The Rise and Fall of American Growth
The productivity case for why the post-1970 US grows slower than the myth.
Summary
Gordon argues that the period from 1870 to 1970 was a unique century of economic transformation that will not repeat, and that growth since 1970 has been substantially slower because the inventions of the special century were more consequential than anything since.
His evidence is a detailed reconstruction of American standards of living, covering food, clothing, housing, transport, information, health, working conditions and household production. He documents what changed: electricity, the internal combustion engine, running water and indoor plumbing, chemicals and pharmaceuticals, communications, and the elimination of much household drudgery. He argues that these transformations were one-time events, since a house can only be connected to electricity and water once, and that measured productivity statistics understate their effect because they exclude improvements in quality of life.
His analysis of the 1920 to 1970 period identifies the fastest productivity growth in American history and attributes it to the diffusion of these inventions through the economy. His argument about the recent period is that computing and communications have transformed a narrower part of life, principally entertainment, information and communication, while leaving food, clothing, housing, transport and health largely as they were in 1970. He identifies four headwinds slowing future growth: demographic change, educational stagnation, inequality and government debt.
The book is over seven hundred pages and the historical detail is the strongest part. Critics argue that Gordon understates the measurement problems in recent technology and that his headwinds are policy choices rather than constraints. The claim that transformations are one-time is the most contestable element.
Key takeaways 8
- The century from 1870 to 1970 produced a transformation in living standards that has not been matched since and that Gordon argues will not repeat.
- Electricity, plumbing, the internal combustion engine, chemicals and communications transformed every dimension of daily life within a few decades.
- These transformations were one-time events, since a house can be connected to electricity and running water only once.
- Productivity statistics understate the effect of these inventions because they exclude improvements in quality of life and in household production.
- Productivity growth between 1920 and 1970 was the fastest in American history and reflected the diffusion of the earlier inventions through the economy.
- Computing and communications have transformed entertainment, information and communication while leaving food, housing, transport and health broadly as they were in 1970.
- Four headwinds slow future growth, which are demographic change, educational stagnation, inequality and government debt.
- Critics argue that Gordon understates measurement problems in recent technology and that his headwinds are policy choices rather than constraints.
Who should read it
Investors and readers thinking about long-run growth expectations who want the detailed historical reconstruction behind the productivity slowdown argument.
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