Brad DeLong: prediction

Transcript context

…— The Son Also Rises, For Whom the Bell Curve Tolls. What do you think of his approach to economic growth after all these years, now that you’ve thought about it, written your own book? Well, his approach is the huge kind of approach, is the largest scale. I’m looking at the 20th century, which is a considerably smaller-scale thing, so what I’m most interested in is all the things that Joel Mokyr talks about, all the things that Greg talks about, all the other stuff that gets you up to 1870. Then you wave your hands and say, “The story continues. ” Well, in this book, I’ve taken the position — and I’m about 70 percent sure I’m right — that really, no, the story doesn’t continue. That, say, from 1770 to 1870, you have about half of a percent per year, on average, of steady technological progress, but one-third of that comes because the last set of glaciers served as bulldozers and scraped all the post-Permian rock off of a good chunk of northwest Europe, leaving all the stored sunlight in the form of coal right there on the surface for you to pick up and then use to power steam engines. About one-third of that comes from the second globalization, allowing you to pull all the manufacturing of the world into the districts in which manufacturing was most productive and efficient. By 1870, the really cheap coal was pretty much gone, and you’d already pulled in all the manufacturing. That leaves you with the underlying rate of invention and innovation, which is about one-sixth of a percent per year — the things discovered, developed, deployed, and diffused in the world economy. That one-sixth — that only supports population growth at the rate of one-third percent per year as farm sizes grow smaller with higher population. One-third of a percent per year — that’s just 10 percent a generation. That’s a steampunk economy in which you ran out of the coal, and you’d already globalized the manufacturing, and you just had invention at kind of the early 19th-century steam engine pace. That produces a steampunk economy that looks pretty damn Malthusian to me. But instead, we had the one big wave, as Gordon calls it. We had the sudden jump up so that we get our 2 percent per year productivity and real income growth after 1870. It’s that 2 percent, together with Schumpeterian creative destruction revolutionizing the economy to double human technological competence every generation — that wild ride from 1870 to today. That’s the story I want to tell. That’s a story that Greg misses because Greg is simply viewing it from too high an altitude. When I read Hayek’s Constitution of Liberty, I see a thinker who favored a social welfare state, single-payer health insurance, and vigorous application of antitrust law. You paint Hayek as for laissez-faire, so what gives?…

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