From the Bretton Woods system to global stagnation [pdf]
paecon.net
paecon.net
When the money supply can be changed so dramatically, how do I know whether energy prices are stable because the comparative value of energy is stable or whether its because fiscal policy is being manipulated to keep the appearance of a stable price?
I'd like to reach for inflation numbers and inflation adjusted prices. That requires an extremely reliable inflation metric though, and when I go down the rabbit hole of how inflation is tracked and how that has changed over time I just don't trust it enough to lean on it for comparison.
"Hard money" based on a tangible asset has definite problems, but prices are much easier to track. Comparing energy prices to a gold backed currency seems much more reliable than comparing against a fist currency that has seems a huge growth in the money supply over the last 80ish years.
> The book describes the 100 years following 1870 as the "Special Century", a time of exceptional growth and prosperity, which it claims has been flatlining since 1970, marked by growing inequality and insecure working conditions. Gordon considers that the apparent increasing economic growth since 1970 is just a faint echo of a great wave of economic growth between 1920 and 1970. The first half of the book discusses the change in the American standard of living pre-WW2, with the second half dedicated to the remainder of the 'special century' and the years post-1970.[3][4]
* https://en.wikipedia.org/wiki/The_Rise_and_Fall_of_American_...
Mainstreaming of computers and the Internet gave a productivity bump in the 1990s, but that had petered out by ~2004.
Beside that aspect there haven't been major improvements in health, education, construction, transportation, etc since ~1960s. We got most of the gains in the early 1900s (water, sanitation, electronics, transportation (ICE, cars, planes), HVAC). Not many 'completely' new inventions since then, mostly refinements.
Just look at the typical kitchen: going from no cold storage, to ice boxes, to refrigerator/freezers occurred from ~1900 to 1960. The last major invention was the microwave, which has mostly had refinements since the 1970s.
Edit:
The book is not arguing that invention has stopped, but rather there have not been major developments that show up in economic productivity or quality of life (e.g., health) metrics. For the last few decades, increases have been 'asymptotic' that they're basically 'crawling' up, as opposed to major rises in the decades pre-1970s.
In general the book is a really interesting read. Worth checking out, if just for the history of 'progress' and how human life has changed post-1870 , even if you don't fully buy into their conclusions.
By the late 1920s >80% of US households had at least one automobile, and even if they had stopped improving, the productivity change of going from (steam/oil-powered) train and animal power (the primary options pre-1910) had made a transportation step change in the US by the 1930s:
* https://www.goodreads.com/book/show/2924825-fighting-traffic
By the 1960s >60% of households had two cars.
So yes, there have been incremental improvements, but the transformation change in society was done decades ago.
What the actual fuck?
Also in what way are "refinements" not technological innovation? e.g. modern cars are massively safer, more reliable and comfortable.
The problem with that is there will be proto-inventions all around us that will later be improved and made economical, but we can't see them yet. So this approach is inherently biased, treating past and current innovation differently.
Except that the book isn't taking about "proto-inventions" but items that could be purchased and used by the general public, from transportation (planes, trains, automobiles), food-related (refrigeration, microwaves, even induction cooking), radios, television, medicine (penicillin/anti-biotics).
All the major inventions (except the Internet) that we would association with 'modern civilization' were invented pre-1980.
Today, any average person can do video calls across the world.
The "invention > refinement" idea would call these the same thing.
Yes, the book makes the point that computers and the Internet was one of the inventions that were and an improvement post-1970s.
But the productivity bump of those seem to have peaked around 2004 (the book has numbers up to 2014, as it was published in 2016). Apple's iSight was released in 2003:
* https://en.wikipedia.org/wiki/ISight
The first webcam was in 1993:
You know those pregnancy tests one can buy in the drug store? Based on MABs. Ditto those COVID tests. The Nobel-prize winning work that first created MABs occurred in the 1970s, but no product was available to consumers then.
MABs are ubiquitous in medicine now.
True to a certain extent:
> Research on rechargeable Li-ion batteries dates to the 1960s; one of the earliest examples is a CuF2/Li battery developed by NASA in 1965. The breakthrough that produced the earliest form of the modern Li-ion battery was made by British chemist M. Stanley Whittingham in 1974, who first used titanium disulfide (TiS2) as a cathode material, which has a layered structure that can take in lithium ions without significant changes to its crystal structure.
* https://en.wikipedia.org/wiki/Lithium-ion_battery#History
* https://en.wikipedia.org/wiki/History_of_the_lithium-ion_bat...
But even if we grant that Li-ion batteries were a post-1970s innovation/invention—as opposed to a refinement of something that came before—it would still be one of the few that occurred, as the referenced book argues.
Not wrong, and I wouldn't want to 'regress', but compared that to going from using gas lighting and candles to the incandescent light, the introduction of LED lighting isn't as much of a step change.
Also remember that there was a noticeable improvement in efficiency with fluorescent lamps pre-1970s:
Fax was invented in the 1800s:
* https://en.wikipedia.org/wiki/Fax
The 1968 Steve McQueen movie Bullitt used a fax machine to send a photograph of suspect. It's a pre-1970s invention, as is the modem: the Bell 101 was released in 1958.
Edit: the authors of the book do say that the mainstreaming of computers and the Internet is one of the post-1970s innovations.
> Also in what way are "refinements" not technological innovation? e.g. modern cars are massively safer, more reliable and comfortable.
But not a new invention. The Model T started production in 1908:
* https://en.wikipedia.org/wiki/Ford_Model_T
By the late 1920s, more that 80% of US households had at least one car; by the 1960s it was something like 160 cars per 100 households (i.e., most had at least two cars). It was by the 1930s that society had already been transformed by the automobile, regardless of how "safer, more reliable and comfortable" (or not) they were:
* https://www.goodreads.com/en/book/show/2924825
For safety, the four biggest factors were seat belts, airbags, ABS and crumple zones, all of which were invented in the 1970s or before:
* https://en.wikipedia.org/wiki/Anti-lock_braking_system#Histo...
* https://en.wikipedia.org/wiki/Airbag#History
* https://en.wikipedia.org/wiki/Seat_belt#History
* https://en.wikipedia.org/wiki/Crumple_zone
Comfort: AC was invented by Willis Carrier in the early 1900s, and put into air cars by the 1950s:
* https://en.wikipedia.org/wiki/Automotive_air_conditioning
For reliability/efficiency, fuel injection was in cars by the 1950s:
We can say we just invented quantum computers and AGI if the fax was supposedly invented in 1800.
In hundred years people are gonna argue with their AI that yeah, all that singularity is nice but it was actually invented 100 years ago, so stagnation all around.
A good portion of the things mentioned in the book (photography, radio (vacuum tube), telephone, television, cars, refrigerators (and AC generally), vaccines, washing machines, trains, trams, subways, automobiles, airplanes (piston and jet/turbine), rocketry and satellites, etc) were invented and available in the fifty years between 1870 and 1920, and completed mainstreaming/saturation in the fifty years between 1920 and 1970.
There were some things that were invented in the 1920-70 time period: penicillin, CT scan, MRI scans, notable car refinements (fuel injection, crumple zones, seat belts, ABS, airbags), computers, transistors, modems, microwaves, fax/photocopiers.
Besides the Internet and maybe smartphones, what new classes of device were created post-1970s that had a major technological, sociological, or medical effect on society? @cperciva mentioned Li-ion batteries in a comment as well.
Neodymium magnets and incredible power density motors they enable. Lithium ion batteries with carbonaceous anode.
As a result drones and other things.
Blue led, OLED. Insane pixel density screen manufacturing Technics.
GPUs
I'm not sure how you can get such blind spot that you don't see immense scientific progress that was made since the 1980s
Literally a better part of a day of average Westerner is spent by looking at things that weren't invented before 1980.
It’s like saying that modern healthcare was invented in the 1800s and therefore there was absolutely no meaningful progress since then. How does that sound?
> created post-1970s
Digital cameras?
Personal computers? Note that by your bizarre standards fridges were invented in the 1830s and microwave ovens in the 1930s so innovation stopped long before the 70s or 60s..
BTW would you also agree that computers were invented in the 1830s as well?
MRI was invented in the 70s but practical devices weren’t created till years later (due to advances in other fields)
Technological advancement in semi-conductors has enabled human-like AI models.
We'll see if AI helps in productivity (e.g., per capita GDP): the book shows data that says that computers and the Internet had effects, but they were done by 2004 (book was published in 2016, and had numbers until 2014).
Offices didn't have them until the late 60s or 70s which is what matters.
It's like saying that people could make video calls back in the 30s...
> the four biggest factors
Yet there were almost 2x more fatalities per same distance driven back in 1980 and almost 4x in 1970
Yes, which goes to the point of the book: the major innovation and mainstreaming of technology occurred "until the late 60s or 70s". You're making the same point as the book is.
Also: photocopiers, https://en.wikipedia.org/wiki/Xerography
Edit: the authors of the book do say that the mainstreaming of computers and the Internet is one of the post-1970s innovations.
The only reason I mentioned fax is because that’s a thing that only became widespread after all innovation had supposedly stopped. BUT it already has been obsolete for decades and replaced by more advanced technologies.
> the authors of the book do say
That’s like saying that there wasn’t much innovation in the late 1800s besides electricity.. Yes if you exclude the area there has been the most progress in your point might have some very superficial merit
Computers and internet transformed plenty of those devices that were apparently already perfected by the 70s.
Except devices like TVs have almost nothing in common with their equivalent from back then besides the name and the fact that they show pictures. So television and CRTs weren’t real inventions either? They are basically the same thing as film projectors and those were a thing back in the 1890s. Really if we think about it almost nothing worth mentioning was invented after 1899..
And where can the general public get or make use of them?
The book is not arguing that invention / improvement has stopped, but that what we've mostly seen is refinements in what was invented pre-1980.
But perhaps you're aware of the mother of all demos. That was in 1968, and we've been effectively just figuring out how to economically deploy the ideas from that demo, and figure out how to actually use these innovations to affect the rest of our lives for the last 50 years.
Another thing to consider is just how systemic and total the innovations in the first half of the 20th century were. We discovered blood types, antibiotics, deployed widespread industrial refrigeration, made air conditioning viable, got widespread automobile adoption, the birth of heavier than air flight, birth of commercial aviation, invention of the jet engine. We harnessed nuclear power for the first time. The first medical x-ray just barely misses the time cut.
I don't know if it's fair to characterize the last 50 years as "stagnation", since maybe 1900 to 1950 is an unfair comparison. But it is fair to say that the rate of change as obviously changed.
* https://www.youtube.com/watch?v=yJDv-zdhzMY&t=1m43s
The book referenced argues there have been no major innovations that have changed society and the economy in large ways since that time period, or at least nothing that shows up in any economic metric.
Transportation: in the US, the automobile hit >80 cars per 100 households by the late 1920s. Airplane invented in early 1900s, the 747 was designed and launch in the 1960s. Rocketry and satellites were developed in the 1960s, and culminated with landing on the moon in 1969. Trains developed in early 1800s, mainstreamed by late 1800s into early 1900s; electric trains in operation in late 1800s. Trams and subways/metros in operation in 1800s.
The vacuum tube in early 1900s, computers in 1950s, transistor in 1960, and since then it's been miniaturization but nothing 'new'. ARPAnet was in 1970s, with the mainstream Internet in the 1990s hitting saturation in 2004, and per the book that's when productivity numbers stopped increasing.
Or health metric: there was a step change when treated water and indoor plumbing (including sewage treatment) came in. We got penicillin in ~1945, and widespread vaccines in the 1950-60s. CT scans were invented in the 1960s, and MRIs in the 1970s.
Honestly, I was kind of skeptical of the claims that the book was making at first, but the arguments and statistics that it puts forward are decently convincing.
Really interesting read. Worth checking out, if just for the history of 'progress', even if you don't fully buy into their conclusions.
Achieving efficient combustion turbines (comparable to steam turbines) wasn't really possible until ~1980.
But that's more of the same commodity that we've been using since the days of Standard Oil. Has fracking increased economic productivity or measurable gains in quality of life?
> Achieving efficient combustion turbines (comparable to steam turbines) wasn't really possible until ~1980.
And ~1980 is very close to the cut-off (1970s) that the book argues things haven't change much. The book does have chapters on transportation, including airplanes.
We can see other examples of changes that are so large that quantitative becomes qualitative. The cost of passenger air travel dropped by an order of magnitude (adjusted for inflation) over the time period. SpaceX's Falcon 9 has done the same, or even more so, to the space launch market. US steel production has overwhelmingly moved to recycled production in EAFs.
(BTW, the fuel tanks of Falcon 9 are assembled using a technology called Friction Stir Welding. This technology, which was a game changer for welding aluminum alloys, was invented in the 1990s.)
Yet another example, and another one illustrating the difference between invention and adoption, is standardized container shipping. There was a very long incubation period where shipping containers were experimented with, but standardization, and then widespread adoption, took decades. The real burst was in the period since 1980. From 1980 to 2021 the mass of cargo shipping internationally on standardized container ships increased by more than two orders of magnitude. Globalization of production is about as significant a change to the society and the economy as you can get.
Apple makes $400 billion a year largely selling a product that was at best a sci-fi imagination item in the 1970s.
> Or health metric: there was a step change when treated water and indoor plumbing (including sewage treatment) came in. We got penicillin in ~1945, and widespread vaccines in the 1950-60s. CT scans were invented in the 1960s, and MRIs in the 1970s.
The book specifically mentions the mainstreaming of computers and the Internet as one of the (few, according to the author) innovations post-1970s.
> https://en.wikipedia.org/wiki/MRNA_vaccine
Possible contender. The book was published in 2016 (and has statistics up to 2014), so perhaps if a second edition is ever published they'll mention this.
But the mortality rate from chlorinated indoor plumbing and sewage treatment, is a hard metric to beat when it comes to improving human mortality. Along with penicillin in 1945 and widespread vaccines in the 1950-60s (especially against smallpox, measles, diphtheria, poio), I'm not sure if MRNA would be as much of a step change.
The author of the book in a 2016 interview:
> Q. As you note in your book, many of the inventions in the special century took as long as five decades to reach their full potential. Since the iPhone was introduced in 2007, isn't it too early to say that smartphones aren't transformative?
> A. I think the potential of smartphones has played out very rapidly. We're still at the dawn of payment systems based on the smartphone. We may 10 years from now look back and marvel at the fact that people had to pull credit cards out of their wallet.
> But remember, the entire decade of the rollout of the smartphone and all the applications have not caused productivity growth to budge. There are many people who think we're missing the benefits of the smartphone in our measures of productivity and GDP. But we've always missed the benefits of new inventions.
Economic growth has always been understated. But the degree of understatement was more important in the past, because the innovations were more transformative to every aspect of human life.
* https://phys.org/news/2016-02-smartphones-lagging.html
From a 2021 interview:
> […] In the last 15 years, we’ve had the invention of smartphones and social networks, and what they’ve done is bring enormous amounts of consumer surplus to everyday people of the world. This is not really counted in productivity, it hasn’t changed the way businesses conduct their day-to-day affairs all that much, but what they have done is change the lives of citizens in a way that is not counted in GDP or productivity. It’s possible the amount of consumer welfare we’re getting relative to GDP may be growing at an unprecedented rate.
* https://conversableeconomist.com/2021/02/24/robert-j-gordon-...
It's very nice to have maps and the world's knowledge in your pocket, but how much has it cause the economy to growth? Has it reduced rates of poverty? If it has, it's not showing up in the numbers, so how can we tell?
(The technology may be having more of an impact in other countries, especially those starting at a lower 'base', but there isn't a measurable economic impact in the US.)
The 1970s do coincide with the development of microprocessors, even though most of the constituent parts were already known.
Not wrong, but the point is still that growth has slowed, so progress since the 1970s (or at least 2004, when the economic effect of the Internet and computers seems to have peaked) may be asymptotic now.
As an economist, this is has a lot of problems.
- the main claim is that the growth rate post bretton woods is lower than during the bretton woods period. It fails to uphold the claim on two counts: 1. It does not provide evidence that the decline is statistically significant, instead it just shows a graph with overlaid lines. I double checked and the data is real, but it is missing the first years of data on world GDP under bretton woods. 2. It dismisses or ignores reasonable alternate explanations such as: - The 60s were the tail end of the recovery from WWII - Changes in technology - Changes in demand (both quantity and composition) - it raises a straw-man version of ricardian and when it tries to discredit it, it fails to discuss the main result from the ricardian model: gains from trade due to comparative advantage. The attempt to discredit it discusses trade deficits, but fails to account for financial markets in any meaningful way (for those who don't know, a trade deficit is offset by foreign investment) - It does not account for changes in purchasing power parity. - The alternative model it suggests is one where firms/countries (it never specifies) seek to export because the domestic market is weak, not because foreign demand is high, and decides to force lower wages across the board (including in foreign countries). My understanding of what the author is proposing is that it ignores supply and demand in an international context and the standard results of increasing wages in the producing and exporting country's export industry. - Some of the other claims appear to be mercantalist in nature, briefly arguing that the purpose of trade is not to get stuff, but money. Change "money" to gold or silver, and you'd have a pretty basic mercantalist claim.
I would recommend that the author read a textbook on international trade and finance. Not only would this show them the basic level of rigour in describing their model they need at a to match, but would allow them to counter the standard theories of trade etc that are actually used. They would also be able to discuss the impact of trade on labor within different industries in a way that doesn't just handwave results they like.