\n\n“The implication of Philippon\u2019s paper is as simple as it is disturbing: We should expect economic growth to slow down in the long run, and the big leaps forward of the last couple centuries may be an aberration.<\/p>\n\n\n\n
This conclusion is far from certain, and it goes against decades of assumptions on how to model economic growth. But Philippon brings a lot of data to bear on his thesis, which makes some intuitive sense, and even the possibility of it being true should alarm us.”<\/p>\n\n\n\n
…<\/p>\n\n\n\n
“What Philippon does is attempt to assess whether TFP actually does<\/em>, in practice, grow exponentially. He first looks at two<\/a> datasets<\/a> covering TFP in the US and finds, instead, linear growth since World War II: TFP does not increase by a set percentage each year, but a set amount<\/em> (0.0245 points, if you\u2019re curious) each year. It doesn\u2019t compound; it just gradually, steadily grows. You\u2019re getting $2 a year, not 2 percent of an ever-increasing pile.<\/p>\n\n\n\n Extending the data back to 1890, he finds linear growth, but with a break: slower growth from 1890 to 1933, and faster after 1933, but steady and non-exponential in each period. He then extends the analysis to 23 relatively wealthy countries, from Japan to Germany to Spain. A linear model fits better here, too.”<\/p>\n\n\n\n …<\/p>\n\n\n\n “The US and other rich countries have experienced a well-documented decline in productivity growth<\/a>, especially TFP growth, since 2004 or so. Philippon\u2019s findings could help explain why that is. The slowdown is only there if you assume TFP should<\/em> be growing exponentially. If you assume mere linear growth, it\u2019s not that things have gotten worse in recent decades. It\u2019s just that they were never that good.<\/p>\n\n\n\n That\u2019s an alarming conclusion, mostly because from the standpoint of human history, the past few centuries have been very<\/em> good. Before the 17th to 18th century or so, human economies grew extremely slowly. Agriculture showed little productivity growth, meaning there was a fixed population that farming societies could support. Living standards varied mostly based on how many people were around; when the population suddenly shrank (as in the Black Death in Europe) people grew richer on a per capita basis, and when the population swelled the opposite occurred. This is known as the \u201cMalthusian trap.\u201d<\/a><\/p>\n\n\n\n \u201cUntil about 1800, the vast bulk of people on this planet were poor,\u201d Joel Mokyr, an economic historian at Northwestern, once noted<\/a>. \u201cAnd when I say poor, I mean they were on the brink of physical starvation for most of their lives.\u201d<\/p>\n\n\n\n That pattern started to break down in the 17th through 19th centuries, a process sometimes shorthanded<\/a> as the \u201cIndustrial Revolution,\u201d but including a wide variety of cultural, scientific, technological, and economic changes. Long story short: productivity sustainably grew for the first time in human history. And it grew, by historical standards, quite rapidly, such that a far lower share of people alive in 2022 are on the brink of starvation than were in 1800, even though the population needing food has never been greater.”<\/p>\n\n\n\n