Response to Comments on The Rise and Fall of American Growth Robert J. Gordon Northwestern University AEA Session San Francisco, January 3, 2016

Central Themes of the Book Economic growth is not continuous 1870-1970 was a special century Freed households from an unremitting daily grind of painful manual labor, household drudgery, darkness, isolation, and early death Special because progress spanned so many dimensions Progress since 1970 substantial but across fewer dimensions (EICT)

The Three Eras of Productivity Growth

The Middle Period Has Triple the TFP Growth

Approach to Interpreting the Standard of Living Well-being depends on market goods combined with household production and leisure minus the disutility from work. Reduced hours, discomfort, physical difficulty Understatement of rise in standard of living due to consumer surplus omitted from GDP Omissions were more important in the special century than since 1970 Examples

Looking Ahead to the Future Forecasts look ahead 25 years, 2015-2040 Future pace of productivity change extrapolates relevant part of the past Headwinds subtract the effects of: Inequality Education Demography Fiscal (increase in debt/GDP; aging population)

Trend in Labor Productivity Growth Starting in 1953

Summary of the Forecasts

Reactions: Starting with Ben Friedman Rich and nuanced reaction from a broad historical perspective Calls attention to the hopefulness of Francis Weyland – what blessings God will bestow View forward from 1837 and 2016 Qualification: “No new advances” will replicate Great Inventions

Ben Friedman and the Future Contrast between my future of reduced pace of technological change and headwinds Vs. Brynjolfsson-McAfee “techno-optimism” Technical change vs. jobs My view: robots and AI are important but evolving very slowly Robot quote

The Other Reactions: In Chronological Order Acemoglu – Moscona – Robinson (A-M-R) concerns the 19th century Crafts focuses on 1920-1950 Clark looks to the future

A-M-R on the Endogeneity of Technical Change Taxes, R&D subsidies, property rights, patent laws, educational system, competition policy Future vs. past depends on these institutions Book is criticized for neglecting these underlying factors, but: Attention to patent system, costs vs. U.K. Differs by treating timing of inventions as spontaneous Future: opportunities for innovation, not institutions

Crafts on 1920-50 Table 1. Valuation of increased life expectancy and reduced hours of work adds to peak growth in 1929-50 His research project, new estimates for education reduce TFP growth 1899-1947 by 0.3. Reallocation within sectors. Understanding TFP to be applauded.

The Great Depression and WW II The book credits New Deal policies and WWII for the great leap in TFP 1930-1950 Unions, higher wages, reduced hours, infrastructure investment WWII: Learning by doing, 2X machine tools Crafts: no infrastructure or private R&D WWII But, government R&D, “big inch pipeline”

Clark on the Future Clark agrees with the book’s techno-pessimism But he gives the book too much credit; his view of the future is complementary but different My reasons for skepticism: Big impacts of IR#3 are in the past Evolutionary progress of robots and AI

Clark’s Reasons for Future Pessimism Dominant and growing share of production in the services, not amenable to automation “A surprising share of current jobs are the timeless ones of the pre-industrial economy” 1960-2007 half of industries have negative TFP growth Stunning: >80% corporate R&D in industries with only 5% of value added ICT: Declining share and growth rate

Conclusion The book and its themes remain intact The special century, the smaller impact of the digital revolution, the time skewness of mismeasurement Future pessimism: Smaller technological opportunities combined with headwinds Despite its pessimism about the future, the book chronicles a joyous cavalcade of progress since 1870 Join me for the book-signing, PUP booth J