The Future Will Be Different From the Past, Economists Conclude
Robert Gordon, an economist at Northwestern University, has made a name for himself as the seer of stagnation: In his estimation, real incomes for most Americans will grow little if at all during the next few decades.
Erik Brynjolffson and Andrew McAfee, a pair of scholars at the Massachusetts Institute of Technology, have a more sanguine take: The inventions of the "second machine age" will soon lead to an era of seemingly boundless prosperity.
Who's correct is, of course, unknowable. That doesn't mean it's fruitless to parse their long-run predictions.
It's easy for optimists to reject Gordon's latest expression of technological stasis. For one thing, many of his arguments aren't new. In 2012, Gordon argued that the most advanced societies had already exhausted most of the significant opportunities for growth by the 1970s. Gordon's fears are reminiscent of the concerns of Alvin Hansen, the Harvard University economist who worried about "secular stagnation" in the 1930s and 1940s -- only to be proven staggeringly wrong by the growth in subsequent decades.
Gordon makes quite a few unwarranted gloomy assumptions in his latest paper, several of which were noted by George Mason University economist Tyler Cowen. The most dubious of the bunch probably is his assertion that income inequality will increase indefinitely. Almost no trend in human affairs -- in economics most of all -- continues unabated.
This doesn't mean that the optimists have an unassailable case. To those -- including Brynjolffson and McAfee -- who say that the Internet is producing huge and unmeasured gains in living standards, Gordon drily responds that the official statistics also couldn't measure the olfactory benefits of replacing horses with cars and buses. Gordon also does a great service by cataloging previous predictions about technological progress and invoking this history to buttress his own predictions about income gains, which he thinks will be unimpressive.
The proper response to these debates is one of healthy skepticism. Food keeps getting more expensive, but manufactured goods are often cheaper than ever relative to incomes. It's hard to make the case that the ability to share the results of personality quizzes on social networks is a significant boon to humanity, but only a fool would deny the potential of driverless cars to improve the lives of commuters, to say nothing of the tens of thousands of lives that might be saved from traffic accidents.
The truth is that no matter who is right, growth of a few percent in gross domestic product each year can produce amazing progress after enough years. Instead of worrying about these long-run issues, which may never materialize, maybe we should ask our economists to focus on the problems that need fixing today.
(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter at @M_C_Klein.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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