I just finished Robert Gordon’s new book, The Rise and Fall of American Growth. This volume is getting a lot of attention—see, for example, Paul Krugman’s recent book review, and it is definitely worth a read for folks interested in economic development. Gordon has long built his reputation as a naysayer about the information technology “miracle,” and his book builds on this perspective. Gordon’s basic thesis is as follows: the period between 1870 and 1940 was an almost magical era of great inventions. Nearly every technology that undergirds modern life—electricity, cars, mass communications—was invented and perfected in this era, and we’ve been reaping the benefits ever since. As these technologies were developed and perfected, they spurred massive productivity and prosperity gains. However, the pace of these benefits has slowed and the effects are seen in our stagnating economic growth since the 1970s. We’ve had some cool new technologies since then—like the computer, Internet, and many medical advances, but none of them have transformed life to the extent of innovations like electric light, the automobile, or mass electrification. Because the productivity enhancing effects of newer technologies are less profound, we are likely facing a future of lessened economic growth.
While I hope Gordon’s gloomy prognosis is wrong, he marshals lots of evidence to support it. Of course, new revolutionary technologies can always emerge, but there’s no guarantee on this front. The book is chock full of interesting histories of new technologies ranging from frozen foods to electric motors to the shopping mall to airplanes. Gordon contends that we still underestimate the economic impact of these older technologies—much as today’s technology advocates argue that we don’t effectively track the economic impacts of today’s new inventions. If Gordon is right, current trends of income stagnation and income inequality will continue and likely worsen. Gordon concludes with some common sense policy ideas for addressing these issues, but he doubts that we can avoid this fate. Whether you agree with Gordon’s thesis or not, this book is a sobering and worthwhile look at one potential economic future.