Northwestern University Colleagues Have Opposing Views of 21st Century Economy
Timothy Aeppel
WALL STREET JOURNAL, June 15, 2014
Economic odd couple Robert Gordon, left, and Joel Mokyr
encapsulate the debate on the future of innovation. Rob Hart for The Wall
Street Journal
EVANSTON, Ill.— Robert Gordon, a curmudgeonly 73-year-old
economist, believes our best days are over. After a century of life-changing
innovations that spurred growth, he says, human progress is slowing to a crawl.
Joel Mokyr, a cheerful 67-year-old economist, imagines a
coming age of new inventions, including gene therapies to prolong our life span
and miracle seeds that can feed the world without fertilizers.
These big-name colleagues at Northwestern University
represent opposite poles in the debate over the future of the 21st century economy:
rapid innovation driven by robotic manufacturing, 3-D printing and cloud
computing, versus years of job losses, stagnant wages and rising income
inequality.
The divergent views are more than academic. For many
Americans, the recession left behind the scars of lost jobs, lower wages and
depressed home prices. The question is whether tough times are here for good.
The answer depends on who you ask.
"I think the rate of innovation is just getting faster
and faster," Mr. Mokyr said over noodles and spicy chicken at a Thai
restaurant near the campus where he and Mr. Gordon have taught for four
decades.
"What's the evidence of that?" snapped Mr. Gordon.
"There isn't any."
The men get along fine when talk is limited to, say, faculty
gossip. About the future, though, they bicker constantly. When Mr. Mokyr
described life-prolonging medical advances, Mr. Gordon cut in: "Extending
life without curing Alzheimer's means people who can walk but can't
think."
Mr. Gordon landed at Northwestern from the University of
Chicago in the fall of 1973, a year before Mr. Mokyr arrived there from Yale
after finishing his Ph.D. Their tit-for-tat repartee makes them popular
speakers—for economists, at least. Mr. Gordon recently began charging as much
as $20,000 for U.S. appearances—a fee, he said, dictated by his new booking
agent.
Even there, the men are at odds. "I am a rank-and-file
academic, not a basketball star," Mr. Mokyr said. "I have neither a
literary agent nor a speaker bureau. I charge what they pay me. If it's not
enough I don't go."
The professors headlined a Bank of Korea event in Seoul
earlier this month. "We always go mano-a-mano," Mr. Mokyr said.
"But we often end up talking about different things. Bob's a
macroeconomist, I'm an economic historian."
Mr. Mokyr has long studied how new tools have led to
economic breakthroughs. For example, how the development of telescopes allowed
for rapid advances in astronomy. History makes him certain his colleague is
wrong.
Mr. Gordon's ideas, in fact, fly in the face of modern
economic orthodoxy. Since Nobel economist Robert Solow first argued
in the 1950s that growth was driven by new technology, most economists have
embraced the idea. Progress may be uneven, according to this view, but there is
no reason to expect the world to run out of ideas.
"Bob says the low-hanging fruit has been picked,
because we won't invent indoor plumbing again," Mr. Mokyr said. In
speeches, Mr. Gordon often displays images of a flush toilet and iPhone and asks: Which would you give up?
Mr. Mokyr said many economists before Mr. Gordon have
proclaimed the end of progress, but these pessimists have always been proven
wrong. It was a popular theme during the Depression, he said, but modern
economists now recognize the 1930s as a period of rapid technological progress
with such advances as the development of jet engines and radar.
Today, Mr. Mokyr said, fast computing is a new tool that
will open the way to new inventions in the future.
The darkness of Mr. Mokyr's family history contrasts with
his optimism for the future. His parents were Dutch Jews who survived the
Holocaust. His father, a civil servant, died of cancer when Mr. Mokyr was a
year old. He was raised by his mother in a small apartment in the port city of
Haifa in Israel. "My mother was not an optimist," he said. "She
had lived a very tough life."
Mr. Gordon, the more famous of the two men, has the
credentials to buck conventional wisdom. His parents and a brother were Ph.D.
economists. His father, an expert on business cycles, taught at the University
of California, Berkeley, for decades. Business Week called them "The
Flying Wallendas of Economics," after the acrobatics family. Mr. Gordon
wrote a widely used macroeconomic textbook and has served for more than three
decades on a committee of the National Bureau of Economic Research that
determines when recessions begin and end.
If anything, his family should have made him an optimist.
Mr. Gordon's father grew up grindingly poor, at one point supporting three
younger brothers after his own father died; his eventual success mirrored the
larger transformation of the U.S. into the world's richest country.
"His generation saw the move from crowded tenements in
the 1920s to suburbia in the 1950s—with everyone having a yard and a car,"
Mr. Gordon said, a leap showing how much progress has since slowed.
Mr. Gordon sees a hobbled U.S. economy ahead. Americans are
getting older, leaving too few workers to support the aging population. The
problem is even worse in other Western economies.
An aging citizenry is among a list of troubles, including
the declining share of working-age men with jobs; stagnant rates of Americans
earning college degrees; jobs lost abroad and high government debt. The biggest
obstacle, he said, is growing income inequality.
To compensate, Mr. Gordon said, economies need technological
advances. The problem is that the biggest breakthroughs—like electrification or
the discovery of antibiotics—are behind us. Electricity changed how people
lived and worked, and it spawned hundreds of new industries. The technology
that allowed people to communicate instantly or travel quickly over long
distances were 19th- and 20th-century innovations.
More recent inventions—including the Internet—won't pack the
same punch, he said: "The rapid progress made over the past 250 years
could well turn out to be a unique episode in human history."
Cellphones, he said, are just a refinement of the telephone.
"Look at what an ideal kitchen looked like in 1955—it's not that different
than today," Mr. Gordon said. "It's nothing like moving from clothes
lines to clothes dryers."
Cars also illustrate how rapid advances have petered out in
recent decades. A century ago, the Ford Model T, with its 20-horse-power engine,
reached a top speed of 45 miles an hour. By the mid-1950s, Mr. Gordon said, his
father had a Chevrolet station wagon that was five times as powerful. More than
50 years later, Mr. Gordon said, he has a Subaru station wagon that is
comparable with his father's Chevy in size, speed and cargo capacity.
Mr. Gordon said his ideas began taking shape between
semesters at graduate school. He worked during the summer of 1965 for a team of
economists analyzing the dazzling productivity growth that began around 1920
and ran through World War II and the postwar boom.
Except for an upturn in the 1990s, growth has been tepid
ever since.
"Everyone has looked for a big overarching factor to
explain this," he said. "But it occurred to me, it could be as simple
as that we'd run out of the great inventions."
Mr. Gordon said his ideas evolved from there. In 2000, he
published a paper saying that computer technology, hailed as the driver of the
"new economy," was far less impressive than earlier big inventions.
He generated more controversy with a 2012 academic paper titled "Is U.S.
Economic Growth Over?"
The paper included a dire prediction: The economy will grow
less than half as fast as the remarkable 2% average it notched between 1870 and
2007. "Americans got used to their standard of living doubling from that
of their parents. No more," he told investment managers in Germany this
year:
If he is right, the standard of living for the average
American—measured in per capita income—will in the future take 78 years to
double, compared with the 35 years it took between 1972 and 2007. The
wealthiest 1%, on the other hand, could double their standard of living in as
little as 23 years, he said.
Other economists have voiced worries about stagnating
growth, but none quite as sweeping. Tyler Cowen of George Mason University in a
2011 book described a technological plateau that slowed U.S. growth. Mr. Cowen
has softened his stance lately, noting that such developments as the shale gas
boom have improved the long-term outlook.
Larry Summers, former chief economic adviser to President
Obama, told a gathering of the International Monetary Fund last year that the
U.S. and other advanced economies faced a prolonged period of extremely slow
growth known as secular stagnation.
But in an interview, Mr. Summers said he didn't share Mr.
Gordon's belief that innovation has stalled. He agreed, however, that the
benefits of meager economic growth "will not be hugely felt by the middle
class."
Other experts side with Mr. Mokyr. Timothy Taylor, an
economist at Macalester College and editor of the Journal of Economic
Perspectives, said, "People like Bob Gordon are making an argument that's
been heard repeatedly for the last 150 years."
Former Fed Chairman Ben Bernanke, in a commencement speech
last year, told graduates of Bard College at Simon's Rock, "Both
humanity's capacity to innovate and the incentives to innovate are greater
today than at any other time in history."
Criticism from Mr. Mokyr and others has prompted Mr. Gordon
to focus more on economic headwinds. Even if the pace of innovation remains
unchanged, he said, current obstacles are enough to support his projections.
Mr. Gordon is now writing "Beyond the Rainbow: The Rise
and Fall of Growth in the American Standard of Living," one book in series
on economic history being overseen by Mr. Mokyr as chief editor.
Much of Mr. Gordon's work focuses on an economy's output.
Mr. Mokyr, meanwhile, is more interested in how new inventions improve the
quality of life in ways that don't show up in traditional measures: new
medicines that treat chronic pain or allow older people to stay active years
longer. A hip replacement, he said, let him keep riding his bike to and from
work.
"For Bob, it's all about the measure of input and
output—especially output," said Mr. Mokyr. That is why the aging
population is such a big problem for Mr. Gordon, since retired people stop
producing.
Mr. Gordon countered that many of the innovations Mr. Mokyr
anticipates—such as new technology to clean air and water pollution—will solve
problems created by past economic growth. Those shouldn't be counted the same
way as breakthroughs that add to output, he said.
"Maybe the problem is that we didn't measure growth in
the past correctly," Mr. Mokyr retorted, "because we didn't account
for the costs."
The two men agree on one point. "One of the main
missions I have in life is to point out to my students how lucky they are to be
born in the 20th century," Mr. Mokyr said. "Compared to what life was
like 100 or 200 years ago, we're incredibly fortunate."
—Michael J. Casey contributed to this article
