Americans like to think they live in an era of rapid and unprecedented change, but this kind of comparison -- pitting the momentous changes of the mid-20th century against the seemingly more modest progress of our present era -- raises a critical question about the nation's future prosperity.
Of course, Gentle Ben gives sort of backhanded support to Gordon's thesis
Ben S. Bernanke, the former chairman of the Federal Reserve who is now at the Brookings Institution, points out that long-term interest rates have been declining for a very long time. This is in response partly to the accumulation of savings in China and other developing economies, which have been buying Treasury bonds hand over fist. But it also suggests that investors, whether they realize it or not, may agree with Professor Gordon's proposition.
"People who invest money in the markets are saying the rate of return on capital investments is lower than it was 15 or 30 years ago," Mr. Bernanke said. "Gordon's forecast is not without some market reality."
My take on the surge in progress through the mid-20th century continues to rest on two points:
1) our collective scientific and engineering knowledge of the real world became nearly complete; today's science is either sub-atomic or cosmological and is highly unlikely to give us new products
2) the 50s and (less so) 60s were led by public and private leaders still embued with a war time socialism, creating a large middle class, thus a large TAM for product
Someone observed that software was going to eat the world. May be so, but that works only so long as the exchange rate betwixt coding and farming/manufacturing remains asymmetric. That will only last so long. I guess many haven't noticed that 2nd and 3rd world coders have eviscerated much of the coding middle class.
There's no question that productivity has burgeoned over the last couple of decades, and as automation continues to displace labor in the production of physical widgets people want to buy, the reckoning will come: as the upper X% become the TAM for widgets, prices have to rise, since the capex to make those widgets can't be laid off the way humans can.
Two new data points from today's news.
- Total CPI dipped to -0.1% (Briefing.com consensus 0.0%) in December
- "There has been concern that consumers are less enthusiastic about the feature and performance gains with the latest iPhone 6s/6s+ models," UBS continued. "Indeed, more consumers appear to be opting for last year's iPhone 6 models that are priced $100 lower." here
The (1 - X%) aren't spending much, and when they do, "good enough" rules. Of course, The Giant Pool of Money continues to demand ever higher returns on government instruments. IOW, a transfer of wealth from taxpayers (only the little people pay taxes) to the X%.