America's possible post-pandemic boom; the optimistic chart pessimists love to hate; culture war vs. housing reform; and more ...
America's possible post-pandemic boom; the optimistic chart pessimists love to hate; culture war vs. housing reform; and more ...
Quote of the Issue: “There is nothing stable in the world; uproar's your only music.” -Joseph Schumpeter
In this Issue:
📈 Post-pandemic America: gloomy or boomy? (342 words)
💢 Why some people hate the the greatest chart of all-time (319 words)
🏘 How anti-progress culture war might undercut pro-growth housing reform (389 words)
📺 The thrilling pro-progress message of the 2012 London Olympic Games (360 words)
📈 Post-pandemic America: gloomy or boomy?
Economists from Wall Street to Washington are predicting crazy-fast economic growth over the next year or two. Credit the reopening of the economy and a tsunami of stimulative government spending. But then what? The gloomy scenario: educational disruption + loss of operational know-how at failed businesses + an increase in risk aversion + heavy public debt + an urban exodus = stagnation.
The boomy scenario: The economic shock of the pandemic forces companies to become more efficient, including smarter and more widespread use of technology. Vaccine success encourages greater government investment in science and technology. Productivity growth accelerates to levels not seen since the mid-1990s through mid-2000s technology surge.
Now as it turns out, the pandemic gave productivity growth a big boost last year — at least as measured by output per hour. It was up 2.5 percent last year, the best performance since 2010. Why? As Moody Analytics economist Mark Zandi explains: “The pandemic crushed lower value-added industries such as brick-and-mortar retail and travel and lifted higher value-added online and technology businesses.” Of course, there are probably also instances of companies using the cover of the pandemic to finally adopting labor-saving tech.
Zandi thinks there’s more good news on the way that could give productivity growth a sustained boost:
But last year’s increase in productivity seems also to reflect a more persistent revival in trend productivity growth. Trend productivity growth was stuck in the post financial crisis expansion at just over 1% per annum, almost a percentage point below the 2% growth experienced in the previous 60 years since World War II. Indeed, we expect trend productivity growth to re-accelerate post-pandemic given the accelerated move online, more judicious business travel, and work-from-anywhere. We are also counting on a more fulsome adoption of promising labor-saving technologies such as machine learning, cloud computing, lidar and drones that have long been percolating. The long-running drag on trend productivity from the aging of the population should soon be easing, and an anticipated large infrastructure program, up next on the Biden administration’s economic policy agenda, will also add to productivity.
As the above chart shows, Zandi is talking about a productivity acceleration, while welcome, would still fall far short of some previous upturns. I hope we will do better that. I’m confident we can do better than that. (It’s why I write Faster, Please! every week.) But it’s a start.
💢 Why some people hate the the greatest chart of all-time
For most of the time humanity has existed most of humanity has been terribly poor. But then humanity started getting richer, first quite slowly and then quite rapidly. This secular miracle is presented in what I have cheekily termed “the greatest chart of all time,” seen here:
While essentially true, this is a stylized and simplified depiction of the underlying economic reality. Another way of looking at this miracle by analyzing the number of deeply poor people today vs. two centuries ago when that great economic upturn began: A new OECD report looks at global poverty in two ways, both the World Bank's $1.90 a day standard and the alternate Basic Needs Poverty line from researcher Robert Allen. Turns out, they tell pretty much the same story.
According to these measures, in 1820 roughly three-quarters of the world population, about 756 million people, could not afford a tiny space to live, food that would not induce malnutrition, and some minimum heating capacity. By 2018, global extreme poverty dropped to 10%.
Rather than celebrate this vast improvement in human welfare, some recoil. Perhaps they worry concession means ignoring the work yet to be done. Or concession means accepting the importance of economic growth at the expense of the environment. Or perhaps concession also means conceding the benefits of market capitalism. Don’t like the c-word? Economist Deirdre McCloskey offers alternatives such as "technological and institutional betterment at a frenetic pace, tested by unforced exchange among all the parties involved" or "fantastically successful liberalism, in the old European sense, applied to trade and politics, as it was applied also to science and music and painting in literature" or “trade-tested progress." Or maybe just “innovism,” meaning an open society that allows and rewards change, as unpredictable as it might be.
So, whatever your preference. I would rather debate what to call what happened than waste timing debating whether it happened at all.
🏘 How anti-progress culture war might undercut pro-growth housing reform
America has a housing problem. Restrictive land-use regulations have limited housing construction for decades, including in some of the nation’s most productive job markets. These are also high-wage job markets. And rapidly rising housing prices both make these cities unaffordable to many and significantly eat into the wage advantage of moving to these places. As economist Daniel Shoag writes, “Poor places are no longer catching up to rich ones, and people are no longer moving from poor places to rich ones. The traditional ways in which American society has ameliorated large gaps between places have broken down.”
In addition to reduced opportunity for upward mobility, there’s the macro impact on U.S. economic growth. Economists Chang-Tai Hsieh and Enrico Moretti find that if the most productive US cities relaxed their housing restrictions to the level of the median US cities, the result would be faster economic growth and $3,000 to $5,000 a year in added income for the average worker. So some good news on the issue in the new Biden infrastructure proposal:
Eliminate exclusionary zoning and harmful land use policies. For decades, exclusionary zoning laws – like minimum lot sizes, mandatory parking requirements, and prohibitions on multifamily housing – have inflated housing and construction costs and locked families out of areas with more opportunities. President Biden is calling on Congress to enact an innovative, new competitive grant program that awards flexible and attractive funding to jurisdictions that take concrete steps to eliminate such needless barriers to producing affordable housing.
This should be an issue of bipartisan support, even if there are differences over the right approach — particularly since federal action must be indirect, employing carrots and sticks. The Biden plan, which includes some $5 billion in financial encouragement, might prove insufficient. A bigger worry than failure is that right-wing, culture war populists are trying to turn housing into a political wedge. Here is Fox News host Tucker Carlson earlier this month. Carlson: “[Biden] also wants to ‘eliminate exclusionary zoning’ and ‘needless barriers to producing affordable housing.’ So your neighborhoods may have to make way for ‘multi-family dwellings.’ You don’t want multi-family dwellings in your neighborhood? Doesn’t matter. It’s equity. Shut up, racist.”
Housing reform should be low-hanging fruit to boost growth, upward mobility, and living standards. This Foxification of the issue is a worrisome development.
📺 The thrilling pro-progress message of the 2012 London Olympic Games
“We may be a small country, but we're a great one, too,” says the British prime minister (portrayed by Hugh Grant) in the 2003 film Love Actually. “The country of Shakespeare, Churchill, the Beatles, Sean Connery, Harry Potter. David Beckham's right foot. David Beckham's left foot, come to that.”
All true. And it would’ve been no vain boast had the PM added, “It was Britain that made the modern world.” The achievements of the Industrial Enlightenment and Revolution were not forgotten by Oscar-winning director Danny Boyle when he put together the glorious opening of the 2012 Summer Olympics in London. The ceremonies begin with the “Green and Pleasant Land” segment — depicting idyllic rural life — before suddenly shifting to “Pandemonium” with its propulsive drums and now iconic visuals of seven coal-smoke belching chimney stacks rising from green fields. Then come the machinery of this revolution, including steam engines and looms, tended by grimy workers and overseen by top-hatted capitalists (led by actor Kenneth Branagh), all performing rhythmically as if machines themselves. William Blake’s dark Satanic mills on full display.
But the story doesn’t end there. The workers have been casting iron rings, the famous Olympic rings, which are eventually hoisted over the stadium where they rain down silver and gold sparks. And it is that image of the glowing rings, ignited as much by the spirit of the age as molten iron, that appeared on the front pages of newspapers around the world nearly a decade ago.
Here’s how Boyle thought about the segment: “We call it Pandemonium, which is Milton’s invented word for the capital of hell in Paradise Lost, and you know all the stories about Victorian Britain, but it also unleashed tremendous potential, and the growth of cities and the growth of a working base was extraordinary really, and it has changed all our lives. It has certainly allowed me to be here.” Indeed, at the end of the segment, a BBC television presenter said the scene was more like “paradise found.”
Those ceremonies are often considered the best in Olympic history. I would agree, but as much for the aspirational message as the evocative presentation.
Test Flight for Sunlight-Blocking Research Is Canceled - New York Times | I wrote about this test in my previous Faster, Please! issue. A disappointing and short-sighted move by the government owned Swedish Space Corporation, which was conducting the test for Harvard University’s Solar Geoengineering Research Program. A Swedish environmentalist is quoted: “The mobilization against this project in Sweden has been remarkable, uniting scientists, civil society and the Saami people, against the danger of a slippery slope toward normalization of a technology that is too dangerous to ever be deployed.” If climate change is an existential threat, then this technology is not too dangerous to be deployed — certainly not too dangerous to be researched as a potential “break the glass” option.
How Bill Gates’ company TerraPower is building next-generation nuclear power - CNBC | Gates efforts aren’t just framed as fighting climate change but also as creating a potential new export sector for the US. The supposed advantages of TerraPower’s advanced nuclear technology: safe “passive cooling system, energy storage capability, cheaper construction costs, less nuclear waste.
The Case Against the Case Against Space - The New Atlantis | Charles T. Rubin reviews the space-skeptical Dark Skies: Space Expansionism, Planetary Geopolitics, and the Ends of Humanity, a 2020 book by Johns Hopkins political scientist Daniel Deudney. Rubin: “Deudney exposes how … techno-utopianism is at the heart of his space expansionists, but in the end seems a little unclear himself on the extent to which the fragility of human life is not a problem to be solved but a condition of our humanity.”
Absolute Decoupling of Economic Growth and Emissions in 32 Countries - Breakthrough Institute | “In a new analysis, we find there are now 32 countries that have absolutely decoupled economic growth from CO2 since 2005. In these places both territorial emissions and consumption emissions (which include CO2 imported in goods) are falling.
Tech Group Says China Poised to Top U.S. Without Migrants - Bloomberg | This report suggests how useful the China geopolitical cases can be in making the pro-expansion case beyond economic growth arguments. From the piece: “If legal immigration levels were doubled, an estimated 31 seniors would live in the U.S. in 2050 for every 100 working-age people compared to 37 under current immigration levels, the study shows. Under that scenario, U.S. gross domestic product is projected to rise to $46.8 trillion in 2050 compared to $49.9 trillion for China. China’s economy wouldn’t overtake the U.S. until closer to 2035.”
Regulation chills minor (but not radical) technological innovations - VoxEU | From researchers Philippe Aghion, Antonin Bergeaud, John Van Reenen: “Discouraging productive firms from becoming larger is one ‘static’ effect of regulation. However, a deeper more dynamic problem might be that firms may be reluctant to invest in growth-enhancing innovations when they face these higher regulatory taxes. Furthermore, even larger firms face this tax on growth, causing them to potentially invest less in R&D.” Hey, incremental advances are important, too.
NASA Selects Innovative, Early-Stage Tech Concepts for Continued Study - NASA | The space agency has selected seven studies for additional funding — totaling $5 million — through its NASA Innovative Advanced Concepts (NIAC) program. Some pretty cool stuff, including a project that aims to “fabricate and test ultra-lightweight materials” for solar sails, and another will design a “wire mesh that small climbing robots could deploy to form a large parabolic reflector” on the far side of the Moon, functioning as a radio telescope.