Krugman reads Gordon’s The Rise And Fall Of American Growth

The obstacles the global economy faces are not rooted in economics, but in politics and ideology. — Joseph Stiglitz

Accommodating the impacts of AI in an already destabilized world of work is going to slam us all right in the face. — Stowe Boyd

Paul Krugman, the Nobel laureate in economics, reviewed Robert Gordon’s book, The Rise And Fall Of American Growth. Gordon’s thesis is that the Great Inventions — electricity, urban sanitation, chemicals and pharmaceuticals, the internal combustion engine and modern communication — were rolled out between 1870 and 1940, and that progress has slowed since.

Paul Krugman, Paul Krugman Reviews ‘The Rise and Fall of American Growth’ by Robert J. Gordon

What happened over the next 30 years was that the further maturing of the Great Inventions led to rapidly rising incomes and a spread of that modern lifestyle to the nation as a whole. But then everything slowed down. And Gordon argues that the slowdown is likely to be permanent: The great age of progress is behind us. But is Gordon just from the wrong generation, unable to fully appreciate the wonders of the latest technology? I suspect that things like social media make a bigger positive difference to people’s lives than he acknowledges. But he makes two really good points that throw quite a lot of cold water on the claims of techno-optimists.

First, he points out that genuinely major innovations normally bring about big changes in business practices, in what workplaces look like and how they function. And there were some changes along those lines between the mid-1990s and the mid-2000s — but not much since, which is evidence for Gordon’s claim that the main impact of the I.T. revolution has already happened.

Second, one of the major arguments of techno-optimists is that official measures of economic growth understate the real extent of progress, because they don’t fully account for the benefits of truly new goods. Gordon concedes this point, but notes that it was always thus — and that the understatement of progress was probably bigger during the great prewar transformation than it is today.

So what does this say about the future? Gordon suggests that the future is all too likely to be marked by stagnant living standards for most Americans, because the effects of slowing technological progress will be reinforced by a set of “headwinds”: rising inequality, a plateau in education levels, an aging population and more.

It’s a shocking prediction for a society whose self-image, arguably its very identity, is bound up with the expectation of constant progress. And you have to wonder about the social and political consequences of another generation of stagnation or decline in working-class incomes.

Of course, Gordon could be wrong: Maybe we’re on the cusp of truly transformative change, say from artificial intelligence or radical progress in biology (which would bring their own risks). But he makes a powerful case. Perhaps the future isn’t what it used to be.

The best version of that wisecrack is ‘The future ain’t what it used to be’, Dr. Krugman, a sentiment I will return to.

My bet is that Gordon is wrong, massively wrong. Not in his characterization of what has happened in the late postmodern period, from the 1970s to 2005, which Gordon nails. But Gordon’s mistake is that he presumes that what is brewing now, and what may come next, is some sort of linear extrapolation of the postmodern era. Let’s take a look at the points he makes, as recounted by Krugman.

First, business practices are being changed, subverted, by the recasting of work culture along decidedly different lines. Consider the rise of freelancing, the erosion of non-cognitive repetitive work as robots, algorithms, and AI have started to muscle into the workplace, and the growing dissatisfaction with non-democratic, Victorian-era command-and-control management models. Don’t get me wrong: this revolution isn’t complete. But massive, tectonic shifts are at work, that have only started to shake the foundations of business.

Second, the near-term impacts of these new technologies and techniques may actually be slowing productivity, temporarily. This post-postmodern world — which I and others call the postnormal — involves the unmaking of a lot of fundamental premises in business and society. And such a future is unevenly distributed, as William Gibson pointed out. The conflicts at the edges of such a large set of changes means that efficiencies of the past may be impeded, like traffic congestion caused by building a new bridge and dismantling an old one.

Watson winning at Jeopardy is the start of AI moving from a curiosity — a sideshow act — to a major factor in every aspect of the industrial and post-industrial economy, ranging from driverless cars, to warehouse robots, to news story-writing apps, to personal assistants that anticipate our every whim.

Yes, we have had 30 years or more of stagnant living standards for the many, and wealth has concentrated into the hands of the few. This is not the end state, however, just where we find ourselves at present. Nor is this state of affairs an inexorable outcome of the technologies now coming to the fore, most notably the Internet and the social world it has engendered. We find ourselves at the present juncture because of political calculation and policy decisions that are largely independent of technologies. As Joseph Stiglitz recently said,

The obstacles the global economy faces are not rooted in economics, but in politics and ideology.

And lastly, the implications of breakthroughs in computing, AI, biology, cognitive science, transportation, and physics suggest an era of technological change is coming to rival Gordon’s Great Inventions. Perhaps the best example: Watson winning at Jeopardy is the start of AI moving from a curiosity — a sideshow act — to a major factor in every aspect of the industrial and post-industrial economy, ranging from driverless cars, to warehouse robots, to news story-writing apps, to personal assistants that anticipate our every whim.

Again, these transitions won’t come without a price, since accommodating the impacts of AI in an already destabilized world of work is going to slam us all right in the face. Just so a world populated with x-ray reading AIs, heart plaque-zapping nanobots, and driverless cars may threaten the jobs of cabbies, delivery guys, and radiologists. This is likely to be a transition as disruptive as global free trade has been, where the prosperous West has seen work stream to the developing world, with major impacts globally, like the decrease in worldwide poverty, at the cost of slowing growth in the West.

So, yes, the future ain’t what it used to be, as Yogi Berra riffed on the well-worn phrase. But the future that is coming may be situated in a different set of premises. If the world is a global village, with inescapable connections between all people and nations, why are we playing a zero sum game between the haves and have-nots? Can we turn our technologies to clean the oceans and avert ecological collapse? Will the rise of AI and biomedicine lead to greater well-being and fulfilling work, or are we doomed to a ceaseless spiral of economic devolution? These are the questions that Gordon and Krugman stop short of, but any well-ordered futurism must arrive there, inevitably.

In the next 30 years we will see the expansion of technologies that will — once again — remake the world. This means a complete revolution in the way we work, the way we live, and the way we coalesce our needs, goals, and dreams.

Originally published at stoweboyd.com on 26 January 2016.

Written by

Founder, Work Futures. Editor, GigaOm. My obsession is the ecology of work, and the anthropology of the future.

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