_______________________________________________Growth Out of Time
by William Janeway
William Janeway, a managing director and senior adviser at the private-equity firm Warburg Pincus, is a visiting lecturer in economics at Cambridge University.
CAMBRIDGE – Robert Gordon of Northwestern University is a distinguished economist whose work in macroeconomics and studies of long-term economic growth have properly earned him high regard. So his recent exercise in speculative future history, which asks whether economic growth in the United States has come to an end, has attracted much favorable attention. But a basic flaw in Gordon’s argument is immediately apparent – and becomes glaringly so on closer examination.
Gordon distinguishes three Industrial Revolutions that have driven economic growth and improved living standards since the eighteenth century: IR #1 (“steam, railroads”), whose defining inventions date from 1750 to 1830; IR #2 (“electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum”), whose defining inventions date from 1870 to 1900; and IR #3 (“computers, the web, mobile phones”), dating from 1960. The core of his article contrasts the transformational impact of IR #1 and, especially, IR #2 on per capita GDP and the quality of life with the relatively trivial consequences of IR #3.
The vulnerability of Gordon’s argument is his shortened time horizon for IR #3. Consider the following four sentences in his paper:
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