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.