Is Growth Over?(krugman.blogs.nytimes.com)
krugman.blogs.nytimes.com
Is Growth Over?
http://krugman.blogs.nytimes.com/2012/12/26/is-growth-over/
25 comments
Growth is not over, but the pace has slowed, due to decreased R&D investment. The reason for the 5-6% global growth of the 1950s-60s (which we haven't seen since then) is all of the research that was being funded during the Cold War. When research funding dried up, smart people (even in unrelated sectors) could no longer demand autonomy to the same degree, and the economy slowed as the empty suits took over (and redistributed all the wealth to themselves).
The overarching story is still faster-than-exponential. A lackluster (in comparison to what was before it) 50 years does not mean that growth is "over".
The overarching story is still faster-than-exponential. A lackluster (in comparison to what was before it) 50 years does not mean that growth is "over".
> 5-6% global growth of the 1950s-60s
> The overarching story is still faster-than-exponential
I've heard a lot of people lately incorrectly using the word "exponential" to just mean "pretty fast." It has a specific mathematical meaning which you clearly don't know, but which you should know if you're going to throw around words like "exponential."
If growth over the period you're talking about has 6% per year as an upper bound, that's really saying it's bounded above by some curve of the form
The only way you can get faster-than-exponential growth is if the percentage growth of GDP is itself growing every year. Needless to say this will eventually become ridiculously fast growth: If we started out with a GDP 1% a year in 1950, and say GDP advanced .5% per year after that, we'd currently be experiencing 31% economic growth per year. Insane!
> The overarching story is still faster-than-exponential
I've heard a lot of people lately incorrectly using the word "exponential" to just mean "pretty fast." It has a specific mathematical meaning which you clearly don't know, but which you should know if you're going to throw around words like "exponential."
If growth over the period you're talking about has 6% per year as an upper bound, that's really saying it's bounded above by some curve of the form
f(t) = k0*1.06^t
The only way you can get faster-than-exponential growth is if the percentage growth of GDP is itself growing every year. Needless to say this will eventually become ridiculously fast growth: If we started out with a GDP 1% a year in 1950, and say GDP advanced .5% per year after that, we'd currently be experiencing 31% economic growth per year. Insane!
Actually, I do know what exponential means.
Faster-than-exponential means the rate of growth increases as time progresses, e.g. e^(e^t).
By "the overarching story is still faster-than-exponential", what I mean is that the rate of economic growth itself is growing-- taking the long (hundreds of years) view. In agrarian times, 0.1% per year was typical. By the 1700s, we were up to 0.3-0.5% per year. By 1825, 1% per year was typical. Now, global economic growth is about 4% per year.
If we started out with a GDP 1% a year in 1950, and say GDP advanced .5% per year after that, we'd currently be experiencing 31% economic growth per year.
It won't grow that fast. My guess is that the growth rate's own doubling rate is about once every 150 years or so (with noise) meaning we'll see 9-10% growth as the norm in the mid-22nd century. Obviously, there's some limit to this, but once humanity is post-scarcity (ca. 2120) who cares?
Faster-than-exponential means the rate of growth increases as time progresses, e.g. e^(e^t).
By "the overarching story is still faster-than-exponential", what I mean is that the rate of economic growth itself is growing-- taking the long (hundreds of years) view. In agrarian times, 0.1% per year was typical. By the 1700s, we were up to 0.3-0.5% per year. By 1825, 1% per year was typical. Now, global economic growth is about 4% per year.
If we started out with a GDP 1% a year in 1950, and say GDP advanced .5% per year after that, we'd currently be experiencing 31% economic growth per year.
It won't grow that fast. My guess is that the growth rate's own doubling rate is about once every 150 years or so (with noise) meaning we'll see 9-10% growth as the norm in the mid-22nd century. Obviously, there's some limit to this, but once humanity is post-scarcity (ca. 2120) who cares?
They are comparing growth from 1750-2012. I'm not sure how relevant the one productive decade (or two) NASA and a few other agencies had during the cold war is to the discussion of macro-economic growth.
Also do you have a source on the reduction in R&D investment in the economy from the cold war until now (for the entire economy)?
Also do you have a source on the reduction in R&D investment in the economy from the cold war until now (for the entire economy)?
It's hard to get those numbers, because of questions regarding how R&D is defined, but:
* Decent academic jobs have become extremely rare in the past 30 years. * Blue-sky corporate R&D has been slashed. * Worker autonomy is decreasing in most companies, resulting in low job satisfaction.
No one in the R&D world debates the contention that this contraction has been going on for 30+ years and that it's immensely destructive.
* Decent academic jobs have become extremely rare in the past 30 years. * Blue-sky corporate R&D has been slashed. * Worker autonomy is decreasing in most companies, resulting in low job satisfaction.
No one in the R&D world debates the contention that this contraction has been going on for 30+ years and that it's immensely destructive.
I agree with the engineers vs suits sentiment. But I think that has more to do with bureaucracy as the result of mega-corporations gaining dominance, bigger universities, population growth and the government growing in size - than it has to do with government (or university) R&D investment.
The startup scene shows engineers and innovations still reign outside of large organizational structures.
The startup scene shows engineers and innovations still reign outside of large organizational structures.
The startup scene shows engineers and innovations still reign outside of large organizational structures.
Disagree, at least if by "startup scene" you mean VC-istan. The VCs hold all the cards, and most of those startups aren't very interesting or innovative.
VC-istan is a postmodern tech company. A fairly good one, but more like a large bureaucracy than a research center. The CEOs are semi-independent PMs who are still beholden to their VC bosses.
The only way to turn VC-istan into something decent would be to impose strict regulations over communications between VCs in order to restrict their ability to collude on terms or blacklist entrepreneurs who piss them off.
Disagree, at least if by "startup scene" you mean VC-istan. The VCs hold all the cards, and most of those startups aren't very interesting or innovative.
VC-istan is a postmodern tech company. A fairly good one, but more like a large bureaucracy than a research center. The CEOs are semi-independent PMs who are still beholden to their VC bosses.
The only way to turn VC-istan into something decent would be to impose strict regulations over communications between VCs in order to restrict their ability to collude on terms or blacklist entrepreneurs who piss them off.
Ugh, regulate communications? That means they'd have to monitor communication.
You can prevent collusion by creating more market options (removing barriers to entry) and promoting greater transparency in the industry.
I'll never understand why people don't look for solutions involving freedom first but instead always look to the government to add restrictions and regulations by force.
That would just make the VC's use encryption and other means of evasion, further pushing their negative activity underground and making it harder for new VC's to get started due to more costs in following regulation.
You can prevent collusion by creating more market options (removing barriers to entry) and promoting greater transparency in the industry.
I'll never understand why people don't look for solutions involving freedom first but instead always look to the government to add restrictions and regulations by force.
That would just make the VC's use encryption and other means of evasion, further pushing their negative activity underground and making it harder for new VC's to get started due to more costs in following regulation.
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Growth may not over but I've been thinking a lot of thoughts related to Krugman's final point. I think employment may generally decline and perhaps a skills gap will only continue to widen. Wealth disparity will widen also, perhaps.
I think that humanity will eventually go to a basic income, first on a national and then on a world scale. I think national BI will follow the next real economic catastrophe (not 2008, but 1930s) and the global one will be possibly 50 years later. I'm optimistic on the long-term future, but I think we have at least one more Great Depression and, unfortunately, at least one big-ass war ahead of us.
BI will probably happen too late, but if we don't want to die, we will implement it. It used to be that it took a 22-year one-time investment to get people ready for the work force, but now it requires continual education, and without BI, people who lack independent income are going to be in trouble.
BI will probably happen too late, but if we don't want to die, we will implement it. It used to be that it took a 22-year one-time investment to get people ready for the work force, but now it requires continual education, and without BI, people who lack independent income are going to be in trouble.
Yeah, I agree - a basic income welfare system may be inevitable. One other thing to think about is - basic income allows for more people to live a life of independent experimentation/research. The effect might be quite positive on open source communities in technical fields but as well as the arts.
I lean heavily libertarian, but my practical side says we should implement a basic income and do away with almost all labor regulations.
Same here. Minimum wage is, effectively, an incompetently structured and meager basic income financed by low-end employers (who react by reducing low-end jobs).
I think the biggest insight here is "Clearly, such a technology would remove all limits on per capita GDP, as long as you don’t count robots among the capitas." You could make the same point about slaves. I'm not opposed to the idea of robot workers, but I suspect that a robot-driven economy will look a lot like a slave-driven economy. Poor and unskilled workers will strongly resent that their jobs are going to robots, just as they did during slave times. Those fortunate enough to own robots will essentially live a life of leisure. The profitability of robots will be heavily reliant on exports, as robots can produce significantly more than they and their owners could consume.
The unfortunate inevitability when welfare turns into negative income tax.
What's the difference? One acts like it's supposed to help you when you happen to not have a job. The other treats not having a job as an inevitability of the increasing incentive for automation.
See: 'Player Piano' by Kurt Vonnegut
What's the difference? One acts like it's supposed to help you when you happen to not have a job. The other treats not having a job as an inevitability of the increasing incentive for automation.
See: 'Player Piano' by Kurt Vonnegut
Growth in the developed world is over.
So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.
The robots will create wealth for the people that don't own robots. If they can't afford this wealth the robots will never be created in the first place. It's no different than any other automation technology.
The robots will create wealth for the people that don't own robots. If they can't afford this wealth the robots will never be created in the first place. It's no different than any other automation technology.
Only if those replaced by automation can provide value to society (employment). Assuming they will find jobs with ever increasing amounts of automation seems naive. Manufacturing and farming employed the VAST majority of people in the past.
If the vast majority of people are unemployed there won't be anyone to support said automation and it won't exist.
Also check out Marshall Brain's essay Robotic Nation.
http://marshallbrain.com/robotic-nation.htm
http://marshallbrain.com/robotic-nation.htm
What does "growth" measure?
If we buy a $7 kindle book rather than a $16 paper back does that halve GDP?
We have improved medical care that costs the same does that imply no growth?
If twice as many people use air travel, but it costs half as much does that mean there is no growth?
If we buy a $7 kindle book rather than a $16 paper back does that halve GDP?
We have improved medical care that costs the same does that imply no growth?
If twice as many people use air travel, but it costs half as much does that mean there is no growth?
I actually think we're just at the very beginning of the information revolution. The reason growth seems to have slowed is that we experienced a hype bubble. People (correctly) predicted that a globally connected network of pervasive computers would fundamentally change every industry, it just looks like it's going to take 50 or 100 years, not 5 or 10.
At the turn of the millenium people got tired of waiting and the speculative markets fell apart.
But the engineering continues. The friction separating the world's information is in mid-collapse, but the actual diffusion has barely even started.
At the turn of the millenium people got tired of waiting and the speculative markets fell apart.
But the engineering continues. The friction separating the world's information is in mid-collapse, but the actual diffusion has barely even started.
Space colonization will probably be another IR, but it seems like serious efforts at a permanent self-sustaining colony (that could survive indefinitely if something really bad happened and the human race on Earth was wiped out) are at least 50 years away.