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

2. Central Themes of the Book
Economic growth is not continuous
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)

3. The Three Eras of Productivity Growth

4. The Middle Period Has Triple the TFP Growth

5. 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

6. Looking Ahead to the Future
Forecasts look ahead 25 years,
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)

7. Trend in Labor Productivity Growth Starting in 1953

8. Summary of the Forecasts

9. 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

10. 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

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

12. 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

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

14. The Great Depression and WW II
The book credits New Deal policies and WWII for the great leap in TFP
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”

15. 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

16. 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”
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

17. 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