Economics, Pethokoukis

Is the age of US growth really over? 3 factors that economist Robert Gordon might be underestimating

I have written several times about provocative new paper from economist Robert Gordon, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds.” It makes the case, or at least questions the assumption “that economic growth is a continuous process that will persist forever. Economist Ed Yardeni offers three reasons, in a research note today, on why Gordon might be overly pessimistic:

(1) Energy revolution. Gordon’s dismissive putdown of the energy revolution in the USA is puzzling. Here’s a brief update on the latest data, which are impressive indeed, in my opinion: During the week of February 8, crude oil field production remained at 7.0mbd, based on the four-week moving average (Fig. 1). It is up 1.3mbd over the past year and 1.6mbd over the past two years. Crude oil and petroleum imports dropped sharply to 9.9mbd, the lowest since December 1999 (Fig. 2). US exports of petroleum products and crude oil have increased by 0.9mbd over the past two years to 3.1mbd. As a result, net imports are down 50% from a record high of 13.6mbd during the week of November 14, 2005 to 6.8mbd in early February.

(2) Cloud revolution. I’m impressed so far with Microsoft’s Office 2013 on the Cloud. Instead of buying the software, it costs $100 a year to rent it, with storage provided on SkyDrive. I’m far less impressed with Windows 8, but it may be almost irrelevant if you can do most of your work on the Cloud. Gordon’s grim outlook could be delayed for a very long time if more and more of us spend less time commuting to work thanks to technologies that allow us to work more productively from home offices. That might also help to lower our gasoline usage and increase our energy independence.

(3) Education revolution. The IT revolution is spreading to numerous industries, even to education. Writing in the 2/1 NYT, Arthur C. Brooks, the president of the American Enterprise Institute, observed: “Ballooning student loan debt, an impending college bubble, and a return on the bachelor’s degree that is flat or falling: all these things scream out for entrepreneurial solutions. One idea gaining currency is the $10,000 college degree–the so-called 10K-B.A.–which apparently was inspired by a challenge to educators from Bill Gates, and has recently led to efforts to make it a reality by governors in Texas, Florida and Wisconsin, as well as by a state assemblyman in California. Most 10K-B.A. proposals rethink the costliest part of higher education–the traditional classroom teaching. Predictably, this means a reliance on online and distance-learning alternatives.” He then relates how he earned his 10K-B.A.

11 thoughts on “Is the age of US growth really over? 3 factors that economist Robert Gordon might be underestimating

  1. Growth in the US can accelerate, but only when we have a strategic vision, a purpose, a direction, something toward which we can direct our effort and energy. Until we have a real longrange plan, we will continue to see rising tempers and animosity between various groups with differing ideologies. There is no Soviet Union left to beat, we’ve done that and won. We won the moon race because we could not let communism be seen by the world as superior to capitalism and democracy. We have no real enemy other than ourselves that can give us a goal toward which our people can work and innovate and create.

    If you want the country, and by increasing irrevocable interconnections and codependencies, the world, then we need to have a lobag range goal. All other efforts, fixing the minutia of the budget, or policy changes here or there, etc., etc., etc., will be temporary and ultimately ineffectual. We need a big awe-inspiring plan that is just beyond our immediate reach. It must be so big that no one business, person, government, organization can do it alone. Those are the lessons from our history. See more at my presentation and documents listed in the presentation at http://bit.ly/XS6M8C

  2. James, this country, and now the world since we’re so interconnected, will only move forward more smoothly and sustainably when we have a big plan. Without a plan, we will continue to falter and swing wildly between extremes.

  3. Let me say it another way, the details of the economy, the systemic issues and problems confronting local, national and global economies, markets, currencies, institutions, will only be resolved with a long range vision or purpose. We’re wasting time otherwise.

  4. Oh, so even after the collapse (by bankruptcy) of Russian Communism and the teetering on the edge of the Socialist Europeans, your solution is to replace free market globalization with central planning. One of the original arguments for central planning was that by 1920 all innovation had ended no new technologies would arise. Even the Communists admitted that you can’t plan for an unseeable future.

  5. Every time we’ve had a plan, we’ve succeeded. A national plan to put a man on the moon gave us the tech we use so freely and easily today. A plan gave us victory over the Japanese, and the tech that enabled much of technology after WW2, a plan gave us the Panama Canal which is still vital to trade today. The big plans move us forward in evry area. Every time there is lack of planning there is chaos and decline. Which do you prefer?

    By the way, in a complex connected world, the need for the big plan grows exponentially too.

  6. I agree with Tim; but, I would state it differently — he sounds like we are going to reconvene the Central Planning Committee. He mentions three good projects — and there were plenty of grand public works projects during the 20th Century that could be mentioned. I like the example of the Space Program. When Kennedy first became President, he consulted with the scientific community to see what he could do to propel the space program forward – in the national interest to best the Russians. Walter Heller was his economic advisor – I am not aware that Heller had much input on this decision. Economics hardly came into the discussion, as far as I know/remember, except for busting the budget. We had a number of failures and were trailing the Russians when Alan Shepard went into space as the first American into space – just a sub-orbital flight from the Cape—up and away—then plop into the Atlantic Ocean. Nobody in the public thought anything about the Moon with that flight. And yet, three weeks after that sub-orbital flight Kennedy says, “We’re going to the Moon!” and by the end of the decade. A year and half later, Kennedy has a conversation with his science advisor and the NASA administrator and they are not convinced that we can make it by the end of the decade. When Kennedy makes the argument, there is no economic decision-making (the decision is made), even science considerations are secondary to him, it’s all about international politics. Our space program is not a public works project. Nobody in the public sees a need to go to the Moon. Political leadership created the demand, not economic opportunism.

  7. We still have plenty of opportunities for growth. We, as Americans and the human spirit, are driven by technological progress. An economy needs to reflect human endeavors.
    Like the 1950’s, we seem to have become complacent, politically ineffectual, and of no consequence. We are now in an economic miasma that is affecting our society and degrading our democracy. Perhaps it is due to the concentration of wealth with its political influence that
    is more interested in maintaining the status quo. That drive for technological progress is inspired by leadership, not managers. Our democratic system and the American culture are characterized by there ability to change.
    We need to tap into the American culture and way of life that wants to be challenged, explore, and innovate – like we did in the ‘60’s. Does it take a Sputnik moment when President Kennedy says, “We keep telling everyone we are Number One, but now no one believes us.” WHERE IS THE DEMAND? At a time when Asia is on the rise and has so many needs, American leadership should rise to the opportunity of economic progress which comes from technological prowess. And there is so much more that we could do right here at home. We are really letting our youngsters down who are just entering the workforce and do not find the opportunities that the ‘60’s generation found when they went to work. True American leadership requires more.

  8. I’ll state it more simply this way: Technological progress drives demand. We have been under the spell of supply-side economics for several decades, since Reagan. That was OK when Reagan came in — we were over-regulated back then and everyone looked to Washington, D.C. But now after several decades, we have been in a stagnant economy (even before the financial crisis). We need to get back to a demand-driven economy and that will take leadership (political and private-sector) to come up with the vision that equates with something like the Race to the Moon.

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