Interesting essay today by Robert Samuelson, a respected nonpartisan economist. He argues that our expectations are out of whack. During the 20th century, it was normal for an economy to grow, on average, several percent per year in real terms. This meant that when a crash came, it was followed by an energetic recovery. In the future, says Samuelson, we may have to get used to a zero-growth environment, and when recessions come, we may have to tone down our expectations of the recovery. It will just OK, just enough to get us back to zero.
As evidence, Samuelson cites a recent paper by Robert Gordon, a pretty eminent fellow. Gordon talks about technology and growth. Since 1800, technological advance has been associated with economic growth. The new stuff being built saved labor input, which was then put into the construction of other things. However, the most recent technological advances may not be growth-inducing. As Samuelson puts it, "Gordon sees the Internet, smartphones and tablets as tilted toward entertainment, not labor-saving."
This research puts some nuts and bolts and evidence on the table, making an exodus recession, a recession caused by people devoting more attention to digital things ("entertainment"), a little bit more than mere conjecture. Back to Samuelson though. He points out that an era of zero growth and massive inequality confronts our societies (he's talking about Europe, the US, Japan, everybody) with a completely different set of policy problems. For example, when an entitlement program is heading into bankruptcy, there are only two *painless* ways to save it. Either you have to have more babies (and hence more young contributors), or you have to make the workers you have more productive. But the developed world's culture is just not into babies any more. And that means, either we have to get productivity growth, or we'll be forced to dramatically cut benefits or dramatically raise taxes - just to stay solvent. Without productivity, the politics of the next 30 years look really, really ugly.
Which, by the way, will only encourage people to take refuge with even greater frequency in digital worlds, where every problem has a satisfying solution.