Editing Idea:Robert Gordon: The Rise and Fall of Technological Impact

{{Idea
|type=person/economist
|id=20250812-1357-gordon-great-inventions-stagnation
|created=2025-08-12T13:57:00Z
|source_type=book
|source_title=The Rise and Fall of American Growth
|source_authors=Robert J. Gordon
|source_year=2016
|links=20250812-1355-schumpeter-creative-destruction-deflation, 20250812-1356-baumol-cost-disease-productivity
}}

= Robert Gordon: The Rise and Fall of Technological Impact =

== Core Perspective ==

Robert Gordon argues that the era of transformative technological change that drove massive improvements in living standards (1870-1970) was a unique, unrepeatable "special century." Modern innovations, while impressive, have less impact on productivity and create less deflationary pressure than the great inventions of the past.

== The Great Inventions Thesis ==

=== Revolutionary Period (1870-1970) ===
* '''Electricity''': Transformed production and daily life
* '''Internal combustion''': Revolutionized transport and cities
* '''Running water/sanitation''': Eliminated disease, saved time
* '''Communications''': Telegraph, telephone, radio, TV
* '''Chemicals/pharmaceuticals''': Extended life, improved materials

=== Digital Era (1970-present) ===
* '''Limited scope''': Mainly entertainment and communication
* '''Smaller impact''': Less effect on total productivity
* '''Diminishing returns''': Each innovation less transformative
* '''Narrow benefits''': Concentrated in specific sectors

== Impact on Value and Deflation ==

=== The Deflation That Was ===

Gordon documents how great inventions created massive deflation:
* '''1900-1970''': Real prices of basic goods plummeted
* '''Quality explosion''': Products became incomparably better
* '''Time savings''': Household production time freed up
* '''Health improvements''': Life expectancy doubled

=== The Deflation That Isn't ===

Modern technology creates less deflationary pressure:
* '''Narrow impact''': Only affects information goods
* '''Service resistance''': Most economy remains labor-intensive
* '''Regulatory capture''': Many sectors resist disruption
* '''Network effects''': Create monopolies, not competition

== Stakeholder Impacts ==

=== GDP and Productivity ===
* '''Measurement problems''': GDP missed past improvements too
* '''Genuine slowdown''': Not just measurement error
* '''One-time gains''': Many improvements can't repeat
* '''Headwinds''': Demographics, education, inequality, debt

=== Business Valuations ===
* '''Winner-take-all''': Few companies capture most value
* '''Intangibles dominate''': Physical capital less important
* '''Speculation increases''': Fewer real opportunities
* '''Zombie firms''': Low rates keep inefficient firms alive

=== Consumer Benefit ===
* '''Entertainment abundance''': Massive content availability
* '''Communication ease''': Global instant connection
* '''But basics stagnant''': Housing, healthcare, education unchanged
* '''Time poverty''': Despite labor-saving devices

=== Government Policy ===
* '''Fiscal pressure''': Slower growth, rising costs
* '''Monetary confusion''': Low inflation despite easy money
* '''Innovation policy''': Desperate attempts to recreate past
* '''Inequality concerns''': Benefits concentrated at top

== The Productivity Paradox Explained ==

Gordon's framework explains why we see less deflation:

# '''Low-hanging fruit picked''': Easy innovations done
# '''Regulatory moats''': Incumbents protect positions
# '''Service economy''': Less amenable to automation
# '''Complexity costs''': Coordination overwhelms efficiency

== Modern Technology Assessment ==

=== Where Tech Succeeds ===
* Information processing and transmission
* Entertainment and media
* Narrow AI applications
* Financial services

=== Where Tech Fails ===
* Physical world transformation
* Healthcare cost reduction
* Education productivity
* Housing affordability

== Critical Quote ==

"The economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could happen only once."

== Implications for Deflation Dynamics ==

=== Why Less Deflation Now ===

Gordon identifies structural reasons:
* '''Scope limitations''': Digital affects small part of life
* '''Regulatory capture''': Protected sectors resist change
* '''Human needs''': Many services require human touch
* '''Physical constraints''': Atoms harder than bits

=== Future Prospects ===

Gordon is pessimistic about future deflation:
* '''AI overrated''': Limited to narrow domains
* '''Biotech expensive''': Extends life but at high cost
* '''Climate costs''': Environmental constraints raise prices
* '''Infrastructure decay''': Deferred maintenance creates inflation

== Policy Implications ==

=== For Innovation Policy ===
* Don't expect miracles from R&D spending
* Focus on removing regulatory barriers
* Accept slower growth as new normal
* Invest in human capital

=== For Monetary Policy ===
* Low inflation not sign of success
* Asset bubbles replace goods inflation
* Productivity stagnation is real
* New frameworks needed

== Connection to Other Perspectives ==

Gordon's pessimism contrasts with:
* '''Schumpeter''': Less creative destruction happening
* '''Baumol''': Cost disease dominates progress
* '''Techno-optimists''': Overestimate digital impact

[[Category:Person/Economist]]
[[Category:Gordon]]
[[Category:Productivity]]
[[Category:Stagnation]]
[[Category:Innovation]]
[[Category:Deflation]]
[[Category:Technological Revolutions]]
[[Category:Growth Theory]]