How To Get Out of a ‘Great Stagnation’
How To Get Out of a ‘Great Stagnation’
Why do we think innovation is slowing down, and what can we do about it?
Are we in a “Great Stagnation”? Some observers of our technology-driven economy say so. They point to the apparent slowdown in the growth rate of “total factor productivity,” a measure of how much can be produced with a given investment of labor and capital. In an age of innovation, we should expect total factor productivity to be growing rapidly as new technology makes us more efficient. But for the past few decades, that hasn’t really been happening.
Others point to the absence of certain kinds of exciting innovations that we had expected. As Peter Thiel famously complained in 2011, “We wanted flying cars, instead we got 140 characters.” (Don’t worry, though, we’ve had a lot of progress since then: Twitter has increased its post limit to 280 characters.) The idea is that Silicon Valley types have been devoting too much of their energy into manipulating bits and getting us to look at apps, and all that brainpower was diverted from building new physical inventions in the real world.
To get an idea of the confusion that reigns on this issue, reflect that the two most common pessimistic scenarios you encounter these days are that we are technologically stagnating—and that hyper-automation is going to take away all our jobs. These are diametrically opposite concerns.
So how much is there to this notion of a Great Stagnation? To the extent it is happening, what are its causes, and how can we fix it?
Dude, Where’s My Flying Car?
Stagnation in technological innovation is notoriously hard to measure. What counts as an important scientific breakthrough versus a mundane extension of existing knowledge? How do you count the number of innovations or rank their importance?
If we focus on the lack of certain specific innovations, we may just find that some of our previous expectations were unrealistic. To have flying cars that float off the ground the way Hollywood imagined them in the movies—we’d have them by 2015, said “Back to the Future,” by 2019 according to “Blade Runner”—requires energy and propulsion technologies that don’t exist yet, even in theory. So if we don’t have flying cars yet, maybe it’s because producing them is a lot harder than the science-fiction writers expected.
Moreover, some of the impression of stagnation may just be a complaint that innovation has been happening in areas that are regarded as less important by the commentators but more important by actual consumers. While launching reusable rockets into orbit may seem like the kind of atoms-not-bits innovation the critics have been asking for, what is the primary commercial application of SpaceX launch capabilities? Broadband satellite internet. And as the past two years have taught us, maybe it’s easier and better to have ubiquitous videoconference technology that lets everyone work at home than to find a faster way to get to the office.
Yet it’s also clear that a lot of top technological talent has been lured into fads such as the non-fungible token (NFT) and cryptocurrency gold rushes, where a lot of that effort will disappear without creating anything useful.
The most intriguing suggestion I’ve seen is a study by economist Thomas Philippon, summarized by Noah Smith here, which argues that growth actually tends to be linear rather exponential. That is, total factor productivity naturally tends to remain stable. What looks like a continuous exponential increase over long periods of time is actually a few upward shocks in growth rates caused by the adoption of a new “general-purpose technology” that make everything more efficient, but with long periods of linear growth in between. In short, the slower productivity growth we’ve seen recently is actually normal, not a slowdown relative to some imagined exponential increase.
The key to this theory is that Philippon places the big technological inflection points much farther apart than you might expect. The last one, he argues, was electrification in the 1930s. This model implies that our current situation is not some radical departure from an era of faster innovation in, say, the 1960s.
The Great Restriction
All of this puts the Great Stagnation into some perspective and argues against a pessimistic interpretation. But as Smith observes, the answer is the same regardless: “Discover more useful technologies, or living standards won’t rise as much.”
We can argue the technology and the economics, but there is a reason why claims of a Great Stagnation ring true, why this does not feel like an era of unbridled of innovation. It is not just the triviality of social media and its 140 characters. It is also the many obstacles we see being erected against new technology.
Take supersonic flight, which is not even really a new technology; the Concorde took its first flight in 1969. But the Concorde was eventually retired due to concerns about its safety and expense, and what took its place? Nothing. As a culture, we simply gave up on supersonic flight. A handful of startups are now attempting to build new supersonic passenger jets, and American Airlines just agreed to buy Boom Supersonic’s Overture jet after they’re done building and testing it. But civilian supersonic flights over the continental U.S. were banned decades ago, and when I talked to Boom’s Blake Scholl five years ago, he admitted that their whole strategy depends on developing the technology first for overseas routes, then waiting for it to become so attractive that the U.S. politicians lift the controls: “When you can get from San Francisco to Tokyo faster than San Francisco to D.C., there are going to be a whole lot of influential people who are motivated to get those rules fixed.”
Probably the chief example of a restrictively regulated industry is nuclear power, which has been widely rejected despite the supposed emergency need for power sources that don’t emit carbon dioxide. Germany is still stubbornly vowing to shut down its last nuclear plants even as it finds itself totally dependent on Russian natural gas in the middle of a war. Japan just reluctantly agreed to restart a few nuclear plants, pulling back from its overreaction after the Fukushima tsunami. And California Governor Gavin Newsom has been fighting his own party to keep the state’s last nuclear power plant running.
There is no question that these excessive restrictions have suppressed not only the generation of power from existing nuclear plants, but the development and construction of improved next-generation nuclear designs. So in many cases, our growth and technological advancement is being actively discouraged.
The Curse of Frankenstein
The deeper problem is not political but cultural: a profound techno-pessimism that makes innovation seem less desirable.
The conservative impulse behind this pessimism cuts across the usual partisan or ideological lines. On the right, techno-pessimism tends to be driven by an overtly nostalgic longing for a supposedly simpler, idealized past—a TV Land economics that wants the 21st-century economy to be a reenactment of “Leave It to Beaver.” On the left, it is driven by either environmental doomsaying or the theory of wokeness relativity, in which critiquing someone else’s scientific or technological achievement is considered far more virtuous, not to mention safer, than creating your own.
And every time you mention artificial intelligence or robotics, somebody is going to mention the “Terminator” movies. If anything is going to be the new general-purpose technology that leads to another leap forward in productivity, AI is it. But the robot apocalypse seems to be our sole mental model for what that future would look like.
To be sure, techno-pessimism is nothing new. I recently had a conversation with Louis Anslow of Pessimists Archive, which documents past hysterias over such nefarious new technologies as the bicycle and the telephone. Ever since Mary Shelley wrote “Frankenstein,” we’ve been convinced that science and technology are going to produce monsters. But perhaps this conviction is more powerful now than before. Anslow calls it the “Black Mirror” fallacy, after a British television show in which every episode is a projection of how some new technology could go horribly wrong. This captures our tendency to see only the negative possibilities in new technology, when a look at history, and particularly the history of the past 200 years, shows us that the long-term benefits of new technology massively outweigh the costs. If we are not already in a Great Stagnation, we are certainly asking for one.
One of the keys to innovation and growth is simply wanting it—wanting it enough to devote resources and effort to it, and enough to keep other considerations from becoming obstacles and barriers. It means believing that growth and innovation are not only good but important. It means fostering a culture of achievement in which making things and coming up with new ideas is regarded as a grand adventure and a source of personal meaning in life. If we see ourselves as being in an era of dreary stagnation, perhaps it is that desire and belief that we have lost.
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