CAMBRIDGE – Robert Gordon of Northwestern University has launched a lively and important debate about the future rate of economic growth in the United States. Although his book The Rise and Fall of American Growth will not be published until January 2016, his thesis has already garnered coverage in the Economist and Foreign Affairs. Clearly, Gordon’s gloomy assessment of America’s growth prospects deserves to be taken seriously. But is it right?
Gordon argues that the major technological changes that raised the standard of living in the past are much more important than anything that can happen in the future. He points to examples such as indoor plumbing, automobiles, electricity, telephones, and central heating, and argues that all of them were much more important for living standards than recent innovations like the internet and mobile phones.
I agree with Gordon that I would rather give up my mobile phone and even the Internet than go without indoor plumbing and electricity. But that just means that we are lucky to be living now rather than a century ago (and even luckier to be living now than two centuries ago or in the middle ages). The fact that these major innovations happened in the past is not a reason to be pessimistic about the future.
Gordon also points to the recent slowdown in real (inflation-adjusted) GDP growth. According to official US statistics, real GDP per worker grew at an average annual rate of 2.3% from 1891 to 1972, but by only 1.5% since then.