And Now for Some Good Economic News? . . .

If you follow the current policy debates, it’s been pretty tough to feel very optimistic about the future state of the US economy.    Inequality is rising, robots are going to take our jobs, the skills shortage is hamstringing American industry, and the prospects for future growth are limited.    This view was well portrayed in Robert Gordon’s excellent 2016 book:  The Rise and Fall of American Growth.  But, another narrative is also possible—that we’re on the verge of a major productivity revolution that may transform our economic prospects.  That’s the message of a new Peterson Institute study called “The Case for an American Productivity Revival.”   This essay argues that a number of factors are coalescing and should help create annual productivity gains that exceed two percent.  Key factors include the development of big data and its impacts in low productivity service sectors like health care, the rise of productivity-enhancing robots, the rise of e-learning, and the ripple effects of current investments in information technology.   These arguments are very compelling to me, and offer some cause for optimism.  However, reality sets in when the authors turn to policy recommendations.  While they believe that productivity improvements are likely, their success depends on smart policy interventions such as continued robust R&D investments, open borders for immigration, and continued opening of global markets.   Alas, few of these items are high on the agenda of the current White House or Congress.   Let’s hope that market trends are sufficiently strong to overcome the inertia of our current policy and political dysfunctions

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