Anheuser-Busch Briefing Center, U.S. Chamber of Commerce
1615 H St NW, Washington, D.C.
Registration and Breakfast: 8:00 a.m.-8:30 a.m.
In reading The Economist’s terrific briefing on today’s “innovation pessimism,” one chart in the report totally shocked me. Chad Syverson of the University of Chicago compared the course of the IT revolution with electrification, looking at their productivity gains over time. One began in 1970, the other in 1870. Over the course of 40 years, they followed practically the same course of growth. It’s really amazing how closely they match.
When most of the major inventions occurred in each revolution, growth was surprisingly tepid. It wasn’t until some 30 years and a generation had passed that the gains in productivity started to really pop. Consumers and businesses alike began to finally adopt and embed these advancements deep into the economy.
Today’s IT revolution is only about 40 years in, with much more time to go. A few years after passing that same milestone, the productivity growth from electrification really took off. Will we see the same thing happen? If the two lines on the chart above keep following each other, then the answer is “yes.”
This chart should offer hope to the innovation pessimists. It shows that growth comes in fits and starts, even in the midst of a technological revolution. The global financial crisis and the broader slowdown in productivity growth after 1970 may be only aberrations. Here’s how The Economist tells the story:
“It may be that the 1970s-and-after slowdown in which the technological pessimists set such store can be understood in this way—as a pause, rather than a permanent inflection. The period from the early 1970s to the mid-1990s may simply represent one in which the contributions of earlier major innovations were exhausted while computing, biotechnology, personal communication and the rest of the technologies of today and tomorrow remained too small a part of the economy to influence overall growth.”
Of course, that same unevenness in growth that Syverson highlights should temper enthusiasm over whether we’ll experience the same dramatic, late-in-life rise in productivity growth that the electrification revolution brought about. Heavy-handed regulation and reduced investment in basic R&D are just two impediments to growth, among many. Only time will tell whether our future will look anything like our past.