🚀 Faster, Please! Week in Review+ #21
The productivity boom that wasn't; the climate speech Biden should give; what might go ... right?; 5QQ chats on government R&D and economic growth; and the best of the podcast
My free and paid Faster, Please! subscribers: Welcome to Week in Review+. No paywall! Thank you all for your support! For my free subscribers, please become a paying subscriber today. (Expense a corporate subscription perhaps?)
So much good stuff last week. Too much? Impossible! I covered a wide range of subjects in the essays, Q&As, and micro reads on Monday and Friday, as well as the free, no-paywall issue on Wednesday. There’s also the free Faster, Please! podcast (and transcript) on Thursday.
Melior Mundus
In This Issue
Essay Highlights
— The pandemic-era productivity boom that wasn't
— Here's the speech Joe Biden should give on the climate 'emergency'
Best of 5QQ
— Faster, Please! Flashback: A conversation with economist Benjamin Jones on government R&D investment
— Economist Bryan Caplan on AI, economic growth, and the rise of China
Essay Highlights
☹ The pandemic-era productivity boom that wasn't
Over the four quarters of 2020, US labor productivity growth surged to 4.1 percent. Good news? “This apparent productivity growth revival has been interpreted as caused by automation, artificial intelligence, and a massive investment by households in the equipment and software needed to conduct work from home,” observe economists Robert J. Gordon (Northwestern University) and Hassan Sayed (Princeton University) in their new NBER working paper, “A New Interpretation of Productivity Growth Dynamics in the Pre-Pandemic and Pandemic Era U.S. Economy, 1950-2022.” Of course, the co-authorship of Gordon is sort of a spoiler here. He’s a well-known skeptic — a highly respected one, to be sure — of the notion that advances in AI and robots are about to drive a big growth and productivity revival. And true to form, he and Sayed throw a bucket over cold water over the “boom.” From the paper: “Positive pandemic-era productivity growth can be entirely explained by a surge in the performance of work-from-home service industries.”
☀ Here's the speech Joe Biden should give on the climate 'emergency'
“What we have is a massive clean-energy problem, one that predates the recent energy shock caused by Russia’s invasion of Ukraine. And this problem has two aspects. First, as the Our World in Data organization puts it, ‘The world lacks safe, low-carbon, and cheap large-scale energy alternatives to fossil fuels. Second, hundreds of millions of people lack access to sufficient energy entirely, with terrible consequences to themselves and the environment.’ If a richer and more technologically capable world were to generate abundant, carbon-free energy, we could begin to tell ourselves a different story. This would be a story not just about a cooler climate, but about a more prosperous humanity with more opportunity-filled lives.”
What might go wrong? I think all of us can devise a pretty long and scary list these days. Inflation goes even higher. A super-infectious and deadly COVID-19 variant emerges. Russia goes nuclear in Ukraine. The next US president is more interested in political vengeance than sound governance. All those climate models turn out to be overly optimistic. Whatever our disaster of choice, most Americans are pretty gloomy right now. It’s not hard to find polls where 70 percent of more of us think the county is headed in the wrong direction. The more interesting question, then, is ‘What might go right?’ How about a nuclear energy revival? Despite the 2011 Fukushima nuclear disaster, Japan is restarting its nuclear power system and hopes to have nine reactors operating in time to avert any power crunch over the winter. And it’s not just Japan. French President Emmanuel Macron recently announced a “rebirth of France’s nuclear industry” and pledged to construct 14 new generation reactors. The UK government just gave the go-ahead to build a new nuclear power station. A recent Morgan Stanley analysis concludes that “just as COVID led to seismic changes in how we work, climate concerns and geopolitical events will revive support for nuclear power: a safe, reliable and carbon-free source of energy.”
Best of 5QQ
▶ Benjamin F. Jones is an economist and professor at Northwestern University’s Kellogg School of Management. Last summer, he authored a fascinating paper, “Science and Innovation: The Under-Fueled Engine of Prosperity,” one that I’ve referred to several times in this newsletter, including the previous issue of Faster, Please. As such, I thought I would highlight a podcast chat I had with him last December.
Walk me through the process of how we figure out how much we should spend. I would guess that might begin by just looking at the returns to public spending on R&D.
Let’s just start with a high-level total number — that 3 percent. Evidence suggests that for every dollar we put into the R&D machine, across the waterfront of R&D policies and investments, on average that’s returning something like $5 or more back in social value. In other words, put $1 in, you get $5 back. That’s an amazing return. It’s an incredible return.
You could imagine doubling it, 3 percent to 6 percent, and that could really elevate the growth rate of the economy. In some ways, the harder question actually is, what exactly would you invest in there? When you study these individual R&D policies, you tend to find over and over again that they have very high returns themselves. A simple policy would be to just expand our investment across the range of inputs into the R&D process, which are very many.
▶ Bryan Caplan is a Professor of Economics at George Mason University and the best-selling author of six books, including The Myth of the Rational Voter and The Case Against Education. His latest are Labor Econ Versus the World and How Evil Are Politicians?, the first two volumes of an eight-volume collection of his best essays.
There's been a lot of talk about the Great Stagnation over the past half century. How do you feel about technological progress and economic growth going forward?
I think that the phrase, the “Great Stagnation” was always misleading. If you would call, if Tyler Cowen had called his book The Slight Stagnation, I wouldn't have had any problem with it. But he had to call it The Great Stagnation. If you go and break up the period from around the founding of the Republic, or at least when we got economic growth data, until he wrote it, the period that he calls the “Great Stagnation” had the second-highest growth rate annually. It wasn't as good as 1945 to 1971, but it was second best and was higher than a bunch of previous periods. So that's where I say it does seem like he was exaggerating there. And then if you break it up more, you can see that the ‘90s were actually really good, ‘70s were bad.
As for what's been happening during COVID, I will then say that's way worse than a stagnation. That was actually a great retrogression. It's one that's hard to see in the official data, but if you properly adjust the data for what's called CPI bias, measuring the quality and variety of products, then I think that we still have a lower living standard than we had in 2019. Honestly, I think in the first year of COVID our living standards probably fell like 30 percent, because so many products simply became unavailable at any price. A lot of other products we took for granted suddenly were rationed, and you couldn't really get them at the initial price. We've had some really bad years because of COVID. The question is, will this just keep spiraling out of control and then we'll have terrible inflation and we'll have some problems with that and then that'll lead to another bad thing?
Best of the Pod
What if the Roman Empire had experienced an Industrial Revolution? That's the compelling hook of Helen Dale's two-part novel, Kingdom of the Wicked: Rules and Order. Drawing on economics and legal history, Helen's story follows the arrest and trial of charismatic holy man Yeshua Ben Yusuf in the first century — but one with television, flying machines, cars, and genetic modification.
In this episode of Faster, Please! — The Podcast, I dive into the fascinating world-building of Kingdom of the Wicked with Helen.
James Pethokoukis: In all good works of speculative fiction of the alt-history variant, there's an interesting jumping-off point. I would imagine you had a real “Eureka!” moment when you figured out what your jumping-off point would be to make this all plausible. Tell me about that.
Helen Dale: Well, yes. I did. Once I realized that points of departure hugely mattered, I then went and read people like Philip K. Dick's Man in the High Castle. The point of departure for him is the assassination of Roosevelt. I went and read SS-GB [by] Len Deighton, a great British spycraft writer but also a writer of speculative fiction. And in that case, Britain loses the Battle of Britain and Operation Sea Lion, the putative land invasion of the UK, is successful. And I really started to think about this and I'm going, "Okay, how are you going to do this point of departure? And how are you going to deal with certain economic issues?"
I'm not an economist, but I used to practice in corporate finance so I've got the sort of numerical appreciation for economics. I can read an economics paper that's very math heavy because that's my skill based on working in corporate finance. And I knew, from corporate finance and from corporate law, that there are certain things that you just can't do, you can't achieve in terms of economic progress, unless you abolish slavery, basically. Very, very basic stuff like human labor power never loses its comparative advantage if you have just a market flooded with slaves. So you can have lots of good science technology, and an excellent legal system like the Romans did. And they reached that point economists talk about of takeoff, and it just never happens. Just, they miss. It doesn't quite happen.
And in a number of civilizations, this has happened. It's happened with the Song dynasty in China. Steve Davies has written a lot about the Song dynasty, and they went through the same thing. They just get to that takeoff point and then just … fizzled out. And in China, it was to do with serfdom, basically. These are things that are very destructive to economic progress. So you have to come up with a society that decides that slavery is really shitty. And the only way to do that is for them to get hooked on the idea of using a substitute for human labor power. And that means I have to push technological innovation back to the middle republic.
So what I've done for my point of departure is at the Siege of Syracuse [in 213-212 B.C.]. I have Archimedes surviving instead of being killed. He was actually doing mathematical doodles outside his classroom, according to the various records of Roman writers, and he was killed by some rampaging Roman soldier. And basically Marcellus, the general, had been told to capture Archimedes and all his students and all their kids. So you can see Operation Paperclip in the Roman mind. You can see the thinking: “Oh no, we want this fellow to be our DARPA guy.”
Thanks for reading this far! Just a quick note for first-time visitors and free subscribers. In my twice-weekly issues for paid subscribers, I typically also include a short, sharp Q&A with an interesting thinker, in addition to a long-read essay. Here are some recent examples of those interviewees:
Economist Tyler Cowen on innovation, China, talent, and Elon Musk
Existential risk expert Toby Ord on humanity’s precarious future
Silicon Valley historian Margaret O’Mara on the rise of Silicon Valley
Innovation expert Matt Ridley on rational optimism and how innovation works
More From Less author Andrew McAfee on economic growth and the environment
A Culture of Growth author and economic historian Joel Mokyr on the origins of economic growth
Physicist and The Star Builders author Arthur Turrell on the state of nuclear fusion
Economist Stan Veuger on the social and political impact of the China trade shock
AI expert Avi Goldfarb on machine learning as a general purpose technology
Researcher Alec Stapp on accelerating progress through public policy