Human invention & innovation have made our lives more pleasant to live, and we are stuck in the mode that the future will be brighter, our kids will live better than us.
Is economic growth a constant?
Meanwhile, the West talk about life returning to the Middle Ages.
West running out of ideas to fire up productivity
BY: ADAM CREIGHTON From: The Australian August 31, 2012 12:00AM
ECONOMISTS often assume growth will magically persist forever, but it ultimately relies on new inventions or technological improvements.
The arrival of the "new economy" in the 1990s, underpinned by the limitless opportunities the internet presented, was supposed to herald a productivity boon. Output per worker improved a little in the late 1990s and early 2000s, but has fizzled since, and not only in Australia.
Nobel Prize-winner Robert Solow's observation in the late 1980s -- "we see computers everywhere except in the productivity statistics" -- might apply equally to the internet today.
Perhaps the ability to bombard each other incessantly with inane messages on Twitter and Facebook, along with the proliferation of millions of time-wasting emails, has offset the benefits of e-commerce.
Economics professor Robert Gordon of Northwestern University released a persuasive paper this month suggesting per capita economic growth in the West might be drifting back to its long-trend: close to zero.
Before the industrial revolution in the late 18th century, human history was largely "nasty, brutish and short", as Thomas Hobbes famously put it, characterised by barely any economic growth at all. Invention of the steam engine and railways, and later, in the 19th century, electricity, the combustion engine, running water and plumbing, unleashed an unprecedented wave of economic development.
It took five centuries from 1300 for per capita incomes to triple, but only 60 years from 1929 for them to increase fourfold. In what is a blink of an eye in world history, life expectancy jumped from 45 years in 1870 in the richest countries to about 80 today.
It would take more than a century for the spin-offs of these historic discoveries to percolate throughout the economy. The combustion engine led to planes and cars, bringing fast transport to the masses, and interstate highways; electricity led to a dazzling array of time-saving household appliances.
Plumbing and sewers liberated half the labour force -- women -- from spending their lives carting water around and emptying chamber pots. Predominantly rural populations poured into what would become densely populated, and vastly more productive, cities.
But, Gordon argues, many of these spectacular advances can occur only once. The enormous productivity benefits of being able to maintain a constant room temperature via air conditioning has now rippled throughout the world.
Countries can only urbanise once, and planes and cars travel no faster today in practice than they did in the 1950s -- indeed, planes fly more slowly because of the need to conserve fuel.
The entrance of women into the workforce is a one-off event. Rapid economic growth in the 20th century was driven both by novel manifestations of these key 19th-century discoveries and their spread from the US to other countries. The economic benefits of this process naturally wane over time.
Invention of the computer in the 1960s appears to have provided far less of a boost to per capita income growth than was anticipated, notwithstanding a relatively short dotcom boom in the late 1990s, when companies raced to develop an online presence.
Gordon argues more recent inventions since the mid 1990s -- such as smartphones -- have "centred on entertainment and community devices that provide new opportunities for consumption on the job and in leisure hours rather than a continuation of the historical tradition of replacing human labour with machines".
History is replete with excessively pessimistic and optimistic outlooks. But the prospects for a renaissance of economic growth look grim in the US, he argues.
The West's population is rapidly ageing and it is mired in debt and gargantuan bureaucracies, and will require punishing taxation to repay. Both will sap the West's creative verve.
Moreover, the fashionable insistence that we tax energy use to stop climate change will hamper further the West's ability to generate improved living standards.
Professor Gordon was writing about the US, but his gloomy prognosis has profound implications for Australia.
If economic growth does in fact revert to Middle Age rates, the West will have to consider how to structure its economies to elicit maximum efficiency from its existing income rather than ponder how much extra money to print.
Is economic growth a constant?
Meanwhile, the West talk about life returning to the Middle Ages.
West running out of ideas to fire up productivity
BY: ADAM CREIGHTON From: The Australian August 31, 2012 12:00AM
ECONOMISTS often assume growth will magically persist forever, but it ultimately relies on new inventions or technological improvements.
The arrival of the "new economy" in the 1990s, underpinned by the limitless opportunities the internet presented, was supposed to herald a productivity boon. Output per worker improved a little in the late 1990s and early 2000s, but has fizzled since, and not only in Australia.
Nobel Prize-winner Robert Solow's observation in the late 1980s -- "we see computers everywhere except in the productivity statistics" -- might apply equally to the internet today.
Perhaps the ability to bombard each other incessantly with inane messages on Twitter and Facebook, along with the proliferation of millions of time-wasting emails, has offset the benefits of e-commerce.
Economics professor Robert Gordon of Northwestern University released a persuasive paper this month suggesting per capita economic growth in the West might be drifting back to its long-trend: close to zero.
Before the industrial revolution in the late 18th century, human history was largely "nasty, brutish and short", as Thomas Hobbes famously put it, characterised by barely any economic growth at all. Invention of the steam engine and railways, and later, in the 19th century, electricity, the combustion engine, running water and plumbing, unleashed an unprecedented wave of economic development.
It took five centuries from 1300 for per capita incomes to triple, but only 60 years from 1929 for them to increase fourfold. In what is a blink of an eye in world history, life expectancy jumped from 45 years in 1870 in the richest countries to about 80 today.
It would take more than a century for the spin-offs of these historic discoveries to percolate throughout the economy. The combustion engine led to planes and cars, bringing fast transport to the masses, and interstate highways; electricity led to a dazzling array of time-saving household appliances.
Plumbing and sewers liberated half the labour force -- women -- from spending their lives carting water around and emptying chamber pots. Predominantly rural populations poured into what would become densely populated, and vastly more productive, cities.
But, Gordon argues, many of these spectacular advances can occur only once. The enormous productivity benefits of being able to maintain a constant room temperature via air conditioning has now rippled throughout the world.
Countries can only urbanise once, and planes and cars travel no faster today in practice than they did in the 1950s -- indeed, planes fly more slowly because of the need to conserve fuel.
The entrance of women into the workforce is a one-off event. Rapid economic growth in the 20th century was driven both by novel manifestations of these key 19th-century discoveries and their spread from the US to other countries. The economic benefits of this process naturally wane over time.
Invention of the computer in the 1960s appears to have provided far less of a boost to per capita income growth than was anticipated, notwithstanding a relatively short dotcom boom in the late 1990s, when companies raced to develop an online presence.
Gordon argues more recent inventions since the mid 1990s -- such as smartphones -- have "centred on entertainment and community devices that provide new opportunities for consumption on the job and in leisure hours rather than a continuation of the historical tradition of replacing human labour with machines".
History is replete with excessively pessimistic and optimistic outlooks. But the prospects for a renaissance of economic growth look grim in the US, he argues.
The West's population is rapidly ageing and it is mired in debt and gargantuan bureaucracies, and will require punishing taxation to repay. Both will sap the West's creative verve.
Moreover, the fashionable insistence that we tax energy use to stop climate change will hamper further the West's ability to generate improved living standards.
Professor Gordon was writing about the US, but his gloomy prognosis has profound implications for Australia.
If economic growth does in fact revert to Middle Age rates, the West will have to consider how to structure its economies to elicit maximum efficiency from its existing income rather than ponder how much extra money to print.
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