David Warsh: The great productivity stagnation

Economic Principals had a pretty good topic in mind this week – the proposition that good ideas are becoming harder to find.  That’s the conclusion contained in an important new paper by Nicholas Bloom, Charles I. Jones, John Van Reenen and Michael Webb.  But there was too much background to tell and the piece sprawled out of control.  Here’s what Stanford’s news service had to say about their account.

The authors’ punchline:

“Our robust finding is that research productivity is falling sharply everywhere we look. Taking the U.S. aggregate number as representative, research productivity falls in half every 13 years – ideas are getting harder and harder to find. Put differently, just to sustain constant growth in GDP per person, the U.S. must double the amount of research effort searching for new ideas every 13 years to offset the increased difficulty of finding new ideas.’’

The team is suitably cautious in whatever surprises may be in store. Who knows what else there is out there to know? Not engineering feats like hyperloops and better batteries, but basic breakthroughs such as  quantum computing, genetic editing techniques and artificial intelligence.

Still, for a decade or more, an intuition has been taking hold that the familiar rate of increasing plenty was slowing down, at least in the United States. This was not simply a matter of resources strained by soaring population. The basic mechanism that Thomas Malthus missed 225 years ago, of increasing know-how and economic growth, was thought to be involved as well.  In this view, an age of widespread affluence is not in coming to end, but perhaps it is stabilizing.

Economist Robert J. Gordon, of Northwestern University, argued strongly that “a special century” of rapid growth had occurred that would not be repeated.  In The Rise and Fall of American Growth: The US Standard of Living Since the Civil War (Princeton, 2016), he described the many very basic inventions – steam, electricity, motors, communications, modern agriculture,  public health – that could only happen once.  Others, he said, others reached natural limits.  Tyler Cowen, of George Mason University, put it more colorfully a little earlier in The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better  (Penguin eSpecial, 2011)

For 30 years, this argument has been slowly working its way forward within technical, which is to say, scientific, university-based economics. Jones, in particular, has been at the center of it. It is hard to find a vein in economics that has made more progress recently than this one. It will make an interesting story someday.

David Warsh, a veteran economics and political columnist, is proprietor of Somerville, Mass.-based ec