Monday, October 9, 2017

The Post-Postgrowth Era (Robert Gordon...)

Perhaps I am the last of you to have looked at Robert Gordon's 2016 book on the history of American economic growth. But if not, Gordon's study has deep implications for what we are trying to do in our teaching and research.

Briefly, the great spurt of 1870-1970 in American economic growth was a one-time wonder. What has happened since is greater inequality, where most of the growth goes to the top 1%. He outlines the big headwinds we face--demographic, for example. We can through various aspects of tax policy make a difference (but those aspects are very different than the ones proposed by Trump/Ryan/McConnell).

The book is sobering. Most of our students, and all of our faculty, came of age during the period when growth has been slowing down. There are no signs that that slowdown is about to end. When we look back to that period pre-1970, we are likely ignoring the evidence of the last almost 50 years. 

We might be asking ourselves: What are the best policy, planning, and development strategies in these times of ongoing slow growth, where in fact whatever we do in terms of policy little will change. Yes, increasing skilled immigrants, more progressive taxation, etc., will help, but the major forces of the past are no longer available. Of course, economic growth is not the only measure of societal well being, so we might look elsewhere for resources.

If I have misread the book, please correct me. 
As long as I have been involved with planning and policy schools, now almost fifty years, there have been two pervasive themes: inequality/empowerment and efficiency/fairness. If we increased wages, then producers would be encouraged to invest in more efficient machinery and organization, so providing one source of robustness. For industries where technological improvements were not available, as in universities and symphonies, no such efficiencies were possible and so costs and prices have risen disproportionately, as William Baumol argued years ago.

My involvement has been in this period of slower growth, where it is unlikely that any of the sources of 1870-1970 were available to supply windfall bonuses. And it is unlikely, according to Gordon, to have those sources available any time soon.

For a public policy school, one with a substantial concern for urban development and for a major institution such as health, what should we be teaching? Presumably, there is still room for marginal improvements on the efficiency frontier, and so much of what we teach and research is exactly at that point. What we do not yet provide is a way of thinking and working to a different future, a different conception of policy, planning, etc.--although there is enormous room to work on inequality and fairness. 

Those who feel left out but who had benefitted unwittingly from the great growth period, in a sense the archetype of the Trump base (I have no idea if that is a good category), are likely to find the future rather more disenchanted--for they thought that their well being was a matter of their own initiative and hard work, when in fact it was rather a matter of a rising tide on which they floated. Finding various scapegoats or sources of their disenchantment, they miss the point that the tide as gone out never to return in their lifetimes. It is tragic and comic at the same time. (Curiously, the great demographic transition in the US, from workers to retirees, would be in part remedied by more immigration rather than less. Or, the availability of contraceptives and ready abortions likely reduced the population of those potential to become low-level  law-breakers, and hence the decline of crime in the last decade or two--and hence, given recent political moves, the likely rise in the next two decades.)

Those who might be called liberal or centrist are warranted to work on inequality, but that too won't make the tide return, although fairness is a political good. Regulation of the world of money and finance makes it less likely we have epidemics of imprudent risk-taking, but I am "encouraged" by human device and desire in the world of greed and gaming.

So what are we doing in our fields?  If it is marginal improvement, that is very important. But as far as I can tell, there is little in the way of invention, political or technical or ..., that would point the way forward. I remain grateful for medical advances in the last fifty years, for computational improvements that lead to new ways of living, and for mechanical improvements that make for LA's better air (albeit big trucks and our port are still major sources of crud in the air). Little compares to antibiotics, the telephone or even IBM 360 machines, or the automatic transmission, though.

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