Should-Read: Kenneth Rogoff: Economists vs. Scientists on Long-Term Growth

Should-Read: A few comments: (1) Ken, Trump or Trump’s advisors have been reading John Cochrane—that is where “6% growth” is getting into the Republican intellectual swamp. (2) True “AI”—the science fiction kind—is still as far off as ever: “AI” today is (a) hype to remove investors from their money, (b) pattern recognition, and (c) voice interfaces for database search where it is no longer jarring for humans to deal with them as if they understood what was being asked of them, and that works only as long as they remain in their very restricted domain. (b) and (c) are not and will not be for the next decade at least things that show themselves in the aggregate productivity statistics. Those of us who know the economic history well know that the technology leads the leading firms that apply it by a generation, and the leading firms lead the macro impact by a generation. And technology “demonstrations” are not technology: Hiero of Alexandria’s second-century aeropile was not a useful steam engine: Kenneth Rogoff: Economists vs. Scientists on Long-Term Growth: “Most economic forecasters have largely shrugged off recent advances in artificial intelligence…

…If supply-side pessimism is appropriate, the recent massive tax and spending packages in the United States will likely do much more to raise inflation than to boost investment. There are plenty of reasons to object to recent US fiscal policy…. We live in an era of rising inequality and falling income shares for labor relative to capital. Governments need to do more, not less, to redistribute income and wealth.

It is hard to know what US President Donald Trump is thinking when he boasts that his policies will deliver up to 6% growth….

Economists’ pessimism… is underpinned by the belief that advanced economies cannot hope to repeat the dynamism that the US enjoyed from 1995-2005 (and other advanced economies a bit later), much less the salad days of the 1950s and 1960s. But the doubters ought to consider the fact that many scientists, across many disciplines, see things differently. Young researchers, in particular, believe that advances in basic knowledge are coming as fast as ever, even if practical applications are taking a long time to develop…. Perhaps we should be far more worried about the ethical and social implications of material growth that is faster than humans can spiritually absorb. The angst over AI mostly focuses on inequality and the future of work. But as science fiction writers have long warned us, the potential threats arising from the birth of silicon-based “life” forms are truly frightening….

The influx of women into the labor force played a major role in boosting growth in the latter part of the twentieth century. But now that has largely played out…. Similarly, global investment has collapsed since the 2008 financial crisis…. And measured productivity growth has declined everywhere….

Still, the best bet is that AI and other new technologies will eventually come to have a much larger impact on growth than they have up to now…. With the after-effects of the financial crisis fading, and AI perhaps starting to gain traction, trend US output growth can easily stay strong for the next several years…. The likely corresponding rise in real global interest rates will be tricky for central bankers to navigate. In the best case, they will be able to “ride the wave,” as Alan Greenspan famously did in the 1990s, though more inflation is likely this time. The bottom line is that neither policymakers nor markets should be betting on the slow growth of the past decade carrying over…


Brad DeLong


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