Looking back 50 years ago, life, over all, does not look
that different. Just like 50 years ago, today’s middle-class owns washing
machines, air conditioners, phones, and cars with an average life expectancy
around 70 years. Compared to 100 years ago, Americans typically moved around on
horse-drawn buggies on dirt or cobblestone roads. Most homes were not even
wired for electricity and the average life expectancy was 53. Americans like to
think that they live in an era of dramatic change, but when one compares today
to the momentous innovations of the mid-20th century it is hard to
see it that way.
The article goes on to discuss Robert J. Gordon’s new book, “The
Rise and Fall of American Growth” which “…ends by doubting that the standard of
living of today’s youths will double that of their parents, unlike the standard
of living of each previous generation of Americans back to the late 19th
century.” Professor Gordon foresees innovation creeping along at the same pace. Moreover, the labor force will continue to decline as
aging baby boomers leave the work force and women’s labor supply plateaus.
Gains in education will contribute little and the growing concentration of
income means that whatever the growth rate, most of the population will not
gain from it. He argues that the explosion of the innovation and prosperity
from 1920 through 1970 was a one-time phenomenon. From now on, progress will
continue on at a more gradual pace.
As Mr. Bernanke of the Federal Reserve points out, long-term interest rates have been declining for an extended duration of time. This is partly due to China's accumulation of savings, but the decline mainly suggests that investors may be agreeing with Professor Gordon.
What do you think about Professor Gordon’s outlook for the
future of innovation? Should we really minimize the enormous gains we have made
in the past 50 years?
Interesting outlook. Even though the growth of economy in the past few decades has made a huge change of our life quality, some optimist might overestimate the benefit taken from economic growth.
ReplyDeleteAlthough America is a developed country, and its economy is operating well after developing for so many years, the enormous gains can still be used to stimulate economic growth, like investing new technologies, or solve other social problems, like inequity.
As for the slowing technological opportunities, I think increasing the level of technology is the only and consistent way to boost economy and make the allocation-of-resources process more efficient.
This is a very interesting topic that I don't think that many people have considered. The main difference between us and the generation 50 years ago is the technology age that we live in. 50 years ago, most people probably couldn't imagine that we would be carrying little computers around with us that give us access to the world of information at all time. A question that pops into my head when I think about this topic is what is the limit to innovation? At some point will technological advances basically level out and reach a point where there's not much more that is possible to advance?
ReplyDeleteI think this article makes a very dawning point. Furthermore, I think there are a couple of points that this article fails to bring up which in turn contribute valuable information toward the fact that Americas greatest days are behind us. One factor I would like to point out is how some individuals believe that the “Veblen effect” will be greater with coming generations than it ever was before. This effect can be closely linked with the “keeping up with the Joneses.” Combing these two ideas one can see that the likely hood of saving may be greatly hampered (because it’s the idea that MPC will be greater with generations to come) hence, less financially stable working class. Add this to idea that innovation may have plateaued presented by the article, I start to question where, who and how are we going to get the money necessary to sustain these effects? Not to mention, the point which Gordon makes about the shrinking of the labor force do to the loss of the baby boomer cohort, poses another question. Will we even have the labor force necessary to support the current and future industry demand? Collectively these facts seem very daunting to me!
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