Economics, Pethokoukis

Is U.S economic growth over?

One of the buzziest econ papers this year was “Is U.S. economic growth over?”
by Robert Gordon of Northwestern Univerisity. The Minneapolis Fed recently interviewed Harvard economist Elhanan Helpman in its Region publication and asked him about the Gordon paper.

Region: Curiously, that lack of change in the view of the growth process brings to mind a recent paper by Robert Gordon on stagnation in economic growth itself. He argues that a number of factors suggest that the rates of economic growth seen in the United States specifically over the past 250 years are not likely to be seen again. Does that seem plausible to you?

Helpman: No. I mean this is his own personal judgment, right, and that’s fine. Essentially, he talks there about technologies that I would term “general-purpose technologies,” which is a subject on which people worked in the past. Again, there hasn’t been much work recently, but in the ’90s, there was quite a bit of work on this.

So, what’s a general-purpose technology? It is a type of technology on which other technological developments build. And it usually induces more specific technical change and the development of inputs that build on this technology for further production.

Region: His examples are steam engines and locomotives, I believe, electricity and …

Helpman: Yes, the steam engine was a general-purpose technology; electricity was a general-purpose technology. The microprocessor was a general-purpose technology. So there are technologies like this, which appear from time to time. And sometimes at the beginning they cause some havoc …

Region: An end to the buggy whip industry, say.

Helpman: Right. But then eventually, they trigger a process of development and growth that can be very fast and can last very long. Therefore, it is true that a number of these general-purpose technologies were big contributors to growth. But there was at least one more recently, the microprocessor.

Moreover, I don’t see how we can predict how many of these technologies will emerge in the future. So, one person can believe that we won’t see anything new in the near future. Another person may think that we will. I don’t think we have the capability actually to predict these developments. It’s easier to predict what will happen once the general-purpose technology emerges. That’s not entirely easy either, but at least you have something to build on in terms of predictive power.

But how do you predict that somebody will come up with a great idea that will trigger a completely new process of technological development? I don’t think that we can do it

And this was my response.

One thought on “Is U.S economic growth over?

  1. One of the strongest arguments in favor of Central Planning in the early 20th Century was that all significant technological advances had been achieved and therefore there would never again be any Innovation to perturb the Planning.

    Central Planning, of course, can’t work if the some new invention or idea pops up unexpectedly.

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