Skip to main content

The End of Growth?

We have all become accustomed to economic growth. We expect our GDP / national income to grow year after year (leaving aside the odd blip).  However, the stagnation of Western economies since the 2008 crisis has resulted in some economists suggesting that long-run economic growth has ground to a halt.  In particular, Robert Gordon has argued that in the grand scale of human history economic growth has been a temporary phenomenon lasting nearly two centuries. His explanation for this temporary growth is simply that technology revolutions (steam, railways, electricity, chemical engineering, combustion engine, household sanitation) raised productivity. He is less sanguine about the ability of computer technology to raise productivity. For one, the IT revolution isn't reflected in the productivity figures. Why? It could be that it eventually will - technology can be slow to raise productivity. On the other hand, maybe the IT revolution isn't such a big deal and doesn't make us more productive. In fact, some gadgets may make us less productive.

Many economists are now asking the question: where is the next big invention coming from? Without a technological breakthrough, we could be looking at near-zero growth being the new normal.

You can read a post by Robert Gordon on this here.  The Daily Telegraph's coverage of the debate is here and the Economist's is here

Growth in Real GDP per Capita, 1300-2100 - from Robert Gordon, "Is US Economic Growth Over? "

Popular posts from this blog

Bitcoin Bubble?

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money.   George Selgin , a free banker, takes an opposing view - click here .  Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press .