Must-Read: : Some thoughts on the end of economic growth: “Technological progress in a particular industry often has diminishing returns…. Clothing is the best example…
A larger and larger fraction of the value people get from the clothing they buy… reflects social factors rather than economic ones…. A similar point can be made about food…. Most of the value of a restaurant meal comes from factors that can’t easily be improved by technology…. So families have been spending a shrinking share of their incomes on basic necessities…. During the 20th century, there was a steady stream of new inventions — cars, televisions, washing machines, refrigerators, telephones, electric lighting, personal computers, and so forth — that soaked up peoples’ growing disposable income. Over the last 30 years, this process has continued for information technology…. But outside of the IT sector, significant new inventions have been few and far between….
A century ago, rich people could spend their money on a wide variety of technological luxury goods — electric lighting, telephones, automobiles, indoor plumbing — that substantially improved their quality of life. Today, very wealthy people have private jets, but otherwise it’s hard to think of examples of major technologies that are available to them but not to Americans with more modest incomes. Instead, wealthy people spend money on… positional goods… and labor-saving services…. We’re running out of room for technological improvements in most areas of economic life, with three big exceptions: IT, medicine… transportation… energy….
We should expect a gradual slowdown in productivity growth rates…. This could be seen as a pessimistic take, but the optimistic way to think about it is that Americans in the top half of the income distribution have arrived: we’re getting pretty close to the highest level of material comfort and security that it’s possible for a human civilization to have. Our children and grandchildren probably won’t enjoy a much higher standard of living than we do, but that’s mostly because it’s hard to imagine what a much higher standard of living would look like.