Saturday, January 05, 2013

The Post-Productive US Economy: Undoing of a Superpower

Back in the mid 1990's there was concern over the United States falling down into a "service economy." There was also talk of robots taking jobs away from humans. There were movies, like "Terminator." Fast Forward to 2013. Robots haven't replaced us --- not yet --- computers HAVE --- and now they are positioned to aid and abet the robots to "take over." Those driverless cars that park themselves without human intervention are your first glimpse of such technology.

Back in 2001 or so, Robert Mirabal put forth a bit of dialog about how many people walk in two different worlds. "So there is nobody in this room who doesn't walk in two different worlds, sometimes even three"? "There is a world I walk on this other side it has a dance, the language and the religion, it a music and the arts, the shrines of the medicine people in the star worlds and all these beautiful things. And here is this other world, a world of confusion, a world of computers, a world of cars and telephones, so much chaos, a world that we also need. Now do you feel that burn of conflict?... I thought you did."

And so it goes, those paths we walk upon have merged as a result of what can only be described as a "technological earthquake." The cell phone became THE SMART PHONE. Suddenly, we all have computers in our pockets. Some say it is a portable  "network of wonderful things." I side with Professor Gordon on this one...

The American economy is running on empty. That's the hypothesis put forward by Robert J. Gordon, Stanley G. Harris Professor in the Social Sciences and Professor of Economics at Northwestern University; CEPR Research Fellow.

Since his publication, Gordon's theory has drawn a heap of criticism from those who believe he's underestimating technology's potential and America's ability to fix its own problems.
As the Economist noted, techno-pessimists have been around a long time, and they tend to be proven wrong.

Gordon, though, hasn't been dissuaded. Recently, he answered many of his detractors in a Wall Street Journal op-ed. "In setting out the case for pessimism, I have been accused by some of a failure of imagination," he wrote. "New inventions always introduce new modes of growth, and history provides many examples of doubters who questioned future benefits. But I am not forecasting an end to innovation, just a decline in the usefulness of future inventions in comparison with the great inventions of the past."

The Atlantic's Jordan Weissmann interviewed Gordon not long after his paper was released. Here are a few excerpts, edited for length and clarity.

It's all about CONNECTION (Networking)

Over the weekend I had time to read and think about Gordon's article. It is truly an eye-opener, especially when you take in the excellent supportive piece published by The Technium: I think Robert Gordon is wrong about his conclusion, but I wanted to start with one of the bits of evidence he offers for his view. He is trying to argue that the consequences of the 2nd Industrial Revolution, which bought to common people electricity and plumbing, was far more important than the computers and internet which the 3rd Industrial Revolution has brought us. (Gordon's 1st Industrial revolution was steam and railroads.) As evidence of this claim he offers this hypothetical choice between option A and option B.

With option A you are allowed to keep 2002 electronic technology, including your Windows 98 laptop accessing Amazon, and you can keep running water and indoor toilets; but you can’t use anything invented since 2002. Option B is that you get everything invented in the past decade right up to Facebook, Twitter, and the iPad, but you have to give up running water and indoor toilets. You have to haul the water into your dwelling and carry out the waste. Even at 3am on a rainy night, your only toilet option is a wet and perhaps muddy walk to the outhouse. Which option do you choose?

Gordon then goes on to say:

I have posed this imaginary choice to several audiences in speeches, and the usual reaction is a guffaw, a chuckle, because the preference for Option A is so obvious. But as I just recounted, Option A is not obvious at all.

The farmers in rural China have chosen cell phones and twitter over toilets and running water. To them, this is not a hypothetical choice at all, but a real one. and they have made their decision in massive numbers. Tens of millions, maybe hundreds of millions, if not billions of people in the rest of Asia, Africa and South America have chosen Option B. You can go to almost any African village to see this. And it is not because they are too poor to afford a toilet. As you can see from these farmers' homes in Yunnan, they definitely could have at least built an outhouse if they found it valuable. (I know they don't have a toilet because I've stayed in many of their homes.) But instead they found the intangible benefits of connection to be greater than the physical comforts of running.


Reference

Gordon, Robert (2012). 'Is US economic growth over? Faltering innovation confronts the six headwinds', CEPR Policy Insight No 63.


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(Wonkblog's Brad Plumer had an excellent roundup of the conversation. Paul Krugman  weighs in with his own pessimistic take in a recent column)


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