Summary: The future of economic growth has become a hot topic. Here’s a brief look at two of the contrasting visions for our future. Read about both visions and decide for yourself!
- Slow growth ahead — or even no growth
- Accelerating growth leading to the singularity
- For more information: the two theories about economic growth
Forecasts of stagnating growth have been commonplace throughout the centuries of economic progress from industrialization. Resource exhaustion, the end of innovation, overpopulation, pollution, wars, and social collapse. These are timeless concerns, by which far seeing (or pessimistic) people in each generation force us to think ahead — to plan and act now to avoid forseeable disasters.
Posts on the FM website tend to debunk doomsters, but not all warnings are exaggerated or in vain. Here we look at two contradictory views of economic growth (a narrow but vital perspective). No final judgement can be made which is correct. Everyone must choose as they will, and live their lives accordingly.
(2) Slow growth ahead — or even no growth
“The more important fundamental laws and facts of physical science have all been discovered, and these are so firmly established that the possibility of their ever being supplanted in consequence of new discoveries is exceedingly remote. … Many instances might be cited, but these will suffice to justify the statement that “our future discoveries must be looked for in the sixth place of decimals.”
— The great physicist Albert Abraham Michelson (1852-1931) in Light Waves and Their Uses (1903)
Is America, and perhaps the entire developed world, doomed to slow economic growth? Are we all fated to follow Japan into a multi-generational stagnation?
(a) The best-known version of this story
The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, an e-book by Tyler Cowen (Prof Economics at George Mason U). About 15,000 words, and costs $4.00. Amazon link: here.
Another common version is “Japanification”: deflation, low growth, aging population, and slow decay of the government’s solvency. Japan has shown how easily a nation falls into this, and how difficult the cure.
(b) A more analytic version of a no-growth forecast
“Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds“, Robert J. Gordon, National Bureau of Economic Research, August 2012 — Abstract:
This paper raises basic questions about the process of economic growth. It questions the assumption, nearly universal since Solow’s seminal contributions of the 1950s, that economic growth is a continuous process that will persist forever. There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely. Rather, the paper suggests that the rapid progress made over the past 250 years could well turn out to be a unique episode in human history.
The paper is only about the United States and views the future from 2007 while pretending that the financial crisis did not happen. Its point of departure is growth in per-capita real GDP in the frontier country since 1300, the U.K. until 1906 and the U.S. afterwards. Growth in this frontier gradually accelerated after 1750, reached a peak in the middle of the 20th century, and has been slowing down since. The paper is about “how much further could the frontier growth rate decline?”
The analysis links periods of slow and rapid growth to the timing of the three industrial revolutions (IR’s), that is:
- steam & railroads — from 1750 to 1830;
- electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, & petroleum — from 1870 to 1900; and
- computers, the web, & mobile phones — from 1960 to present.
It provides evidence that IR #2 was more important than the others and was largely responsible for 80 years of relatively rapid productivity growth between 1890 and 1972. Once the spin-off inventions from IR #2 (airplanes, air conditioning, interstate highways) had run their course, productivity growth during 1972-96 was much slower than before.
In contrast, IR #3 created only a short-lived growth revival between 1996 and 2004. Many of the original and spin-off inventions of IR #2 could happen only once – urbanization, transportation speed, the freedom of females from the drudgery of carrying tons of water per year, and the role of central heating and air conditioning in achieving a year-round constant temperature.
Even if innovation were to continue into the future at the rate of the two decades before 2007, the U.S. faces six headwinds that are in the process of dragging long-term growth to half or less of the 1.9% annual rate experienced between 1860 and 2007. These include demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. A provocative “exercise in subtraction” suggests that future growth in consumption per capita for the bottom 99% of the income distribution could fall below 0.5 %per year for an extended period of decades.
From the conclusion of the paper:
Volumes have been and will be written on all the issues identified here, and thus it is beyond the scope of this short article to make any serious attempt to provide solutions. Some of the headwinds contain a sense of inevitability. The most daunting is headwind #4, the interplay between globalization and modern technology, which accelerates the process of catching up of the emerging markets and the downward pressure on wages and real incomes in the advanced nations.
(c) Posts about economic stagnation or even collapse
- Peak Oil Doomsters debunked, end of civilization called off , 8 May 2008
- From the 3rd century BC, Polybius warns us about demographic collapse, 11 June 2008
- Is global food production peaking?, 13 January 2010
- Recovering lost knowledge about exhaustion of the Earth’s resources (such as Peak Oil), 27 January 2011
- A look at forecasts for peak oil – and the end of civilization, 13 July 2012
- The Reference Page Demography – studies & reports
(3) Accelerating growth leading to the singularity
“Everything that can be invented has been invented.”
— Charles H. Duell, Director of U.S. Patent Office, 1899 (a famous fake quote, as false as the idea it expresses)
The singularity is a amalgam of ideas, some contradictory, about a future of accelerating technological evolution leading to a new world beyond our understanding. We cannot understand what will come, much as one cannot see through a singularity in the physical universe.
It’s origins go back to the mid-19th century (perhaps earlier). For a good introduction to modern thought about it see Three Major Singularity Schools, Eliezer S. Yudkowsky, Singularity Institute blog, September 2007. Here’s the opening:
Singularity discussions seem to be splitting up into three major schools of thought: Accelerating Change, the Event Horizon, and the Intelligence Explosion. The thing about these three logically distinct schools of Singularity thought is that, while all three core claims support each other, all three strong claims tend to contradict each other.
Core claim: Our intuitions about change are linear; we expect roughly as much change as has occurred in the past over our own lifetimes. But technological change feeds on itself, and therefore accelerates. Change today is faster than it was 500 years ago, which in turn is faster than it was 5000 years ago. Our recent past is not a reliable guide to how much change we should expect in the future.
Strong claim: Technological change follows smooth curves, typically exponential. Therefore we can predict with fair precision when new technologies will arrive, and when they will cross key thresholds, like the creation of Artificial Intelligence.
Advocates:Ray Kurzweil, Alvin Toffler(?), John Smart
Core claim: For the last hundred thousand years, humans have been the smartest intelligences on the planet. All our social and technological progress was produced by human brains. Shortly, technology will advance to the point of improving on human intelligence (brain-computer interfaces, Artificial Intelligence). This will create a future that is weirder by far than most science fiction, a difference-in-kind that goes beyond amazing shiny gadgets.
Strong claim: To know what a superhuman intelligence would do, you would have to be at least that smart yourself. To know where Deep Blue would play in a chess game, you must play at Deep Blue’s level. Thus the future after the creation of smarter-than-human intelligence is absolutely unpredictable.
Core claim: Intelligence has always been the source of technology. If technology can significantly improve on human intelligence – create minds smarter than the smartest existing humans – then this closes the loop and creates a positive feedback cycle. What would humans with brain-computer interfaces do with their augmented intelligence? One good bet is that they’d design the next generation of brain-computer interfaces. Intelligence enhancement is a classic tipping point; the smarter you get, the more intelligence you can apply to making yourself even smarter.
Strong claim: This positive feedback cycle goes FOOM, like a chain of nuclear fissions gone critical – each intelligence improvement triggering an average of>1.000 further improvements of similar magnitude – though not necessarily on a smooth exponential pathway. Technological progress drops into the characteristic timescale of transistors (or super-transistors) rather than human neurons. The ascent rapidly surges upward and creates superintelligence (minds orders of magnitude more powerful than human) before it hits physical limits.
Advocates: I. J. Good, Eliezer Yudkowsky
Works about the singularity:
- The Wikipedia entry about the singularity is excellent.
- Marooned in Realtime by Vernor Vinge (1986) — Fun sci-fi.
- The Coming Technological Singularity: How to Survive in the Post-Human Era, Vernor Vinge, 1993
Posts about the singularity:
- Good news: The Singularity is coming (again), 8 December 2007
- The Singularity is in our past, 29 March 2009
(4) For more information: the two theories about economic growth
(a) This is a complex subject. These two Wikipedia entries provide a good introduction to the theories underlying these two visions of the future.
(b) Posts about the future:
- Fears of flying into the future, 25 February 2008
- Good news about the 21st century, a counterbalance to the doomsters, 9 May 2008
- Some thoughts about the economy of mid-21st century America, 12 January 2009
- A look at our history – from the 23rd century, 13 April 2009
- A look back at our time from the 2100 A.D. edition of the Encyclopedia Britannica, 24 June 2010
See all posts about this topic at these Reference Pages: