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.
I guess none of you ever saw a movie or TV over the last 60 years(60,000 years)... other than building weapons to prevent the other guy from having power and using the young as war fodder, we've been nothing but a world hiding in virtuality. Religious myths or Pop culture myths, pick your delusion.
Posted Oct 8, 2012 1:10:49 PM | link
I am not impressed by Robert Samuelson's argument as you summarize it. First, even in a no-growth environment, you can increase the tax base fairly painlessly without more babies or more productivity, just by adjusting how many (productive) people you allow to immigrate.
Second, why do we think technological change leading to growth has slowed? Have we got all the benefits we are going to get from IT? No. Is biotech and/or cybernetics likely to spark another mini-technological revolution? Yes.
Posted Oct 8, 2012 1:20:09 PM | link
I strongly agree with the general trend towards entertainment, or let's add some flavor to it and call it decadence and escapism.
Engineers and builders were the heroes of yesteryear and today, we get Kim Kardashian.
Posted Oct 9, 2012 3:04:46 PM | link
the economy sucks! /plays D3 to make my day better
Posted Oct 11, 2012 3:12:25 PM | link
"Gordon sees the Internet, smartphones and tablets as tilted toward entertainment, not labor-saving."
This dichotomy is false. In the 19th century theatre, opera and music hall were much more popular forms of entertainment. A Gilbert and Sullivan opera might see dozens of entertainers working to entertain a couple of hundred people.
In the 21st century we have entertainment items produced by a number of people that is usually smaller than the cast of a G&S opera distributed to millions. And repeatable.
So the amount of work used to provide a comparable "good" is much less. This is perhaps particularly true in video games. How many man-hours did Sid Meier and his team spend on Civilization compared with the number of hours the rest of us spent playing it?
Posted Oct 11, 2012 9:17:11 PM | link