In the new paper “The Future of U.S. Economic Growth,” economists John Fernald of the San Francisco Federal Reserve and Charles Jones of Stanford’s business school highlight key factors affecting America’s economic future. (The paper was released by the SF Fed, though technically it just reflects the views the authors.)
The bad news here is that three-fourths of US growth since 1950 reflects rising educational attainment, R&D intensity, and population. But all of those things, say the researchers, “are likely to be slower in the future than in the past. These factors point to slower growth in US living standards.” In other words, as economist Tyler Cowen would put it, the low-hanging fruit have been pretty much picked.
On the other hand, the rise of China, India and other emerging economies means millions more highly educated brains doing scientific research. The paper notes that in 1978, China produced almost no PhD’s in science and engineering, but by 2010 they were producing 25% more than the United States. “How many future Thomas Edisons and Steve Jobses are there in China and India, waiting to realize their potential?,” ask Fernald and Jones. That’s good for those nations and for us. As economist Amar Bhide persuasively argues in The Venturesome Economy, high-level know-how produced abroad is highly mobile and cheap and available for global use.
Then Fernald and Jones offers this bit of fascinating speculation:
… artificial intelligence and machine learning could allow computers and robots to increasingly replace labor in the production function for goods … In standard growth models, it is quite easy to show that this can lead to a rising capital share — which we intriguingly already see in many countries since around 1980 — and to rising growth rates. In the limit, if capital can replace labor entirely, growth rates could explode, with incomes be coming infinite in finite time. … the shape of the idea production function introduces a fundamental uncertainty into the future of growth.
Artificial intelligence? Infinite growth? Fundamental uncertainty? That would add up to what some technologists and science-fiction call the “Singularity.” Here is Kevin Kelly in his essay “The Singularity is Always Near”:
The power of computers has been increasing at an exponential rate with no end in sight, which led [sci-fi author and mathematician Vernor Vinge] to an alarming conclusion. In his analysis, at some point not too far away, innovations in computer power would enable us to design computers more intelligent than we are; these smarter computers could design computers yet smarter than themselves, and so on, the loop of computers-making-newer-computers accelerating very quickly towards unimaginable levels of intelligence.
This progress in IQ and power, when graphed, generates a rising curve that appears to approach the straight-up vertical limit of infinity. In mathematical terms it resembles the singularity of a black hole, because, as Vinge announced, it will be impossible to know anything beyond this threshold. If we make an Artificial Intelligence (or AI), which in turn makes a greater AI, ad infinitum, then their futures are unknowable to us, just as our lives are unfathomable to a slug. So the singularity becomes, in a sense, a black hole, an impenetrable veil hiding our future from us.
The Fed paper is particularly amazing when you consider that when outgoing Fed chairman Ben Bernanke mentioned “robotics” in a commencement address last spring, he was the first US central-bank boss to use the word in a speech since Alan Greenspan in 2000. Expect more mentions from Janet Yellen.
Technological progress in AI and robotics — even short of the singularity — raises huge questions about the future of work, mobility, and inequality — many of which are examined in the new book The Second Machine Age by MIT’s Erik Brynjolfsson and Andrew McAfee. Beyond that, if accelerating technological change creates an “impenetrable veil hiding our future from us,” what do we make of all those long-range economic and fiscal forecasts from folks at the Fed, Congressional Budget Office, and other expert groups? How do we plan for a future that may be just as revolutionary, if not more so, as the Industrial Revolution?