Outstanding new op-ed by the best living economic historian, Joel Mokyr at Northwestern: What Today’s Economic Gloomsayers Are Missing.
There is nothing like a recession to throw economists into a despondent mood. Much as happened in the late 1930s. The economic growth experienced through the 20th century, they tell us, was fleeting. Our children will be no richer than we are.
What is wrong with this story? The one-word answer is technology. The digital codification of information = reinvention of invention. [Terms] like ‘IT’ don’t begin to express the scope of the change [array of] tools that the digital age places at science’s disposal.
The consequences are everywhere, from molecular genetics to nanoscience to research in Medieval poetry. As science solves problems that were not even imagined, inventors, engineers and entrepreneurs are waiting in the wings to design new gizmos and processes based on the new discoveries that will continue to improve our lives.
The economy may be facing some headwinds, but the technological tailwind is more like a tornado. Fasten your seat belts. So: If everything is so good, why is everything so bad? Why the gloominess of so many of my colleagues?
[GDP and productivity] work for a steel-and-wheat economy, not [ours], as they mismeasure the contributions of innovation to the economy. Many new things are expensive to design, but copy at low/zero cost: They contribute little to GDP even if the consumer welfare impact is large.
I highly recommend Mokyr’s books: The Lever of Riches: Technological Creativity and Economic Progress, The Gifts of Athena: Historical Origins of the Knowledge Economy, and The Enlightened Economy: An Economic History of Britain 1700-1850. I also highly recommend Mokyr’s recent podcast with
@EconTalker from Nov 2013, an hour of genius.