The End of Progress?
Have we reached the end of technological progress? John Hancock isn’t betting on it.
An idea – as powerful as it is depressing – is gaining traction. It suggests that the U.S.’s current economic malaise is less the result of flawed policies, reckless banks, and too much debt, and more of a deeper and longer-term problem: the slowdown of technological innovation. If true, it has profound implications for the economy, for politics, and for our deeply held belief – and expectation – that progress is inevitable.
Tyler Cowen first floated the idea in The Great Stagnation, which New York Times columnist David Brooks described, with good reason, as the most debated non-fiction book of 2011. Cowen’s thesis is brilliantly simple. Until the mid-1970s, the U.S. economy surged on the power of abundant natural resources, mass education, and revolutionary new technologies: electricity, plastics, automobiles, etc. This fuel is now exhausted, with the result that median U.S. family incomes, which more than doubled between 1947 and 1973, increased by less than a quarter between 1973 and 2004. But our expectations – especially our expectations about government entitlements – have continued to soar. “We have built social and economic institutions on the expectation of a lot of low-hanging fruit,” writes Cowen, “but that fruit is mostly gone.” The U.S.’s debt-burdened economy is the symptom, not the cause, of decades of stagnant growth.
It’s a testimony to the power of Cowen’s argument that it is now repeated – often without attribution – by growing legions of commentators and academics. Peter Thiel of PayPal offers an ever-darker vision of techno-pessimism in his National Review essay, “The End of the Future.” Never one to miss catching the next intellectual wave, the very public historian Niall Ferguson gloomily predicts the “harsh reality” that the next quarter-century will fail to deliver the same breathtaking technological advances produced by the previous quarter-century. Others, like economist Robert J. Gordon, have joined the Greek chorus pronouncing the age of dramatic innovation and growth over.
But are they right? One alternative explanation – which Cowen anticipates – is that the current bout of slow growth reflects not the end of technological progress, but a pause before the next great leap forward. One of the radical insights of Thomas Kuhn’s The Structure of Scientific Revolutions is that scientific and technological progress is non-linear, moving forward in sudden leaps or “paradigm shifts,” rather than in small, accumulating steps. It may be that we are awaiting the right combination of social, economic, and intellectual events to catalyze the next technological revolution. Such revolutions, by definition, are difficult to imagine because they haven’t happened yet. Einstein, for example, believed that “there was not the slightest indication that atomic energy would ever be available,” as it would mean “the atom would have to be shattered at will.” Who, besides a few sci-fi dreamers, foresaw airplanes, the television, or the internet? As Niels Bohr memorably reminded us, “prediction is very difficult, especially about the future.”
Another possibility is that we have yet to fully understand – and exploit – the revolutions in computing, robotics, or genetic engineering that are already taking place. Paradoxically, one of the most dramatic periods of technological diffusion – marked by the mass spread of electricity, cars, and radio – was the Great Depression. Perhaps the full economic impact of, say, the internet revolution has yet to be felt. Facebook or Twitter may not be productivity enhancing – just the opposite, some would argue – but the way the internet is reshaping global manufacturing and retail undoubtedly is. Many of these seismic economic changes are only just beginning.
Then there is the possibility that today’s growth statistics fail to capture the full value of recent technologies. Take the World Wide Web. There is little question that humanity’s unprecedented access to free – and freely available – information represents a huge advance for education, research, and basic living standards. But this mass diffusion of free information barely shows up in GDP accounting, precisely because it’s free. There are many other examples of “under-valuing” new technologies. The computers we use today are 20 times faster and, in terms of power, a million times cheaper than the ones we used in the 1980s. The cost of an overseas telephone call is negligible (zero if Skyping) and we can carry the phone in our pocket. The problem may be that we are trying to measure the new economy with old instruments.
This is not the first time the end of growth and progress has been predicted. Every generation entertains the secret conceit that it has reached the pinnacle of achievement – and every economic downturn has sparked fears that our spectacular run of growth has finally reached its end. No discipline is more pessimistic than the dismal science. Thomas Malthus, whose name is synonymous with economic doom, predicted that exploding populations would inevitably outrun economic growth, arresting any hope of human progress. David Ricardo believed it was the growing scarcity of arable land that would eventually bring growth to a stand still. Karl Marx argued that capitalist competition would lead to ever-smaller profits and ever-lower wages, dooming the system to self-destruction. None could imagine a world in which economic growth and technological progress continued indefinitely. All were convinced that growth would sooner or later stop, that diminishing returns would set in, and that mankind would have to learn to share a static pie.
Yet, so far, the gloom and doom predictions have been proved wrong. Has technological progress finally plateaued? It’s a bold and provocative theory, but I wouldn’t bet on it.
Photo courtesy of Reuters