After 150 Years, the American Productivity Miracle Is 'Over' (qz.com)

An anonymous reader shares an article on Quartz: Economist Robert Gordon has spent his career studying what makes the US labor force one of the world's most productive. And he has some bad news. American workers still produce some of most economic activity per hour of any economy in the world. But the near-miraculous productivity growth that essentially transformed the US into one of the world's most affluent societies is permanently in the country's rearview mirror. In his new book, The Rise and Fall of American Growth, the Northwestern University professor lays out the case that the productivity miracle underlying the American way of life was largely a one-time deal. It was driven by a flurry of technologies -- electric lights, telephones, automobiles, indoor plumbing -- that fundamentally transformed millions of American lives within a matter of decades. By comparison, Gordon argues, today's technological advancements -- Uber, Facebook, Amazon.com -- will touch the productivity of the American economy lightly -- if at all. And a combination of demographic factors, such as the aging of the US population, and sociological problems such as growing inequality and educational performance that's worsened in comparison to many other rich nations, will stymie economic growth for the foreseeable future.For those not following Gordon's work, he has been expressing these views for quite some time now. Here's his TED talk from 2013 It shouldn't come as a surprise that many strongly disagree with Gordon's views. Kevin Kelly wrote in 2013: I think Robert Gordon is wrong about his conclusion: According to Gordon growth has stalled in the internet age. This question was first asked by Robert Solow in 1987 and Gordon's answer is that there are 6 'headwinds' six negative, or contrary forces which deduct growth from the growth due to technology in the US (Gordon reiterates he is only speaking of the US). The six 'headwinds' slowing down growth are the aging of the US population, stagnant levels of education, rising inequality, outsourcing and globalization, environmental constraints, and household and government debt. I agree with Gordon about these headwinds, particularly the first one, which he also sees as the most important. Where Gordon is wrong is his misunderstanding and underestimating of the power of technological growth before it meets these headwinds. First, as mentioned above, he underestimates the value of the innovations that the internet has brought us. They seem trivial compared to running water and electric lights, but in fact, as billions around the world show us, they are just as valuable. [...] So the 3rd Industrial Revolution is not really computers and the internet, it is the networking of everything. And in that regime we are just at the beginning of the beginning. We have only begun to connect everything to everything and to make little network minds everywhere. It may take another 80 years for the full effect of this revolution to be revealed. In the year 2095 when economic grad students are asked to review this paper of Robert Gordon and write about why he was wrong back in 2012, they will say things like "Gordon missed the impact from the real inventions of this revolution: big data, ubiquitous mobile, quantified self, cheap AI, and personal work robots. All of these were far more consequential than stand alone computation, and yet all of them were embryonic and visible when he wrote his paper. He was looking backwards instead of forward." You might also find Freakonomics' Stephen J. Dubner views on this interesting.

Comments

Thanks, Obama!

[Anonymous Coward]

Think I'm trolling? Think again:

In a new paper, also cited by Leubsdorf, Danny Yagan at Berkeley suggests that reduced migration is only part of the problem. What has made the aftermath to the 2008-2009 recession so bad is that migration is low at the same time that it has become more necessary than ever. The 2008-2009 recession was especially localized, it hit some places harder than others and in a way that appears to be permanent. But migration has been too slow to solve the problem.

The usual story is that in-and-out migration equalizes wage, unemployment and employment rates across the nation. Some places may be harder hit than others but movement quickly makes the US into one labor market. In the aftermath of this recession, however, that isn’t happening for employment rates. Using a clever research design that looks at workers with similar education and skills doing the same jobs at the same large firms but in different locations, Yagan finds that location continues to matter years after the recession has ended. Workers who worked in the places hardest hit in the 2007-2009 recession have employment rates today that are 1% lower than similar workers in regions that were less hard hit.

Re:Thanks, Obama!

[Tablizer]

libtards forced the banks to give loans to people who had ZERO business owning a house

That's a huge exaggeration. The CRA laws merely meant that loanee's neighborhood can't be used as a factor to reject loans. CRA said ZERO about skipping income verification. Most of the problem loans were NOT in so-called minority neighborhoods. I lived in S. Calif. during the crash, and saw where the foreclosures were with my own eyes. The "minority" houses were usually closer to the center of town, and thus kept a lot of their resell value even during the slump. The outskirts took the biggest hit.

the federal government (through Fannie Mae) agreed to buy up ANY mortgage after 6 months, meaning the lenders only had to find people who could make 6 payments...

Do you have a link on this?

And if true, why did so many banks croak during the crash? If FM was to back most their loans, they'd still be alive. (Most later bailouts were not thru FM.)

4) Ridiculously low interest rates

You blame "big gov't", but high interest rates would be more gov't interference. It seems a contradiction. If gov't didn't regulate interest rates at all, the rates would be as low or as high as banks wanted. And the fed rate doesn't prevent banks from charging higher rates from the fed rate, it only sets the floor. Therefore, "low" was not forced upon the banks.

The banks voluntarily got themselves in hot water. They voluntarily skipped background checks, largely because they wanted to quickly re-sell them to a bigger sucker bank before it all crashed down. Ponzi-ish. They knew their slime.

Big federal government. Limited government would have never allowed this because the banks lending to people who had no business owning a home would simply go out of business.

Many did go out of biz. The only reason there were some bailouts is because the banks were too big to fail: they'd take the entire econ with them if most failed. If anti-trust were enforced, they perhaps would not be too big to take econ down with them.

Banks are key infrastructure for good or bad. Key infrastructure usually has to be regulated to some degree, otherwise companies would hold civilization hostage for cash, kind of like OPEC.

I see it in the PC vs. the smartphone

[RobinH]

While companies are busy measuring smartphone sales as some proxy for how well the industry is doing (and calling the PC market dead), I see a difference between PCs as machines used to do things, and smartphones as ways to waste time. Obviously this isn't exactly true, but in general it is. This is why smartphones have replaced PCs in popularity - people would rather waste time than do work. The media is so focused on getting our "attention" rather than helping us get things done, and we're so connected to that media now, that in my opinion it's obvious why productivity is falling. People aren't really working when they're "working" anymore. They're just distracted.

Also, don't discount the importance of air conditioning in US productivity, especially in the southern US.

That said, there could be a new jump in productivity as better technologies are developed. What if we counteracted smartphones with a drug or a widget that could make you focus?

Interconnection

[war4peace]

The "problem" with interconnection is that it propagates outside of just Internet and device-to-device linking.
During the last few decades it has become increasingly easier for people to not only communicate but to travel and work together (or fight), no matter where they are.
This means:
- Salaries across the world are slowly trending towards a midpoint. This will suck for more developed countries and will boost lesser developed countries.
- Productivity will likewise even out: countries where people work 6h a day will no longer be able to sustain that work style. Similarly, countries where people work 12h a day, 6-7 days a week will slowly roll down to less than that.
- Cultures will clash. They already do and it's not pretty. Some countries' culture is 500 years back: they will have to go through a deep transformation to reach present time, or they will bring down more evolved cultures - and then productivity will be the least of our worries as a species.

Re:False premise

[mjwx]

Uber: order an illegal taxi.. but online.
Facebook: Gossip circle... but online.
Amazon: going to a warehouse... but online.

None of these are innovations, apart from Amazon, none of them are even successful. This is why American innovation is failing, you cant just add "but online" to something that already exists and call it new. Uber and Facebook are feats of marketing over technology and hard work and if you ask me, that is exactly the problem.

First off, dont get me wrong, the US still produces a lot of innovative products, just not from people you normally think (Apple, Uber, Facebook, none of them innovative, yes fanbois, its true and you know it so bite me). Think of things like VMWare NSX, the thing is, things like that are built with global talent. That has really been the only thing keeping the US ahead of the game, the fact that you used to be able to attract the best scientific and engineering talent... So what happened.

Well I said commonly cited "innovations" are nothing but marketing circuses and there in lies the problem. Being seen as an innovation is more important to a modern American company than actually being innovative. Science and engineering jobs are not respected, they're seen as cost centres, necessary evils and punished when engineering cannot produce what marketing has promised. As such, STEM jobs are now low paying and have appalling conditions. Long hours and low pay in lay terms, why would anyone want to go to the US for that, you can have shit wages in your own country and often better conditions than the US (20-28 paid holidays a year sound nice)?

Add to this, the patent and copyright minefield that has been created. The US became big by deliberately ignoring the patents of other nations, now seeks to viciously defend its own. Property that has no tangible value is defended more vigorously than people who can actually develop and build new technologies.

Whilst engineers have always been happy to work long hours for their craft, they've traditionally been rewarded for it, this is the kind of thing that made NASA, Boeing and IBM giants. Now the marketers are more important and get the big wages, the lawyers, instead of being told to solve problems for the engineers are now forcing engineers to solve problems for them. Laws have become anti-innovation and anti-technology. Appearance is now more important than reality. Am I the only one who sees the problem with this?

Re:False premise

[Anonymous Coward]

Science and engineering jobs are not respected, they're seen as cost centres, necessary evils and punished when engineering cannot produce what marketing has promised. As such, STEM jobs are now low paying and have appalling conditions.

Ding! Ding! Ding!

You named the root of one of the problems that I have personally seen working in IT, and lead to my decision to get out.

I remember being a direct report to a vice president of the company and had been tasked with maintaining a system that had been installed in a bank. I myself had more than 5 years working in both the tech support environment and tech support in the financial services environment and a failure of one of our installed systems had occurred and I was blamed because I had not, in the failure situation, pulled out my own credit card, bought the replacement part on the spot and repaired the system to meet our service level agreement. (Shit rolls downhill) The service level agreement, along with the fact of the choice of buying low quality hardware and not testing before the install feeds into the problem you point out that created a perfect storm of circumstance that lead to our losing the customer.

What should have happened. The company manager who had purchased the hardware and installed it should have tested it. (this was not me who did the install, I was just called in to repair it.) Promises were made by salesmen based on an assumption that I had a much higher income than I did, sure if I had $900 to $1800 of disposable income, I would have used my own money, but the point is that the promise should not have been made or hinged on my using my own income to retain the customer. The blaming me for the loss of the customer was out of line, and yes I argued this with the vice president and kept my job. (Though the VP always was the type that acted like his actions did not have consequences and that he was always the smartest person in the room, despite the fact he had no college education or technical experience.) This problem would have been most directly solved by under promising and over delivering. This did not happen because of problems that were out of my sphere of influence to correct, yet I had that bad mark on my record with the company.. IN the future I plan to save up some money to spend in situations like this and then charge them hefty interest when they pull crap like this.. so I get praise for saving the day and make a monetary profit when they have poor planning like this.

Education is the problem, the fact that the leaders are marketing people who think that because they make more money that makes them IT experts. This kind of management fail is what caused the Challenger disaster.. when the beancounters got too big for their britches and started making technical decisions.

Ran out of frontier. Change is too fast.

[140Mandak262Jamuna]

The idea that industrial revolution and productivity gains will always create more jobs than destroyed is a very euro centric view. Globally if you take into account the jobs destroyed in the colonies along with the jobs destroyed in Europe, productivity improvements have never produced more jobs than lost. Had been true since the dawn of industrial revolution. When Europe ran out of fresh colonies, productivity gains destroyed jobs at home and it resulted in the world wars I and II.

Drastic cuts, old wealth disappearing, new order emerging etc held something at bay in Europe.

America had its own internal frontier. As long as the frontier was moving west and more land came under the till the population growth kept it going. World war II and the baby boom helped it going farther.

Finally we have run out of frontiers both in Europe and America. But that is merely the space frontier, the time frontier is endless. The next generation, always larger than the previous in sheer numbers will provide the demand needed to create more jobs than lost. But the pace is furious and is acceleration. Society does not have the time to adjust or grow to create more demand.

The world simply does not have the energy and material needed to provide first world comfort to the third world. But efficiency gains in material and energy use, as well as labor use, can create the demand needed to keep all the world employed gainfully.

Improving the living conditions of the third world is how we can create jobs in the first world. We need to promote trade that will genuinely improve the lives of the people of the third world, not trade policies driven by tax dodgers, job outsources, and environment scofflaws.

America Favors People Who Don't Work

[BrendaEM]

No, not the welfare recipients. American laws and tax structures favors people who have money, use people to their, and game the system.

Just a though experiment:
A person works to make $100; they can expect to end up with $70 in their paycheck.
If someone's rich relative gives them $100, they get $80.
What utter bullshit. The person doing nothing gets more, and they procreate, breeding more people who provide no benefit.

Re:False premise

[Austerity Empowers]

Uber and Amazon are arguably technological advancements, although the former isn't obviously a boon to productivity. Amazon though is the culmination of many technological advancements. At some point if you use enough ingredients in a new way you have a transformative technology on its own, and I think Amazon qualifies. It is a tremendous help to productivity, it comes at a cost, but I don't spend a lot of time driving around town to find things anymore, I type it in a search bar and get presented with 60 different versions of it within 5 seconds. Then a day later I have that thing, and the fact that I can have the thing a day later is itself the product of a few advances.

It's not sexy, you won't be taking it to alpha centauri in 15 minutes, but it lets us do more in less time.