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Robert J. Gordon, an economist at Northwestern University, has recently published an important new book, The Rise and Fall of American Growth, which argues that the U.S. has entered a new age of stagnation in which our hopes for an ever more prosperous future will largely evaporate. While Gordon’s argument is often characterized as being the opposite of the one I have made in my two books about the impact of advancing automation technology on the job market (most recently, Rise of the Robots), there are many areas in which I think we would agree.
Gordon’s main point is that we no longer have the kind of robust, broad-based innovation that powered economic growth and rising living standards between, roughly, 1870 and 1970. Electricity, cars, planes, indoor plumbing, and all the rest completely changed the quality of our lives during this period, and we haven’t seen anything comparable in the decades since. This is certainly true. However, I think it’s clear that innovation since then has continued (and even accelerated) but has focused largely on information and communication technology. It has not had the saeconomics. The impact on median incomes and living standards, and I think one important reason why is that information technology is increasingly substituting for cognitive human labor....
What the debate over Robert Gordon’s latest book misses is important: "The most important insight is not that we no longer have broad-based innovation. It’s that innovation no longer guarantees broad-based prosperity. To solve that problem, I think we will ultimately have to change our economic rules."