The Great Stagnation, another voice heard from, Jason Furman

Tyler Cowen interviews Jason Furman on a variety of things. On productivity:

COWEN: If investment is important, does that make you an economic pessimist, given the apparent end of the savings glut from Asia?

FURMAN: I think I’m an economic realist. You look at Robert Gordon, and he’s been turned into this big pessimist, this pole of prediction that’s this negative. We’ve run out of ideas. Nothing ever is going to happen. It turns out, if you just look at average productivity growth over the last 50 years and assume that’s what you’re going to get over the next 50 years, we’re going to have a GDP growth rate that is around 2 percent, maybe a little bit below it. And that’s just from continuing the last 50 years.

Now, the average of the last 50 years is better than the average of the last 15 years. So, in some ways, I’m an optimist. I think we’ll get back to our historical productivity growth. But the idea that we’re going to get way beyond that certainly could happen, but I don’t think it’s a reasonable forecast of what’s going to happen.

COWEN: Referring to Gordon, here’s another softball question. Why did productivity fall so much after either 1973 or in, say, the last 15 years?

[laughter]

This is the easy podcast.

FURMAN: Yep. I think there’s something. Less infrastructure investment, less R&D. There were some major projects in terms of highways in the 1950s, the lunar landing in the 1960s, et cetera. I’d like to think that was the answer to your question. I think the truth is, when you go and quantify that type of public investment, it’s a couple tenths of a percent of the answer.

In the recent period, I do think the increased concentration we’re talking about might be a tenth or two percentage point of the slowdown that we’ve seen. Some of it may be that you need to invert your question and ask not why did productivity slow down, but why was productivity so fast?

There’s a lot of very special things about the 1950s and the 1960s, just coming off of World War II. And in terms of ’95 to 2005, well, it’s a relatively short period of time. Stuff fluctuates. You have a period of faster growth. But broadly speaking, we’re in a world of 1.5 percent productivity growth if we’re lucky. Unfortunately, it’s been more like 1 [percent] lately, and that’s just what it is.

COWEN: What is your take on the degree of unmeasured benefits from the internet? High, low, intermediate?

FURMAN: Intermediate, but most of them were in the base 5, 10, 15 years ago — Google, online travel, online shopping, Wikipedia. It’s not like adding these are going to add to your measure of productivity growth in the year 2019 or the year 2018. They might add to the level of productivity, but they were in the level. They were in the base a while ago now. And they’ve just continued up. So, I certainly think there’s some things we’re not measuring.

A bunch of it, though, is about the use of our time. YouTube may be better than TV, but it’s only a bit better than TV, so you can’t just take the gross benefits of YouTube. You have to do the net benefits relative to the other activity. And then, if you’re being a paternalist, you could ask, “Is any of this a good use of our time?” But without even going there, I think you get decent-size impact on the level of well-being, a small impact on the growth of well-being over the last decade.