The Rise and Fall of American Economic Growth

I finally got around to reading Robert Gordon’s Rise and Fall of American Economic Growth. It is an excellent book. Much of the book is essentially an expansion of Lebergott’s Pursuing Happiness. It describes the many ways in which the material conditions of life (what they consumed, how they worked, and their health) were transformed from 1870 to 1970. Gordon argues that economic growth this period essentially created modern economic life: comfortable homes with electricity and clean water, cars parked out front, and all of this purchased with less labor hours and less onerous labor. 

Much of the attention the book has received has focused on Gordon’s argument that current innovations in information and communication are not transforming life the way the earlier changes did and that the rate of growth is unlikely to return to the rapid pace experienced for most of the twentieth century. This argument actually occupies a relatively small part of the book. I also found this part of the argument to be somewhat more cautiously stated than I think it has been in the popular press and in blurbs for the book. While Gordon argues that some of these innovations were uniquely transforming and points to specific factors that he believes are likely to slow growth (e.g. demographic change, education, inequality), he also has suggestions for policy changes which might mitigate some of these headwinds (e.g. reducing excessive regulation, policies to reduce inequality). In other words, he doesn’t appear to believe that the current course is inevitable. He also acknowledges that any attempts to make predictions about future innovations are somewhat speculative.

His analysis of the causes of the “Great Leap Forward” also seems reasonable, though I think he gives too much credit to Alex Field for pointing out the technological innovations that took place during the Great Depression and not enough to Michael Bernstein, who emphasized these changes long before Field.

I do tend to disagree with Gordon and others who underplay the transformation brought about by information technology. You can say that it is only entertainment and communication but my children ages 17, 23 and 27 are never without their phones. They use social media, they watch movies and tv shows. They listen to an incredible variety of music. When I was a teenager you pretty much had to pick one kind of music: heavy metal, or punk, or disco. My kids listen to everything. They listen to podcasts on soccer, cooking, politics, etc. They can’t get lost. A map is no further than the phone. Maybe it is just entertainment and information, but it is a world of information and entertainment in their hand.

I agree with Gordon that attempts to make predictions about future innovations are speculative, but I tend to be somewhat more optimistic than he is. In part, my optimism stems from the dismal performance of dire predictions about the future. Read Jevon’s on the Coal Question, or Alvin Hansen on secular stagnation.

Part of my optimism is also related to what I think might be the chief weakness of the book. It tells the story strictly from an American standpoint. The problem with this is that the same things happened in many other countries. The United States is not the only wealthy country. One of the things that I believe I learned from John Nye (listen to John’s Econ Talk on the Great Depression, Political Economy and the Evolution of the State) is that you might want to occasionally look outside of particular area to see if the same thing is happening in other places. If it is, you might want to ask what are the broader forces at work. I think that if innovations can travel across borders and innovation is not isolated to Americans there are some good reasons to be optimistic. Increased economic freedom and access to education in Asia have the potential to dramatically increase the pool of innovators. I don’t think that economic freedom is firmly enough established to feel completely secure about this, but I think the potential is great.