You have to be careful not to confuse productivity growth and innovation. The former includes the latter, but also lots of other things. It isn’t obvious whether innovation is slowing down or getting harder, even if you see slow productivity growth.
- 18 Apr 2017 Aggregate Productivity versus Aggregate Technology ... Again
- 24 Jan 2017 Yes, ideas are harder to find. Don't panic yet.
- 01 May 2016 Technology versus the Distribution of Workers in Aggregate Productivity
- 30 Mar 2016 Productivity versus Technology in American Growth
- 24 Mar 2016 Reviewing the Rise and Fall of American Growth
- Cowen, T. (2016) “Is Innovation Over?” Available at: Link.
- Cowen, T. and Smith, N. (2017) “How to shake up the complacent class: a debate.” Available at: Link.
- De Long, J. B. (2013) “Is Growth Getting Harder?” Available at: Link.
- Ip, G. (2016) “We’re out of big ideas.” Available at: Link.
- Lee, T. B. (2016) “The productivity paradox.” Available at: Link.
- Dalgaard, C.-J. and Kreiner, C. T. (2001) “Is declining productivity inevitable?,” Journal of Economic Growth. Springer, 6(3), pp. 187–203.
Fertility has been declining on all continents for the last couple of decades and this development is expected to continue in the future. Prevailing innovation-based growth theories imply, as a consequence of scale effects from the size of population, that such demographic changes will lead to a major slowdown in productivity growth. In this paper we challenge this pessimistic view of the future. By allowing for endogenous human capital in a basic R&D driven growth model we develop a theory of scale-invariant endogenous growth according to which population growth is neither necessary nor conductive for economic growth.
- Gordon, R. J. (2016) The Rise and Fall of American Growth. Princeton University Press. Available at: Link.
- Gordon, R. J. (2012) Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds. Working Paper 18315. National Bureau of Economic Research. doi: 10.3386/w18315.
This paper raises basic questions about the process of economic growth. It questions the assumption, nearly universal since Solow’s seminal contributions of the 1950s, that economic growth is a continuous process that will persist forever. There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely. Rather, the paper suggests that the rapid progress made over the past 250 years could well turn out to be a unique episode in human history. The paper is only about the United States and views the future from 2007 while pretending that the financial crisis did not happen. Its point of departure is growth in per-capita real GDP in the frontier country since 1300, the U.K. until 1906 and the U.S. afterwards. Growth in this frontier gradually accelerated after 1750, reached a peak in the middle of the 20th century, and has been slowing down since. The paper is about "how much further could the frontier growth rate decline?" The analysis links periods of slow and rapid growth to the timing of the three industrial revolutions (IR’s), that is, IR #1 (steam, railroads) from 1750 to 1830; IR #2 (electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum) from 1870 to 1900; and IR #3 (computers, the web, mobile phones) from 1960 to present. It provides evidence that IR #2 was more important than the others and was largely responsible for 80 years of relatively rapid productivity growth between 1890 and 1972. Once the spin-off inventions from IR #2 (airplanes, air conditioning, interstate highways) had run their course, productivity growth during 1972-96 was much slower than before. In contrast, IR #3 created only a short-lived growth revival between 1996 and 2004. Many of the original and spin-off inventions of IR #2 could happen only once - urbanization, transportation speed, the freedom of females from the drudgery of carrying tons of water per year, and the role of central heating and air conditioning in achieving a year-round constant temperature. Even if innovation were to continue into the future at the rate of the two decades before 2007, the U.S. faces six headwinds that are in the process of dragging long-term growth to half or less of the 1.9 percent annual rate experienced between 1860 and 2007. These include demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. A provocative "exercise in subtraction" suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades.