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Response to Comments on
The Rise and Fall of American
Growth
Robert J. Gordon
Northwestern University
AEA Session
San Francisco, January 3, 2016
Central Themes of the Book
• Economic growth is not continuous
• 1870-1970 was a special century
– Freed households from an unremitting daily
grind of painful manual labor, household
drudgery, darkness, isolation, and early death
• Special because progress spanned so
many dimensions
• Progress since 1970 substantial but
across fewer dimensions (EICT)
The Three Eras of Productivity
Growth
The Middle Period Has Triple the
TFP Growth
Approach to Interpreting
the Standard of Living
• Well-being depends on market goods
combined with household production and
leisure
– minus the disutility from work.
– Reduced hours, discomfort, physical difficulty
• Understatement of rise in standard of living
due to consumer surplus omitted from GDP
• Omissions were more important in the
special century than since 1970
• Examples
Looking Ahead to the Future
• Forecasts look ahead 25 years, 2015-2040
• Future pace of productivity change
extrapolates relevant part of the past
• Headwinds subtract the effects of:
– Inequality
– Education
– Demography
– Fiscal (increase in debt/GDP; aging population)
Trend in Labor Productivity Growth
Starting in 1953
Summary of the Forecasts
2.5
1920-2014
2015-2040
2.26
2.11
2.0
1.82
1.69
Percent
1.5
1.20
1.0
0.80
0.5
0.40
0.30
0.0
Output per Hour
Source: Data underlying Table 18-4.
Output per Person
Median Output per
Person
Disposable Median
Income Per Person
Reactions: Starting with
Ben Friedman
• Rich and nuanced reaction from a broad
historical perspective
• Calls attention to the hopefulness of Francis
Weyland – what blessings God will bestow
– View forward from 1837 and 2016
• Qualification:
– “No new advances” will replicate Great
Inventions
Ben Friedman and the Future
• Contrast between my future of reduced pace
of technological change and headwinds
• Vs. Brynjolfsson-McAfee “techno-optimism”
• Technical change vs. jobs
• My view: robots and AI are important but
evolving very slowly
• Robot quote
The Other Reactions:
In Chronological Order
• Acemoglu – Moscona – Robinson
(A-M-R) concerns the 19th century
• Crafts focuses on 1920-1950
• Clark looks to the future
A-M-R on the Endogeneity of
Technical Change
• Taxes, R&D subsidies, property rights, patent
laws, educational system, competition policy
• Future vs. past depends on these institutions
• Book is criticized for neglecting these
underlying factors, but:
– Attention to patent system, costs vs. U.K.
– Differs by treating timing of inventions as
spontaneous
– Future: opportunities for innovation, not
institutions
Crafts on 1920-50
• Table 1. Valuation of increased life
expectancy and reduced hours of work adds
to peak growth in 1929-50
• His research project, new estimates for
education reduce TFP growth 1899-1947 by
0.3. Reallocation within sectors.
Understanding TFP to be applauded.
The Great Depression and WW II
• The book credits New Deal policies and WWII
for the great leap in TFP 1930-1950
• Unions, higher wages, reduced hours,
infrastructure investment
• WWII: Learning by doing, 2X machine tools
• Crafts: no infrastructure or private R&D
WWII
– But, government R&D, “big inch pipeline”
Clark on the Future
• Clark agrees with the book’s technopessimism
• But he gives the book too much credit; his
view of the future is complementary but
different
• My reasons for skepticism:
– Big impacts of IR#3 are in the past
– Evolutionary progress of robots and AI
Clark’s Reasons for Future
Pessimism
• Dominant and growing share of production in
the services, not amenable to automation
• “A surprising share of current jobs are the
timeless ones of the pre-industrial economy”
• 1960-2007 half of industries have negative
TFP growth
• Stunning: >80% corporate R&D in industries
with only 5% of value added
• ICT: Declining share and growth rate
Conclusion
• The book and its themes remain intact
• The special century, the smaller impact of the
digital revolution, the time skewness of
mismeasurement
• Future pessimism: Smaller technological
opportunities combined with headwinds
• Despite its pessimism about the future, the
book chronicles a joyous cavalcade of
progress since 1870
• Join me for the book-signing, PUP booth