Have We Hit the Limits of Growth?

Have We Hit the Limits of Growth? June 8, 2016


Ever since the Great Recession and the grindingly slow recovery that’s followed, it’s become an especially urgent question whether we can expect the future to be more prosperous than the past. Singularitarians and other techno-utopians predict that technology will make economic growth an ever-upward exponential curve, bringing undreamed-of material abundance and making each generation’s life vastly better than the one that preceded it. On the other hand, skeptics argue that minimal or zero advancement is the new normal, and a future of stagnation or slow decline lies ahead.

This isn’t an abstract debate about GDP numbers or a problem that’s only relevant to the rich. The economy is the engine of everything we need for a good life: the food we eat, the clothes we wear, the houses we live in, the medical treatments we buy. The question of growth is really just asking how much of these goods are available and how easy they are to obtain. A future of rapid growth means that millions more people can rise out of severe poverty; stagnation means that those people could be condemned to perpetual hunger and misery.

I’ve seen several essays about The Rise and Fall of American Growth, a book by the historian Robert Gordon that makes the case for the gloomy answer. Gordon’s thesis is that all the low-hanging fruit of progress has been picked – basically, that this is as good as it’s going to get. He argues that a few major inventions, like electricity, the internal-combustion engine, urban sanitation, and the assembly line, propelled the explosive economic growth that the Western world saw in the late 19th and early-to-mid-20th centuries, and that nothing we can invent in the future will have a comparable impact:

Urban life in America on the eve of World War II was already recognizably modern; you or I could walk into a 1940s apartment, with its indoor plumbing, gas range, electric lights, refrigerator and telephone, and we’d find it basically functional…. By contrast, urban Americans from 1940 walking into 1870-style accommodations — which they could still do in the rural South — were indeed horrified and disgusted. Life fundamentally improved between 1870 and 1940 in a way it hasn’t since.

It’s easy to snark at this. As I said on Twitter the first time I saw this, “I read this story on a device I carry in my pocket that gives me access to all the world’s knowledge.” And millions of people, me included, have jobs that would probably have been incomprehensible, or at least the stuff of science fiction, to people in the 1940s and 1950s.

There’s also the social progress angle to consider. For rich, straight white men (such as, dare I say, most renowned academic historians), it’s true that life isn’t that different today compared to what it was fifty or sixty years ago. For just about everyone else, social mores have changed for the better, often dramatically, even if this is the kind of change that’s harder to measure in GDP figures.

Still, it’s true that most of the economic gains of the last few decades – like the sharp decline in global poverty – have come from equalizing access to technologies that already exist, not by inventing radically new ones. Expanded access to human knowledge aside, the internet has changed the way we consume leisure time more so than it’s led to dramatic increases in material abundance.

So, have we run up against the limits of growth? Are we doomed to a future of zero-sum competition over who can snatch the biggest slice of an unchanging economic pie?

While I think Gordon has a point in that newer inventions haven’t produced the same tangible gains as older ones, I also believe he’s selling short the potential of technologies that are just beginning to emerge. I’ve written about many of them: Self-driving cars and drones will transform transportation and shipping. Self-landing rockets will make it easy to reach orbit and could even open the way to interplanetary colonization. Tailored genetic therapy, tissue engineering and better-than-natural prostheses will enable us to repair and rebuild the human body in once-unimaginable ways. 3-D printing could give every house a manufactory more powerful and flexible than all the assembly lines of the 19th-century world.

We can’t imagine how these technologies will transform human life in the future, or what currently undreamed-of uses may emerge for them. Even if our era is living through a productivity slowdown, it’s only in retrospect that we’ll be able to tell whether it was a lasting change or just a temporary blip in an upward exponential. I don’t necessarily believe that human ingenuity is limitless, but it’s much too early to conclude that we’ve run out of ways to improve our existence.

I’m in accord with this view from Noah Smith, who points out that technology, like wealth, is subject to diminishing returns:

But growth isn’t the same thing as life satisfaction. Economists generally believe that humans have a decreasing marginal utility of wealth, meaning that each successive increase in material abundance matters less than the last… The same principle applies to technological progress – inventions that take us from the brink of starvation to prosperity and security will seem more important than what comes after, even if both add the same to GDP. That can create the illusion of stagnation.

I’d also propose that, whether or not technology has plateaued, there are other ways we could improve human lives. What if the work week was four or three days rather than five, or if we paid everyone an unconditional basic income that was enough for the necessities of life? What if we made increased leisure, rather than winner-take-all profit, an explicit policy goal? If all the world had the same productivity-enhancing technologies and other public goods that Westerners enjoy, I have no doubt that we could do these things without any decline in our standard of living. That alone could bring forth a huge increase in happiness and a brighter future. And who knows – if more people had time to study, tinker and think, rather than labor, that might be the root of the next economic breakthrough.

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