Excerpt
June 5, 2024, Paper: "Over the past decade, few ideas have been more influential in macroeconomic policy that the notion advanced economies can look forward to a century of stagnation, with perpetually slow productivity growth and rapidly aging populations implying a very long era of slow growth and ultra-low real interest rates. In his magisterial (2016) book on the history of economic progress, productivity expert Robert J. Gordon essentially argued that after 250 years of stunning economic progress, economically impactful new inventions were becoming increasing scarce and marginal, and there is no end to this trend in sight. Gordon’s historical analysis seemed to support what many productivity researchers had been finding for some time, with many papers showing that productivity slowed starting in the 1970s, and except for a burst in the 1990s, had continued at a very low level. Of course, this is only at the frontier; other economies depending on their level of development and institutional capacity, can still look forward to growth coming from deepening human and physical capital, as well as from catch-up through adoption of frontier-economy methods. Eventually, however, all economies would converge to slow growth. Work on demographics was similarly pessimistic, especially as applied to aging advanced economies."