currently providing. This blind spot includes ignoring the massive, massive change cellular phones have brought to countries that never received radio or telephony in any meaningful sense, how solar power is providing alternative, more economical, and less damaging progress thru both I1 and I2, without actually having either of them at any point. As well as less dramatic impacts in other nations. But it also includes ignoring the near total loss of forms of industry to the rest of the world, and that what productivity I3 tech provides has displaced much and will displace more of that old productivity, so it is bigger than it appears because it was not additive growth. I recognize I1 and I2 were not additive to agriculture either, but the absolute amount of production thus displaced was pitiful compared to what is made today. And most of all -- he ignores the possibility that old models of what productivity even is may not only be ignoring current extant improvements (I get it, you love toilets, I do too, but you're being myopic), but also that the absolute devotion of our finance/consumer based economy since 1980 necessarily just fucks industry in every way -- including both breaking down old industry, and prohibiting the full potential of currently existing technology. Our economy entered an entirely different kind in 1940, which spurred i2, and was a state-capitalist system. Our economy (re)entered a plutocratic and globalist (in a colonial sense) finance and consumer system around 1980. Industry has been less and less important over time.
Second, he bases his idea of what can happen in the future on what is happening now -- and that is his actual argument, that it is what is happening now. This is misguided. Everyone expects things to continue linearly, but that's not what actually happens. At the end of the book, he repeatedly mentions the weakness of tech that has only meaningfully existed for a year or two, often after being researched since 1960 (voice recognition), while ignoring that the progression of this tech was exponential, starting from 0 tho, it took a long damn time to even become something visible, then something like voice recognition went from Siri's initial uselessness in 2012 with the iPhone 4s to a plethora of options now, and all of which function. And it's hard to get it into people's head how freaking amazing it is that you can say "Alexa, play Three Doors Down" and then Running out of Days comes on. Is that, in itself, a dramatic quality of life change? I'm not sure, it's best probably to consider it a quality of life change with the actual price tag an Echo has until we make a better model than GDP, but technologically speaking it is a move that is, mathematically, incomparable to the shift from making thread by hand to the spinning jenny. Spinning jenny made thread right? Whatever.
The biggest thing is that sheer number of calculations to produce a result are rather difficult to see, so the evolution of tech, thus far, LOOKS linear, but it's not, it is exponential, and the difference between the two is not in what things are like today, but what they will be like 100 years from now. And the argument that science fiction writers predicted stuff for today, especially the incomparable Joules Verne (actually, he is comparable. . Isaac Asimov) does not mean that economists are for crap at it, the tend not to be, and an exception would be just that, it would be a test to the rule, that proved it by being quite exceptional.
Or, to paraphrase the overly optimistic Kurzweil - We're approaching, just entering, or not quite yet to the 'knee of the curve'. You can't see the real effects of the technological shift that came with the move to transistors yet.
If you want a prediction -- we won't see it until we move to the thing after transistors (the development of which has been helping to drag down the shrinking of transistors on a chip as well as the difficulty of actually cramming more and more of them into a finite space, there's only so small you can go) -- but the first CPU after silicon chips is going to many orders of magnitude better than any silicon chip, we may or may not actually catch up to Moore's law depending on how long it takes, but we don't actually need to double every 2 years, nor is Moore's Law an actual law, it's better thought of as an illustration of "Damn, tech is moving FAST".
And last. . .I forgot the other point I was thinking of. . .Something about GNR? something about how being able to feed 7 billion people is not just a quantitative but a qualitative difference vs. less than a billion? That trying to undo the damage of the past just goes to show how much of the progress of the past was a 'lie'? That prices are not important, nor productivity? That the 5% unemployment rate for 2015 is so misleading, and deliberately so because it does not care about certain groups of people, as to be a damned lie? That calling the shift to robots glacial is just fucking ludicrous? Just, how the fuck did you get away with talking about productivity in 2015 without mentioning a single other country? I mean, seriously. Ohh, how about measuring education against industrial and classical norms of knowledge rather than, you know, useful things. But, also, how come the MIC/Pentagon get's no discussion, literally none?
The points he makes about current inequality and troubles for just the average joe, those 'headwinds', yeah. Those are all problems, and they suck, and he does actually mention globalization here (weird that it isn't part of his thesis), and if things don't change dramatically in politics and technology, we're fucked.
And finally -- the post-script is entirely equalizing policies. I tend to agree with the motivation behind them and the actual policies suggest, especially heavy taxation of 'rent seeking' (profiting of having money/IP/lands without producing anything) and revamping, possibly even to the point of totally abolishing the prison industry and legalizing drugs and taxing the shit out of them.
If he's right about the technological progress we can expect, tho I don't think he is, his policy suggestions become even more important, essential to the future of our nation.
~~~~~~~~~~
It's at least twice as long as it has any excuse to be. Especially due to frequent repetition, where most of the book just drives home how big a deal electricity/water/gas, roads, and most of all, refrigeration are. For me this was mostly a good thing.
There's never actually a defense of or explanation as to why GDP should be taken seriously, at all, despite the book spending its first 2/3rds pointing out how it fails to even do what it says on the tin.
On the plus, there's plenty reference to how the post-reconstruction South ran on a peonage equivalency of slavery, general suck in factories, the advantages of Mid-West during that time, all the government subsidies that backed railroads, and such. so, there's a broad amount of oft ignored info here.
Yet, various other basic Capitalism ideas getting an unexamined pass, when the guy can spend 60 pages talking about how much horse shit there use to be. As well as much real American behaviour, like piracy of British industrial inventions, as that is what put us into the industrial revolution at all, protectionist tariffs while refusing to recognize foreign patent and copyright, blatant corruption a la teapot dome, etc.
Look at the post 1970 break tho, especially starting 1985 or so, and tell me how that time period is most different economically from any other time in world history? There's suddenly a single, uncontested, world superpower, capable of and eager to colonise the economies of as much of the rest of the world as possible. Yet, does this focus on that, or whether or not the cell phone changed your life as much as getting to shit inside, behind closed doors, where the waste would go far away from you, and have heating and air conditioning in that room. I mean, yeah, that's a pretty damn hard feeling to beat man. But. . . c'mon. That doesn't make the changes now any the less, it just makes that a milestone we probably won't beat.
I like this book, but it is far from complete, and it's much longer than it needs to be to boot.
Gordon has some massive damn blind-spots as well:
First he never addresses the possibility that technology currently provides far greater potential for improvement than the real improvement it is currently providing. This blind spot includes ignoring the massive, massive change cellular phones have brought to countries that never received radio or telephony in any meaningful sense, how solar power is providing alternative, more economical, and less damaging progress thru both I1 and I2, without actually having either of them at any point. As well as less dramatic impacts in other nations. But it also includes ignoring the near total loss of forms of industry to the rest of the world, and that what productivity I3 tech provides has displaced much and will displace more of that old productivity, so it is bigger than it appears because it was not additive growth. I recognize I1 and I2 were not additive to agriculture either, but the absolute amount of production thus displaced was pitiful compared to what is made today. And most of all -- he ignores the possibility that old models of what productivity even is may not only be ignoring current extant improvements (I get it, you love toilets, I do too, but you're being myopic), but also that the absolute devotion of our finance/consumer based economy since 1980 necessarily just fucks industry in every way -- including both breaking down old industry, and prohibiting the full potential of currently existing technology. Our economy entered an entirely different kind in 1940, which spurred i2, and was a state-capitalist system. Our economy (re)entered a plutocratic and globalist (in a colonial sense) finance and consumer system around 1980. Industry has been less and less important over time.
Second, he bases his idea of what can happen in the future on what is happening now -- and that is his actual argument, that it is what is happening now. This is misguided. Everyone expects things to continue linearly, but that's not what actually happens. At the end of the book, he repeatedly mentions the weakness of tech that has only meaningfully existed for a year or two, often after being researched since 1960 (voice recognition), while ignoring that the progression of this tech was exponential, starting from 0 tho, it took a long damn time to even become something visible, then something like voice recognition went from Siri's initial uselessness in 2012 with the iPhone 4s to a plethora of options now, and all of which function. And it's hard to get it into people's head how freaking amazing it is that you can say "Alexa, play Three Doors Down" and then Running out of Days comes on. Is that, in itself, a dramatic quality of life change? I'm not sure, it's best probably to consider it a quality of life change with the actual price tag an Echo has until we make a better model than GDP, but technologically speaking it is a move that is, mathematically, incomparable to the shift from making thread by hand to the spinning jenny. Spinning jenny made thread right? Whatever.
The biggest thing is that sheer number of calculations to produce a result are rather difficult to see, so the evolution of tech, thus far, LOOKS linear, but it's not, it is exponential, and the difference between the two is not in what things are like today, but what they will be like 100 years from now. And the argument that science fiction writers predicted stuff for today, especially the incomparable Joules Verne (actually, he is comparable. . Isaac Asimov) does not mean that economists are for crap at it, the tend not to be, and an exception would be just that, it would be a test to the rule, that proved it by being quite exceptional.
Or, to paraphrase the overly optimistic Kurzweil - We're approaching, just entering, or not quite yet to the 'knee of the curve'. You can't see the real effects of the technological shift that came with the move to transistors yet.
If you want a prediction -- we won't see it until we move to the thing after transistors (the development of which has been helping to drag down the shrinking of transistors on a chip as well as the difficulty of actually cramming more and more of them into a finite space, there's only so small you can go) -- but the first CPU after silicon chips is going to many orders of magnitude better than any silicon chip, we may or may not actually catch up to Moore's law depending on how long it takes, but we don't actually need to double every 2 years, nor is Moore's Law an actual law, it's better thought of as an illustration of "Damn, tech is moving FAST".
And last. . .I forgot the other point I was thinking of. . .Something about GNR? something about how being able to feed 7 billion people is not just a quantitative but a qualitative difference vs. less than a billion? That trying to undo the damage of the past just goes to show how much of the progress of the past was a 'lie'? That prices are not important, nor productivity? That the 5% unemployment rate for 2015 is so misleading, and deliberately so because it does not care about certain groups of people, as to be a damned lie? That calling the shift to robots glacial is just fucking ludicrous? Just, how the fuck did you get away with talking about productivity in 2015 without mentioning a single other country? I mean, seriously. Ohh, how about measuring education against industrial and classical norms of knowledge rather than, you know, useful things. But, also, how come the MIC/Pentagon get's no discussion, literally none?
The points he makes about current inequality and troubles for just the average joe, those 'headwinds', yeah. Those are all problems, and they suck, and he does actually mention globalization here (weird that it isn't part of his thesis), and if things don't change dramatically in politics and technology, we're fucked.
And finally -- the post-script is entirely equalizing policies. I tend to agree with the motivation behind them and the actual policies suggest, especially heavy taxation of 'rent seeking' (profiting of having money/IP/lands without producing anything) and revamping, possibly even to the point of totally abolishing the prison industry and legalizing drugs and taxing the shit out of them.
If he's right about the technological progress we can expect, tho I don't think he is, his policy suggestions become even more important, essential to the future of our nation.
September 14, 2021
"The Rise and Fall of American Growth" van de economisch historicus Robert J. Gordon is een monumentaal werk over de revolutionaire periode die Amerika doormaakte tussen 1870-1970. Deze kanjer van 700 pagina's vertelt hoe Amerika op honderd jaar tijd transformeerde in een moderne, hoogtechnologische en welvarende samenleving.
De hoofdstelling van Gordon is even verrassend als provocatief: het tijdperk van snelle economische groei en technologische innovatie is voorbij. De uitvindingen die tussen 1870-1970 werden gedaan, waren zo revolutionair dat ze maar één keer konden plaatsvinden. Hij spreekt over drie 'General Purpose Technologies' (GPTs) die het leven van de Amerikanen (en later ook West-Europa, en nu de groeilanden) hebben getransformeerd: elektriciteit, de verbrandingsmotor en de lopende band van Henry Ford. Die drie uitvindingen zorgden voor de grootste productiviteitsgroei ooit.
Elektriciteit bracht letterlijk licht in de duisters. Dankzij de gloeilampen van Edison moesten mensen niet langer knoeien met flikkerende kerosinelampen die altijd voor brand konden zorgen. Ze konden later opblijven om te lezen. Fabrieken konden langer openblijven en het stadsleven bleef ook na zonsondergang bruisen.
Dat was slechts het begin: elektriciteit maakte metro's en trams mogelijk, zodat de nood aan paarden voor transport verminderde. Arbeiders konden zo gemakkelijker pendelen tussen hun werk en hun huis in de suburbs.
Vanaf de jaren twintig en dertig kwamen er elektrische apparaten op de markt om het huishoudelijk werk te verlichten. Daarvan was de wasmachine ongetwijfeld de belangrijkste. Niet langer moesten vrouwen elke dag sleuren met emmers water om kleren te wassen. Ze waren tevens verlost van het saaie en zware karwei om kleren te schrobben op een wasbord. Dankzij de droogkast moesten kleren niet meer aan een waslijn worden gehangen.
Elektriciteit maakte ook de koeling van voedsel moeilijk. Dankzij de ziektekiemtheorie van Louis Pasteur werden mensen bewust dat het koelen van voeding belangrijk was om besmetting met bacteriën te voorkomen. Eerst gebruikte men blokken ijs in vrachttreinen, maar in de jaren dertig werd de elektrische koelkast uitgevonden. Net zoals de wasmachine, werd de koelkast razend populair op korte tijd.
Een andere revolutie die elektriciteit teweegbracht was "het binnenbrengen van de wereld in de huiskamer" via de radio en de televisie. Radio was een echt familiegebeuren waarbij kinderen en ouders aandachtig luisterden naar wat de radiopresentator vertelde over het dagelijkse nieuws. Mensen op het platteland en in kleine dorpjes waren niet langer geïsoleerd van de buitenwereld. De televisie bracht bewegende beeld in de huiskamer. Er ontstonden tv-sterren die door iedereen gekend en geliefd werden. Er kwam nieuws binnen van over de hele wereld, en zelfs daarbuiten. Tientallen miljoenen volgden de maanlanding in 1969 live op televisie.
De verbrandingsmotor werd net als elektriciteit uitgevonden in 1879, maar zou pas vanaf het begin van de 20ste eeuw echt beginnen doorbreken. De eerste auto's kwamen toen op de markt, maar ze waren enkel betaalbaar voor de welgestelde klasse. Autorijden was vrij gevaarlijk door de slechte staat van de wegen en door het gebrek aan verkeersborden en snelheidslimieten. De eerste auto's hadden bovendien een broze carrosserie en vielen regelmatig in panne. De ingenieuze ondernemer Henry Ford zorgde ervoor dat de auto een product voor de massa werd. Door zijn perfectionering van het lopende bandsysteem (de 'assembly line') werd de productie van auto's veel efficiënter, sneller en goedkoper. Daardoor kon hij in een razend tempo zijn T-Model van de band doen rollen. Hij betaalde zijn arbeiders royale lonen voor die tijd, zodat ze hun eigen Ford T-Model konden kopen.
De auto was een verademing voor veel stedelingen omdat men tot dan toe vooral op paarden moest rekenen om van A naar B te geraken. Er werden zoveel paarden ingezet dat de straten vollagen met paardenmest en -urine. Als het geregend had gleden mensen vaak uit met breuken tot gevolg. Soms lagen paarden te rotten op straat, omdat het dan gemakkelijker was om ze in stukken te snijden en ze weg te halen. Dit zorgde niet alleen voor een ondraaglijke stank, maar ook voor risico op ziekten. De vele koetsen en paardentrams zorgden ook voor een drukte van jewelste en voor veel dodelijke ongevallen. Genoeg redenen dus om de auto te verwelkomen.
Auto's bevrijdden de Amerikanen niet alleen van paardenmest, maar ook van geografische isolatie. Boeren op het platteland konden nu naar de stad gaan om te gaan winkelen in 'chain stores' en grote warenhuizen (zoals Montgomery en Macy's). Voordien konden ze enkel hun boodschappen kopen in de buurtwinkel ('country stores') die dankzij zijn lokale monopolie hogere prijzen kon aanrekenen.
Dankzij de auto floreerde de postordercatalogus van Sears-Robuck. Consumenten hadden een ruime keuze aan producten die ze via de post konden bestellen en laten bezorgen.
De auto zorgde voor een transformatie van de ruimtelijke ordening. Naarmate steeds meer Amerikaanse gezinnen een auto hadden, kozen ze ervoor om in de suburbs te gaan wonen. Die suburbs begonnen zich steeds meer uit te breiden. Er ontstond een nieuwe vrijetijdsactiviteit: rondreizen door het land. Langs de nieuw aangelegde asfaltwegen groeiden wegrestaurants en motels als paddenstoelen. In de jaren 50 werden de mogelijkheden nog groter dankzij de eerste passagiersvliegtuigen. Voortaan konden Amerikanen veel sneller van kust naar kust reizen en, zelfs naar, naar andere continenten. De grote verliezer waren de treinen. Eind negentiende eeuw werd de 'Golden Spike' geslagen in de eerste transcontinentale spoorweg. Het spoorwegennetwerk breidde zich in de decennia daarna snel uit. Maar doordat de Amerikanen massaal auto's aanschaften in de jaren 20 werd de trein steeds minder populair als vervoersmiddel. De investeringen in spoorwegen daalden daarna gestaag.
Naast de drie grote uitvindingen (elektriciteit, verbrandingsmotor, lopende band) vond er in de periode 1870-1970 ook een gezondheidsrevolutie plaats. Door de aanleg van een netwerk van waterleidingen kwam er stromend water binnen in de Amerikaanse huizen. De toevoeging van fluor en chloor elimineerde voornaamste bacteriën. Daarnaast kwamen er ook een rioleringssysteem zodat proper water en afvalwater van elkaar gescheiden werd. Amerikaanse gezinnen installeerden toiletten ('water closets' of WC's) binnenshuis zodat ze niet langer in een uithuisje hun behoefte moesten doen.
Er kwamen ook strengere regels tegen de contaminatie van voedsel. Melkboeren voegden vaak melasse (een zoetstof) en gips toe aan melk om de bedorven smaak te verdoezelen. Om meer melk te verkopen lengden ze de melk aan met water dat vaak onzuiver was. Door de Food en Drug Act werd er grotendeels paal en perk gesteld aan deze praktijken. De sanitaire revolutie en de strengere voedselregulering zorgden voor de grootste sprong in levensverwachting ooit. De baby'- en kindersterfte daalde spectaculair tussen 1910-1940. De stijging in levensverwachting gebeurde dubbel zo snel als in de decennia na WO II, toen de grootste stappen in de geneeskunde werden gezet.
Gordon stelt dat de grootste technologische revoluties en verbetering in levensstandaard in 1940 al voltrokken was. Na WO II zouden er nog veel belangrijke innovaties komen, maar die hadden een minder grote impact op het dagelijks leven van Amerikanen dan de verbrandingsmotor, elektriciteit, stromend water, sanitair en goedkope en efficiënte massaproductie.
De computer, de gsm en de smartphone hebben ook een enorme impact gehad, maar die impact bleef beperkt tot de domeinen van communicatie, entertainment en informatie. De Grote Uitvindingen beïnvloedden elk aspect van het dagelijks leven en de economie. Het Tijdperk van de Grote Uitvindingen zal zich volgens Gordon niet gauw meer herhalen. Hij gelooft niet dat AI, robots,
3D-printers, zelfrijdende auto's of gentechnologie de komende 25 jaar terug voor een periode van snelle groei zullen zorgen. Hiermee gaat hij in tegen "techno-optimisten" die stellen dat we in een nooit gezien tijdperk van technologische innovatie leven en dat het beste nog moet komen. Gordon komt met een karrenvracht onderzoek, cijfers en data om aan te tonen dat dat tijdperk niet nu is, maar een eeuw geleden. Dat stemt tot dankbaarheid voor de verwezenlijkingen van het verleden, maar ook tot bescheidenheid wat betreft onze verwachtingen voor de toekomst.
De hoofdstelling van Gordon is even verrassend als provocatief: het tijdperk van snelle economische groei en technologische innovatie is voorbij. De uitvindingen die tussen 1870-1970 werden gedaan, waren zo revolutionair dat ze maar één keer konden plaatsvinden. Hij spreekt over drie 'General Purpose Technologies' (GPTs) die het leven van de Amerikanen (en later ook West-Europa, en nu de groeilanden) hebben getransformeerd: elektriciteit, de verbrandingsmotor en de lopende band van Henry Ford. Die drie uitvindingen zorgden voor de grootste productiviteitsgroei ooit.
Elektriciteit bracht letterlijk licht in de duisters. Dankzij de gloeilampen van Edison moesten mensen niet langer knoeien met flikkerende kerosinelampen die altijd voor brand konden zorgen. Ze konden later opblijven om te lezen. Fabrieken konden langer openblijven en het stadsleven bleef ook na zonsondergang bruisen.
Dat was slechts het begin: elektriciteit maakte metro's en trams mogelijk, zodat de nood aan paarden voor transport verminderde. Arbeiders konden zo gemakkelijker pendelen tussen hun werk en hun huis in de suburbs.
Vanaf de jaren twintig en dertig kwamen er elektrische apparaten op de markt om het huishoudelijk werk te verlichten. Daarvan was de wasmachine ongetwijfeld de belangrijkste. Niet langer moesten vrouwen elke dag sleuren met emmers water om kleren te wassen. Ze waren tevens verlost van het saaie en zware karwei om kleren te schrobben op een wasbord. Dankzij de droogkast moesten kleren niet meer aan een waslijn worden gehangen.
Elektriciteit maakte ook de koeling van voedsel moeilijk. Dankzij de ziektekiemtheorie van Louis Pasteur werden mensen bewust dat het koelen van voeding belangrijk was om besmetting met bacteriën te voorkomen. Eerst gebruikte men blokken ijs in vrachttreinen, maar in de jaren dertig werd de elektrische koelkast uitgevonden. Net zoals de wasmachine, werd de koelkast razend populair op korte tijd.
Een andere revolutie die elektriciteit teweegbracht was "het binnenbrengen van de wereld in de huiskamer" via de radio en de televisie. Radio was een echt familiegebeuren waarbij kinderen en ouders aandachtig luisterden naar wat de radiopresentator vertelde over het dagelijkse nieuws. Mensen op het platteland en in kleine dorpjes waren niet langer geïsoleerd van de buitenwereld. De televisie bracht bewegende beeld in de huiskamer. Er ontstonden tv-sterren die door iedereen gekend en geliefd werden. Er kwam nieuws binnen van over de hele wereld, en zelfs daarbuiten. Tientallen miljoenen volgden de maanlanding in 1969 live op televisie.
De verbrandingsmotor werd net als elektriciteit uitgevonden in 1879, maar zou pas vanaf het begin van de 20ste eeuw echt beginnen doorbreken. De eerste auto's kwamen toen op de markt, maar ze waren enkel betaalbaar voor de welgestelde klasse. Autorijden was vrij gevaarlijk door de slechte staat van de wegen en door het gebrek aan verkeersborden en snelheidslimieten. De eerste auto's hadden bovendien een broze carrosserie en vielen regelmatig in panne. De ingenieuze ondernemer Henry Ford zorgde ervoor dat de auto een product voor de massa werd. Door zijn perfectionering van het lopende bandsysteem (de 'assembly line') werd de productie van auto's veel efficiënter, sneller en goedkoper. Daardoor kon hij in een razend tempo zijn T-Model van de band doen rollen. Hij betaalde zijn arbeiders royale lonen voor die tijd, zodat ze hun eigen Ford T-Model konden kopen.
De auto was een verademing voor veel stedelingen omdat men tot dan toe vooral op paarden moest rekenen om van A naar B te geraken. Er werden zoveel paarden ingezet dat de straten vollagen met paardenmest en -urine. Als het geregend had gleden mensen vaak uit met breuken tot gevolg. Soms lagen paarden te rotten op straat, omdat het dan gemakkelijker was om ze in stukken te snijden en ze weg te halen. Dit zorgde niet alleen voor een ondraaglijke stank, maar ook voor risico op ziekten. De vele koetsen en paardentrams zorgden ook voor een drukte van jewelste en voor veel dodelijke ongevallen. Genoeg redenen dus om de auto te verwelkomen.
Auto's bevrijdden de Amerikanen niet alleen van paardenmest, maar ook van geografische isolatie. Boeren op het platteland konden nu naar de stad gaan om te gaan winkelen in 'chain stores' en grote warenhuizen (zoals Montgomery en Macy's). Voordien konden ze enkel hun boodschappen kopen in de buurtwinkel ('country stores') die dankzij zijn lokale monopolie hogere prijzen kon aanrekenen.
Dankzij de auto floreerde de postordercatalogus van Sears-Robuck. Consumenten hadden een ruime keuze aan producten die ze via de post konden bestellen en laten bezorgen.
De auto zorgde voor een transformatie van de ruimtelijke ordening. Naarmate steeds meer Amerikaanse gezinnen een auto hadden, kozen ze ervoor om in de suburbs te gaan wonen. Die suburbs begonnen zich steeds meer uit te breiden. Er ontstond een nieuwe vrijetijdsactiviteit: rondreizen door het land. Langs de nieuw aangelegde asfaltwegen groeiden wegrestaurants en motels als paddenstoelen. In de jaren 50 werden de mogelijkheden nog groter dankzij de eerste passagiersvliegtuigen. Voortaan konden Amerikanen veel sneller van kust naar kust reizen en, zelfs naar, naar andere continenten. De grote verliezer waren de treinen. Eind negentiende eeuw werd de 'Golden Spike' geslagen in de eerste transcontinentale spoorweg. Het spoorwegennetwerk breidde zich in de decennia daarna snel uit. Maar doordat de Amerikanen massaal auto's aanschaften in de jaren 20 werd de trein steeds minder populair als vervoersmiddel. De investeringen in spoorwegen daalden daarna gestaag.
Naast de drie grote uitvindingen (elektriciteit, verbrandingsmotor, lopende band) vond er in de periode 1870-1970 ook een gezondheidsrevolutie plaats. Door de aanleg van een netwerk van waterleidingen kwam er stromend water binnen in de Amerikaanse huizen. De toevoeging van fluor en chloor elimineerde voornaamste bacteriën. Daarnaast kwamen er ook een rioleringssysteem zodat proper water en afvalwater van elkaar gescheiden werd. Amerikaanse gezinnen installeerden toiletten ('water closets' of WC's) binnenshuis zodat ze niet langer in een uithuisje hun behoefte moesten doen.
Er kwamen ook strengere regels tegen de contaminatie van voedsel. Melkboeren voegden vaak melasse (een zoetstof) en gips toe aan melk om de bedorven smaak te verdoezelen. Om meer melk te verkopen lengden ze de melk aan met water dat vaak onzuiver was. Door de Food en Drug Act werd er grotendeels paal en perk gesteld aan deze praktijken. De sanitaire revolutie en de strengere voedselregulering zorgden voor de grootste sprong in levensverwachting ooit. De baby'- en kindersterfte daalde spectaculair tussen 1910-1940. De stijging in levensverwachting gebeurde dubbel zo snel als in de decennia na WO II, toen de grootste stappen in de geneeskunde werden gezet.
Gordon stelt dat de grootste technologische revoluties en verbetering in levensstandaard in 1940 al voltrokken was. Na WO II zouden er nog veel belangrijke innovaties komen, maar die hadden een minder grote impact op het dagelijks leven van Amerikanen dan de verbrandingsmotor, elektriciteit, stromend water, sanitair en goedkope en efficiënte massaproductie.
De computer, de gsm en de smartphone hebben ook een enorme impact gehad, maar die impact bleef beperkt tot de domeinen van communicatie, entertainment en informatie. De Grote Uitvindingen beïnvloedden elk aspect van het dagelijks leven en de economie. Het Tijdperk van de Grote Uitvindingen zal zich volgens Gordon niet gauw meer herhalen. Hij gelooft niet dat AI, robots,
3D-printers, zelfrijdende auto's of gentechnologie de komende 25 jaar terug voor een periode van snelle groei zullen zorgen. Hiermee gaat hij in tegen "techno-optimisten" die stellen dat we in een nooit gezien tijdperk van technologische innovatie leven en dat het beste nog moet komen. Gordon komt met een karrenvracht onderzoek, cijfers en data om aan te tonen dat dat tijdperk niet nu is, maar een eeuw geleden. Dat stemt tot dankbaarheid voor de verwezenlijkingen van het verleden, maar ook tot bescheidenheid wat betreft onze verwachtingen voor de toekomst.
January 14, 2018
This beastly but essential book covers the revolution in the American standard of living between 1870 and 1940 and its impact on economic growth. It begins with one of my favorite economic history quotes: "Around 10,000 C.E., agriculture was invented. For the next 11,800 years, nothing happened." Then there was the Industrial Revolution. The focus of this book is how a variety of innovations between 1870 and 1940 utterly transformed the daily life and standard of living of virtually all Americans. The main inventions relate to the "networked home" (sewage, water, heat, electricity, telephones), personal transportation (railroads to cars), sanitation (toilet, horse manure, germ theory, clean water), mortality, especially among children (huge cuts to mortality largely related to water borne illnesses and vaccination), and diet (massive expansion of variety and quality). Gordon throws dozens of charts at you that describe the rapid ascension of all of these trends, some of which are simply astounding. It wasn't just that these technologies/systems became so widespread; it's that they became so cheap. Take cars, which despite accelerating quality declined by several times in price in between 1900 and 1930 to the point where a majority of households owned won. The scale of industrial production and the market can't be beat in terms of providing affordable access . Lest you think he's being a raging capitalist here, Gordon also shows how Progressive reformers and city planners helped install these systems in poor neighborhoods and regulated the excesses and abuse of capitalist competition.
Possibly the biggest point in this book is that the revolutionary changes in the SoL between 1870 and 1940 could all only happen once. This sounds obvious, but it has major implications. These changes were all changes in type, not just degree. Going from lugging water from a dirty common tap to turning on a faucet is a one time sea change, as is going from horse to car or from no modern sanitation to modern sanitation. The gains in economic growth and the productivity of labor caused by these changes therefore can also only happen once. That's a big reason why the standard of living surged in this time period and leveled off. In terms of where/how/at what cost we eat, drink, live, travel, receive health care, and communicate, 1870-1940 was way more significant a change than 1940-the present.
Still, 1940-1970 were still boom economic years, in large part building on the SoL and productivity surge of the previous years. Other important factors in this surge included: The pent-up demand and population boom following WWII, the restructuring of the economy and labor during the New Deal, continued advances following 1940, a lack of global economic competitiveness, huge advances in efficiency/productivity during WWII, and the surge in the US education system post WWII. Post 1970, however, things started to slow down. One interesting case study in the book is air conditioning in the office, which became normal in the 40-70 period and greatly helped efficiency Aside from the usual factors, like rising inequality and increasing global competition/outsourcing/automation, Gordon argues that the major innovations since 1970 have mostly changed our communication, access to information, and entertainment rather than more fundamental shifts in the standard of living and productivity that would create economic growth. Advances in computer technology and communication helped create an economic surge in the 1990's and early 2000's, but this petered out. Gordon's second to last chapter explores why AI, driverless cars, smartphones, and other current and future innovations are unlikely to create a productivity/growth surge in the near future.
Gordon's brilliant last chapter diagnoses the many headwinds to economic growth besides a slowdown in life-changing innovations. The biggest one is inequality: gains in the last 50 years have gone disproportionately to the top 10 or 1%, wages for most Americans have stagnated, costs like health care and education have surged, taxation for the wealthy has dropped, manufacturing jobs have left, unions are weaker, and more Americans are working non-unionized, low-pay service jobs. These factors flatten out growth and productivity and lend great anger to our politics. Gordon identifies a number of other causes of slower growth/productivity: stagnation of educational achievement, mass incarceration, lower rates of marriage/children born in wedlock, demographic shifts like the retirement of the boomers, increasing national debt, and the mixed benefits of immigration (good for national growth but tough for the existing working class).
He also spells out a number of possible solutions to these headwinds, most of which fit into a fairly progressive economic plan. The one he really highlights is free preschool, which most first world countries do and would have huge effects of disparate outcomes in education and the increasing set of working class people who are adrift in an economy that doesn't provide livable wages. Other ideas are a shift to a points based system of immigration, limiting tax deductions that favor the wealthy, changes to zoning regulations that would allow poorer people to live in better areas, changes to how public schools are funded, reducing the prison population as well as New Jim Crow type restrictions on people after they leave prison, drug legalization, a more progressive tax (especially on dividends and capital gains), more cultural emphasis on marriage, wider access to/knowledge of birth control, and raising the minimum wage considerably. I, for one, can get behind all of these ideas. Gordon falls far short of Bernie Sanders.
What's nice about Gordon is that he's so data-driven, objective, and practical. His last chapter mixes liberal (ok, mostly liberal) and conservative ideas to formulate a new platform that could attack the causes of inequality and maybe help slow growth. However, the bigger point in this book is that our expectations about the economy today are shaped by the 1870-1970 revolution, which is why we almost always feel cheated and disappointed. In many ways we are; note the rising tide of inequality and the stagnation of real wages for the majority of Americans. However, this book suggests that we might have to wean ourselves off the idea that our kids' lives will be better than our economically as if that promise is something that could be maintained indefinitely, independently of economics and history. This will be a tough idea to crack.
The main flaw in this book is not so much that it's long but that it's repetitive. Gordon repeats his major points for each chapter and the whole thesis many, many times. There's a certain point where you're like "I get it." I also wouldn't tackle this book without a working knowledge of basic economics and U.S. history because Gordon doesn't slow down too often to explain these things. This book is a real challenge, but I know I will refer to it over and over again as a teacher and historian. There are so many fascinating tidbits that I can't fit into a review. It reshaped my view of the broad stretch of US history, highlighting the importance of a revolutionary time span and helping explain the roots of our current stagnation. PS: If you want to tackle the book, please note that the paperback Princeton U Press version of this book has ridiculously small print. If I had known this, I would have snagged the Kindle version.
Possibly the biggest point in this book is that the revolutionary changes in the SoL between 1870 and 1940 could all only happen once. This sounds obvious, but it has major implications. These changes were all changes in type, not just degree. Going from lugging water from a dirty common tap to turning on a faucet is a one time sea change, as is going from horse to car or from no modern sanitation to modern sanitation. The gains in economic growth and the productivity of labor caused by these changes therefore can also only happen once. That's a big reason why the standard of living surged in this time period and leveled off. In terms of where/how/at what cost we eat, drink, live, travel, receive health care, and communicate, 1870-1940 was way more significant a change than 1940-the present.
Still, 1940-1970 were still boom economic years, in large part building on the SoL and productivity surge of the previous years. Other important factors in this surge included: The pent-up demand and population boom following WWII, the restructuring of the economy and labor during the New Deal, continued advances following 1940, a lack of global economic competitiveness, huge advances in efficiency/productivity during WWII, and the surge in the US education system post WWII. Post 1970, however, things started to slow down. One interesting case study in the book is air conditioning in the office, which became normal in the 40-70 period and greatly helped efficiency Aside from the usual factors, like rising inequality and increasing global competition/outsourcing/automation, Gordon argues that the major innovations since 1970 have mostly changed our communication, access to information, and entertainment rather than more fundamental shifts in the standard of living and productivity that would create economic growth. Advances in computer technology and communication helped create an economic surge in the 1990's and early 2000's, but this petered out. Gordon's second to last chapter explores why AI, driverless cars, smartphones, and other current and future innovations are unlikely to create a productivity/growth surge in the near future.
Gordon's brilliant last chapter diagnoses the many headwinds to economic growth besides a slowdown in life-changing innovations. The biggest one is inequality: gains in the last 50 years have gone disproportionately to the top 10 or 1%, wages for most Americans have stagnated, costs like health care and education have surged, taxation for the wealthy has dropped, manufacturing jobs have left, unions are weaker, and more Americans are working non-unionized, low-pay service jobs. These factors flatten out growth and productivity and lend great anger to our politics. Gordon identifies a number of other causes of slower growth/productivity: stagnation of educational achievement, mass incarceration, lower rates of marriage/children born in wedlock, demographic shifts like the retirement of the boomers, increasing national debt, and the mixed benefits of immigration (good for national growth but tough for the existing working class).
He also spells out a number of possible solutions to these headwinds, most of which fit into a fairly progressive economic plan. The one he really highlights is free preschool, which most first world countries do and would have huge effects of disparate outcomes in education and the increasing set of working class people who are adrift in an economy that doesn't provide livable wages. Other ideas are a shift to a points based system of immigration, limiting tax deductions that favor the wealthy, changes to zoning regulations that would allow poorer people to live in better areas, changes to how public schools are funded, reducing the prison population as well as New Jim Crow type restrictions on people after they leave prison, drug legalization, a more progressive tax (especially on dividends and capital gains), more cultural emphasis on marriage, wider access to/knowledge of birth control, and raising the minimum wage considerably. I, for one, can get behind all of these ideas. Gordon falls far short of Bernie Sanders.
What's nice about Gordon is that he's so data-driven, objective, and practical. His last chapter mixes liberal (ok, mostly liberal) and conservative ideas to formulate a new platform that could attack the causes of inequality and maybe help slow growth. However, the bigger point in this book is that our expectations about the economy today are shaped by the 1870-1970 revolution, which is why we almost always feel cheated and disappointed. In many ways we are; note the rising tide of inequality and the stagnation of real wages for the majority of Americans. However, this book suggests that we might have to wean ourselves off the idea that our kids' lives will be better than our economically as if that promise is something that could be maintained indefinitely, independently of economics and history. This will be a tough idea to crack.
The main flaw in this book is not so much that it's long but that it's repetitive. Gordon repeats his major points for each chapter and the whole thesis many, many times. There's a certain point where you're like "I get it." I also wouldn't tackle this book without a working knowledge of basic economics and U.S. history because Gordon doesn't slow down too often to explain these things. This book is a real challenge, but I know I will refer to it over and over again as a teacher and historian. There are so many fascinating tidbits that I can't fit into a review. It reshaped my view of the broad stretch of US history, highlighting the importance of a revolutionary time span and helping explain the roots of our current stagnation. PS: If you want to tackle the book, please note that the paperback Princeton U Press version of this book has ridiculously small print. If I had known this, I would have snagged the Kindle version.
August 21, 2020
A good book, providing an in-depth economic analysis of America’s overall productivity and the resultant rise in standard of living from the late 19th century to the present. The author, Robert J. Gordon, a noted economist, details a trove of data comparing economic growth in the US across a range of time periods. He presents a thesis arguing that the period 1940 to 1970 was the apex of American productivity due to the successful development of durable manufacturing practices in the 80 preceding years and a society that had benefited from the continued rise in the standards of living which that growth brought. He makes a compelling case that the period of 1870 to 1940 saw the Industrial Revolution’s various stages advance numerous “hard” technologies and make significant improvements in the American way of life. Gordon generally discounts the ability of the Information Revolution’s less durable advancements over the last 40 years to match that same growth rate. This, along with other arguments concerning stagnant wages and an increasingly divergent economy, Gordon explains as the reasons for America’s much slower economic growth and concurrent flattening out of the standard of living in the years since 1970. Gordon ends with a prescription for bringing back that same level of growth seen in the post war years, based mostly on improving education to meet the needs of the moment, a government centered on fostering innovation, and a social system able to fuel more durable growth. There are more than a few ‘big claims’ made in the book, and I know it has not been universally praised. But, as with any good academic endeavor, the arguments are well made and the data is fully presented. If nothing else, Gordon’s somewhat irreverent presentation provides great food for thought as we struggle to understand the new world in which we live. The most enjoyable parts for me were the comparisons of standards of living for Americans from 1870 to the present. These covered a wide swathe of business sectors and human needs. I really liked the deep comparisons and understanding how inventions and innovations take a generation or more to truly bear fruit. A great book for those wanting to better understand America’s economic development over the “Long 20th Century.” Highly recommended for anyone attempting to better understand the current state of the American economy and how we got here.
August 18, 2017
Like many other dense economic works, The Rise and Fall of American Growth was at times a slog to get through and utilizes plenty of graphs and discussions of methodology which might put off the layman. This is a shame because it's underlying thesis, and the evidence it presents for it is important to the future of the United States, and given the US' relative power and importance in a global context, to the World.
In short, Gordon's thesis is this; The period of Rapid American growth, starting in the 1870's, accelerating in the interwar period and immediately after, then stalling out in the 1970's, was a historical aberration caused by several factors, but principally economic, cultural and technological 'events' which can only happen once and will not recur, nor is it likely something comparable will happen.
That is the expectations engendered in the immediate post-war Era regarding growth and productivity are misplaced, and that period is not coming back.
The work isn't perfect of course; some of the historical analysis I think a little bit simplistic, and there were a few claims throughout the book I was incredulous about. Overall, however, the book presents a compelling thesis. One example; the development of the Steam Engine, rather than jeopardize the horse, exploded it's use, as the ability to transport goods from station to station between cities meant many more such horses were needed to transport those goods in the destinations cities. This leads into discussing how the development of the Automobile fundamentally changed urban transport, the farm, and culture, in a way that will not be repeated.
I think he also does a compelling job of answering the 'Techno-optimist' who posit an amazing expansion of growth in the next decade or two based on emerging technologies. That is he shows how the Internet and the Smartphone, unarguably two of the most transformational technologies of the last 30 years, have virtually no impact on Growth or productivity and that no emergent tech looks to have the transformational effect of refrigeration, electricity, or the combustion engine.
So final review is that this thing will be a slog for many people, even if you have a background in Math, but it's probably worth it. It paints a damning picture of the future of American society and Capitalism in a historical context.
In short, Gordon's thesis is this; The period of Rapid American growth, starting in the 1870's, accelerating in the interwar period and immediately after, then stalling out in the 1970's, was a historical aberration caused by several factors, but principally economic, cultural and technological 'events' which can only happen once and will not recur, nor is it likely something comparable will happen.
That is the expectations engendered in the immediate post-war Era regarding growth and productivity are misplaced, and that period is not coming back.
The work isn't perfect of course; some of the historical analysis I think a little bit simplistic, and there were a few claims throughout the book I was incredulous about. Overall, however, the book presents a compelling thesis. One example; the development of the Steam Engine, rather than jeopardize the horse, exploded it's use, as the ability to transport goods from station to station between cities meant many more such horses were needed to transport those goods in the destinations cities. This leads into discussing how the development of the Automobile fundamentally changed urban transport, the farm, and culture, in a way that will not be repeated.
I think he also does a compelling job of answering the 'Techno-optimist' who posit an amazing expansion of growth in the next decade or two based on emerging technologies. That is he shows how the Internet and the Smartphone, unarguably two of the most transformational technologies of the last 30 years, have virtually no impact on Growth or productivity and that no emergent tech looks to have the transformational effect of refrigeration, electricity, or the combustion engine.
So final review is that this thing will be a slog for many people, even if you have a background in Math, but it's probably worth it. It paints a damning picture of the future of American society and Capitalism in a historical context.
January 15, 2018
A thoroughly exacting read, Robert Gordon does a remarkable job in chronicling the economic history of the American economy from 1870 onwards. In an age marked by the optimism of a Yuval Noah Harari, Gordon belongs to the other side - his unnerving conclusion after exhaustive (often very dry) analysis is that the growth and increase in prosperity that the US saw between 1870-1970 is most likely not to be repeated, at least for decades to come. Why? Simply put, the argument is that the changes brought in by electricity, automobiles and travel in general, construction of modern housing, clothing, retailing, household appliances and utilities networking are unlikely to be replicated in the same measure - think of the change from gas lights to electricity. All the innovations taking place have "pace" yet do not have high "impact" on productivity - the most important ingredient for a country's GDP growth. Progress in communication and entertainment continues but it neither matches the momentous change brought in by inventions such as the telephone, and even if this progress is high, society as a whole is not moving forward in so many different areas as before.
For a person reading this up to now, the chief resistance would stem from her own experience seeing life change almost on a yearly basis with newer, faster technologies. However, Gordon's work is based on data. He hardly ever ventures out to give his own opinion - it might have helped reading through the book given its length and dry content - and he bases his conclusions on the cumulative assessments of decades of research (including his own) and gives table after table, figure after figure to prove their credibility and believability.
In the weeks to come I'll try to distill some of the broader lessons and facts I gained from the book. One thing's clear, and this is for India. Any developing country will not move forward without investments in basic sanitation, education and healthcare. The amazing, awe-inspiring history of the US teaches us that long term investments in these areas pays for many generations to come.
The book's last section looks at forecasting the future. Though I agree with the general idea of Gordon's thesis (and his detailing through the book is incredible) I think the forecast is too pessimistic - I don't think BIG inventions won't come, though admittedly a period of stagnation is possible. And it is because of the latter point that his chapter on inequality - and the contrast between the rise in prosperity of those at the top from the rest of the population from the 50s and 60s to today- is very persuasive.
It's a difficult read. I took a LOT of time to get through it and that's why I ended up giving it 4/5 stars. It's rewarding in its own way but you need to do the work for it. I lost about 20 books last year over this one.
For a person reading this up to now, the chief resistance would stem from her own experience seeing life change almost on a yearly basis with newer, faster technologies. However, Gordon's work is based on data. He hardly ever ventures out to give his own opinion - it might have helped reading through the book given its length and dry content - and he bases his conclusions on the cumulative assessments of decades of research (including his own) and gives table after table, figure after figure to prove their credibility and believability.
In the weeks to come I'll try to distill some of the broader lessons and facts I gained from the book. One thing's clear, and this is for India. Any developing country will not move forward without investments in basic sanitation, education and healthcare. The amazing, awe-inspiring history of the US teaches us that long term investments in these areas pays for many generations to come.
The book's last section looks at forecasting the future. Though I agree with the general idea of Gordon's thesis (and his detailing through the book is incredible) I think the forecast is too pessimistic - I don't think BIG inventions won't come, though admittedly a period of stagnation is possible. And it is because of the latter point that his chapter on inequality - and the contrast between the rise in prosperity of those at the top from the rest of the population from the 50s and 60s to today- is very persuasive.
It's a difficult read. I took a LOT of time to get through it and that's why I ended up giving it 4/5 stars. It's rewarding in its own way but you need to do the work for it. I lost about 20 books last year over this one.
October 7, 2022
I didn't expect a 850 book on the factors that led American growth from 1870 to 1920 then from 1920 to 1970 and its slowing since then. The book is methodical without being dry and the book is shot through with absolute gems as you read through. The utter drudgery of the past is brought to life.
The author then also doesn't shy away from what America could do policy-wise to try and slow the drop in productivity and work hours. Overall the book puts together a complete picture of the last 150 years of economic action, what makes and made the US special and what can or would. Many of the gains in productivity were one time events such as letting women work or pushing for mass primary education. As time goes on, fewer such obvious large changes remain.
Some favorite bits:
-The breaking of Moore's Law more reflects the lack of demand for intensely powerful chips vs running into basic scientific and engineering barriers. Our processors have gotten good enough.
-No product has gotten better faster and cheaper than processors did in the 80s and 90s.
-The single greatest drop in the cost of living occurred when the price of the Ford Model T dropped almost 80% from its introduction to the end of its first run.
-One way to look at productivity is the amount of capital each worker is employing in terms of tools. Over the course World War II, manufacturing doubled the capital intensity of each worker which proved to be permanent.
-Urban kids at the turn of the previous century were generally less educated than their rural kin. Truancy laws were poorly enforced and urban manufacturing had jobs that kids as young as six could do. Rural children brought no such large gains in productivity as they were often simply too small leaving them time for education. Urban work was year round whereas farm work was often highly seasonal generating additional time for study.
-While household work has generally dropped in the past 150 years, work is non-linear with participants. There's a fixed amount a week required to just have a household and each extra person only adds a little to that comparatively. In the late 1800s households were larger so even if the the number of hours required to run a house were 60 for a family of 6, that work was divided likely across a mother and two daughters or 20 a person-week. A similar three person household now likely has one person doing all 30 hours of housework resulting in 30 hours of work for that person increasing the work by 50% per person.
-Wealth inequality tends to reduce productivity simply because the marginal dollar at the bottom end does vastly more than it does being accumulated at the top.
The author then also doesn't shy away from what America could do policy-wise to try and slow the drop in productivity and work hours. Overall the book puts together a complete picture of the last 150 years of economic action, what makes and made the US special and what can or would. Many of the gains in productivity were one time events such as letting women work or pushing for mass primary education. As time goes on, fewer such obvious large changes remain.
Some favorite bits:
-The breaking of Moore's Law more reflects the lack of demand for intensely powerful chips vs running into basic scientific and engineering barriers. Our processors have gotten good enough.
-No product has gotten better faster and cheaper than processors did in the 80s and 90s.
-The single greatest drop in the cost of living occurred when the price of the Ford Model T dropped almost 80% from its introduction to the end of its first run.
-One way to look at productivity is the amount of capital each worker is employing in terms of tools. Over the course World War II, manufacturing doubled the capital intensity of each worker which proved to be permanent.
-Urban kids at the turn of the previous century were generally less educated than their rural kin. Truancy laws were poorly enforced and urban manufacturing had jobs that kids as young as six could do. Rural children brought no such large gains in productivity as they were often simply too small leaving them time for education. Urban work was year round whereas farm work was often highly seasonal generating additional time for study.
-While household work has generally dropped in the past 150 years, work is non-linear with participants. There's a fixed amount a week required to just have a household and each extra person only adds a little to that comparatively. In the late 1800s households were larger so even if the the number of hours required to run a house were 60 for a family of 6, that work was divided likely across a mother and two daughters or 20 a person-week. A similar three person household now likely has one person doing all 30 hours of housework resulting in 30 hours of work for that person increasing the work by 50% per person.
-Wealth inequality tends to reduce productivity simply because the marginal dollar at the bottom end does vastly more than it does being accumulated at the top.
Read
December 27, 2019Picked up this tome to gain a firm understanding of economic change and productivity over the past several American generations. The main focus of the book decries the daffy promises of the techno-optimists: The United States, hindered by bleak economic headwinds and used up many of their one time productivity surges are over.
Most of the book is devoted to explaining where the big productivity gains came during America's "special century" of 1870 - 1970, this is the change from an agricultural to a urban/industrial economy. Basically, electricity and the combustable engine, with gradual improvement, were the root causes of such rapid productivity. America's zenith of productivity came during World War Two, when the US was pumping out aircraft bombers and battleships at a furious pace. Pressure to produce so much came from a national unity to win the war and many suggestions in enhancing production.
Other enlightening facts I read in the book, that I hadn't heard before (but had suspected) was the relation to plumbing as increasing life expectancy and that every time the stock market goes up, inequality increases. There's much more to Gordon's detailed analysis, but those were a few things I walked away with from the book.
Most of the book is devoted to explaining where the big productivity gains came during America's "special century" of 1870 - 1970, this is the change from an agricultural to a urban/industrial economy. Basically, electricity and the combustable engine, with gradual improvement, were the root causes of such rapid productivity. America's zenith of productivity came during World War Two, when the US was pumping out aircraft bombers and battleships at a furious pace. Pressure to produce so much came from a national unity to win the war and many suggestions in enhancing production.
Other enlightening facts I read in the book, that I hadn't heard before (but had suspected) was the relation to plumbing as increasing life expectancy and that every time the stock market goes up, inequality increases. There's much more to Gordon's detailed analysis, but those were a few things I walked away with from the book.
June 3, 2018
I'm of two minds about Robert Gordon's thesis that growth is decelerating because we grabbed all the low-having technological fruit. I want him to be right because I'm afraid if growth accelerates, we don't have the political will to make policy choices that benefit the whole of the population. Any growth will be captured by the owners of capital and the masses will be in the same boat they've always been in. I suppose this is true even with low growth - it is a political question. I want him to be wrong because I still want Keynes to be right from his essay on the economic possibilities of our grandchildren. If the techno-optimist future is right, we can trade off work for leisure (again, as long as we can distribute the fruits of capital somewhat equitably) and we can use cleaner tech to start undoing the planetary destruction we've done in the last twenty years. No matter what you think of his projections, the book is well done in aggerating economic history for the past hundred years and is a useful reference as a piece of history.
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