1 00:00:00,480 --> 00:00:03,400 Speaker 1: Brought to you by stage Summit Live, the virtual conference 2 00:00:03,400 --> 00:00:05,840 Speaker 1: that provides all the highlights of Stage Summit from the 3 00:00:05,840 --> 00:00:11,240 Speaker 1: convenience of your desk, celebrity entrepreneurs in safle workshops absolutely free. 4 00:00:11,760 --> 00:00:16,000 Speaker 1: Register at Stage Summit livestream dot com. Only about ten 5 00:00:16,079 --> 00:00:20,520 Speaker 1: percent of Americans sent text messages on the cell phones. Wait, Dan, 6 00:00:20,800 --> 00:00:23,520 Speaker 1: are you sure about that? That sounds kind of well? 7 00:00:23,600 --> 00:00:34,519 Speaker 1: I was thirteen years ago. Hi, and welcome back to 8 00:00:34,560 --> 00:00:39,519 Speaker 1: Bloomberg Benchmark, a show about the global economy. It's Thursday August. 9 00:00:40,560 --> 00:00:43,920 Speaker 1: I'm Daniel Moss, executive editor for Economics of Bloomberg in 10 00:00:44,000 --> 00:00:47,440 Speaker 1: New York. I'm joined today by my co host, Scott Landman, 11 00:00:47,640 --> 00:00:50,680 Speaker 1: an economics editor in Washington. Hey Dan, how's it going. 12 00:00:51,000 --> 00:00:55,160 Speaker 1: Here's an amazing statistic. Only about ten percent of Americans 13 00:00:55,200 --> 00:00:58,480 Speaker 1: sent text messages on their cell phones. That's got phone 14 00:00:58,520 --> 00:01:02,959 Speaker 1: companies like Verizon and A ten T plenty worried. Wait, Dan, 15 00:01:03,240 --> 00:01:06,000 Speaker 1: are you sure about that? That sounds kind of well? 16 00:01:06,040 --> 00:01:10,360 Speaker 1: I was thirteen years ago. That was the subject of 17 00:01:10,400 --> 00:01:13,920 Speaker 1: a perfectly serious Bloomberg News story from two thousand and 18 00:01:14,000 --> 00:01:17,759 Speaker 1: three that lamented how Americans were laggers. In the wondrous 19 00:01:17,840 --> 00:01:21,640 Speaker 1: new text messaging technology. Think about it. Back then, Mark 20 00:01:21,720 --> 00:01:25,039 Speaker 1: Zuckerberg was still at Harvard toying with an app he 21 00:01:25,160 --> 00:01:30,200 Speaker 1: called facemash. He didn't launch Facebook until six months after 22 00:01:30,240 --> 00:01:34,759 Speaker 1: we published that two thousand and three story on text messaging. Yeah, 23 00:01:34,920 --> 00:01:37,520 Speaker 1: it's amazing how fast things have changed in that field. 24 00:01:38,160 --> 00:01:40,360 Speaker 1: Now we have apps that let you rent your home 25 00:01:40,480 --> 00:01:44,840 Speaker 1: to strangers from the internet. Driverless cars aren't just on 26 00:01:44,880 --> 00:01:48,040 Speaker 1: the horizon, they're they're being tested now in Pittsburgh. What 27 00:01:48,800 --> 00:01:52,200 Speaker 1: we heard recently true enough. But step back just a 28 00:01:52,240 --> 00:01:55,080 Speaker 1: little bit and you can come to a different perspective 29 00:01:55,520 --> 00:01:59,760 Speaker 1: on the pace of technological change. For all that Airbnbs 30 00:01:59,800 --> 00:02:03,920 Speaker 1: and Uber seems to be life changing, they aren't actually 31 00:02:04,000 --> 00:02:08,480 Speaker 1: adding a lot to American productivity growth, not at any 32 00:02:08,560 --> 00:02:12,280 Speaker 1: rate the way the invention of the automobile, electric lights, 33 00:02:12,320 --> 00:02:15,639 Speaker 1: and indoor plumbing had on the impact of civilization as 34 00:02:15,639 --> 00:02:18,960 Speaker 1: a whole. That's according to Robert Gordon, a professor at 35 00:02:19,040 --> 00:02:22,400 Speaker 1: Northwestern University and the author of The Rise and Fall 36 00:02:22,520 --> 00:02:26,600 Speaker 1: of American Growth, published this year. Now, that's not to 37 00:02:26,639 --> 00:02:29,520 Speaker 1: say America's economy, which is much maligned for its quote 38 00:02:29,600 --> 00:02:33,960 Speaker 1: unquote slow recovery, is going to start growing and it 39 00:02:34,000 --> 00:02:37,639 Speaker 1: doesn't mean the unemployment rate won't continue to inch lower. 40 00:02:38,080 --> 00:02:40,840 Speaker 1: It just means that all these new technologies that we 41 00:02:40,960 --> 00:02:44,959 Speaker 1: have that we've come to think of as so amazing, aren't, 42 00:02:45,000 --> 00:02:47,799 Speaker 1: in the broad historical sweep, doing a lot for us. 43 00:02:48,200 --> 00:02:51,960 Speaker 1: Professor Gordon joins us. Now, hello, professor, it's great to 44 00:02:52,000 --> 00:02:54,200 Speaker 1: have you. I'm looking at a copy of the book 45 00:02:54,240 --> 00:02:57,280 Speaker 1: in the studio here, and it's massive. It's almost as 46 00:02:57,360 --> 00:03:01,400 Speaker 1: much of a physical weapon as Paquetti's tone inequality. Now, 47 00:03:01,520 --> 00:03:05,200 Speaker 1: Paquetti captured the zeitgeist of the moment with that, and 48 00:03:05,240 --> 00:03:08,640 Speaker 1: you seem to have done that same thing this year. 49 00:03:09,120 --> 00:03:12,200 Speaker 1: We seem to heed daily from FED officials and prominent 50 00:03:12,200 --> 00:03:18,400 Speaker 1: economists like Larry Summers about quote secular stagnation, unquote, declining productivity, 51 00:03:18,960 --> 00:03:21,680 Speaker 1: low and neutral rates and so on. But you know, 52 00:03:21,760 --> 00:03:24,840 Speaker 1: it's easy to forget the economy has been expanding since 53 00:03:24,919 --> 00:03:27,840 Speaker 1: two thousand and nine. But professor, that's not your point. 54 00:03:27,960 --> 00:03:32,320 Speaker 1: Right now, We've had this paradox of rapid growth and 55 00:03:32,400 --> 00:03:35,720 Speaker 1: employment fifteen million new jobs since two thousand and nine, 56 00:03:36,400 --> 00:03:40,000 Speaker 1: and at the same time the growth and output has 57 00:03:40,040 --> 00:03:43,160 Speaker 1: been very slow. While the resolution of that is very simple. 58 00:03:43,520 --> 00:03:46,440 Speaker 1: We have rapid growth in hours of work, slow growth 59 00:03:46,480 --> 00:03:48,960 Speaker 1: and output per hour. Put them together and you get 60 00:03:48,960 --> 00:03:52,840 Speaker 1: slow growth in output that is usually called real GDP. 61 00:03:54,000 --> 00:03:58,080 Speaker 1: When you introduced me, you mentioned that innovation is not 62 00:03:58,200 --> 00:04:02,280 Speaker 1: paid off. That's not actually true. We've had a great 63 00:04:02,440 --> 00:04:06,600 Speaker 1: revival of productivity back in the period between two thousand 64 00:04:06,680 --> 00:04:12,000 Speaker 1: and five, associated with the utter conversion of business methods 65 00:04:12,040 --> 00:04:16,040 Speaker 1: from the old days of the typewriter, file cabinet piles 66 00:04:16,080 --> 00:04:20,200 Speaker 1: of paper to the world of personal computers, spreadsheet and 67 00:04:20,320 --> 00:04:24,000 Speaker 1: word processing software, and then the internet, search engines and 68 00:04:24,080 --> 00:04:27,520 Speaker 1: e commerce. So we did get a big productivity payoff 69 00:04:27,600 --> 00:04:31,919 Speaker 1: of the first round of the digital revolution back in 70 00:04:32,000 --> 00:04:35,520 Speaker 1: the nineteen eighties and nineties. What's happened in the last 71 00:04:35,560 --> 00:04:39,920 Speaker 1: ten years is that the conversion to that new world 72 00:04:40,000 --> 00:04:44,279 Speaker 1: of personal computers and laptops um and getting rid of 73 00:04:44,279 --> 00:04:48,919 Speaker 1: the paper, the conversion from card catalogs and paper catalogs 74 00:04:48,920 --> 00:04:54,720 Speaker 1: to electronic catalogs that's primarily been finished. We've made our 75 00:04:54,800 --> 00:04:58,440 Speaker 1: transition to a t M machines for getting cash, bar 76 00:04:58,520 --> 00:05:02,360 Speaker 1: code scanning for checking out of the supermarket. That's all 77 00:05:02,400 --> 00:05:05,640 Speaker 1: happened more than ten years ago. So it's the lack 78 00:05:05,760 --> 00:05:11,720 Speaker 1: of really profound economy wide impacting innovation in the past 79 00:05:12,400 --> 00:05:15,920 Speaker 1: few years. That's been the problem. How did those profound 80 00:05:15,920 --> 00:05:21,280 Speaker 1: economy wide innovations actually impact the economy in the period 81 00:05:21,360 --> 00:05:26,200 Speaker 1: of eighteen seventy nine, as you talked about in your book, Well, 82 00:05:26,360 --> 00:05:29,479 Speaker 1: those were the the innovations that completely altered the way 83 00:05:29,480 --> 00:05:32,680 Speaker 1: people lived. We started out in eighteen seventy with a 84 00:05:32,720 --> 00:05:36,560 Speaker 1: country where almost half the workforce was working on farms 85 00:05:37,080 --> 00:05:42,160 Speaker 1: as farm owners or farm laborers. We had in the 86 00:05:42,240 --> 00:05:44,960 Speaker 1: seventy years from eighteen seventy and nineteen forty and then 87 00:05:45,040 --> 00:05:49,719 Speaker 1: on through nineteen seventy we had electricity that made possible 88 00:05:50,240 --> 00:05:55,880 Speaker 1: electric light elevators, the urban city with its density, portable 89 00:05:55,920 --> 00:05:59,440 Speaker 1: and fixed electric tools of all sorts in every industry, 90 00:06:00,200 --> 00:06:04,360 Speaker 1: the internal combustion engine, motor cars, air transport, the invention 91 00:06:04,400 --> 00:06:10,120 Speaker 1: of entertainment and communication devices like the telephone, radio, phonograph, movies, 92 00:06:10,200 --> 00:06:15,560 Speaker 1: and television. And the utter change in life expectancy that 93 00:06:15,680 --> 00:06:19,680 Speaker 1: came when we learned about the importance of germs, of 94 00:06:19,839 --> 00:06:24,839 Speaker 1: cleaning up, of having running water and sewage disposal. All 95 00:06:24,839 --> 00:06:28,760 Speaker 1: those things happened during that relatively short period, and they 96 00:06:28,880 --> 00:06:31,159 Speaker 1: were a much more profound change in the way people 97 00:06:31,160 --> 00:06:34,800 Speaker 1: live than what's going on now with a smartphone. So 98 00:06:34,920 --> 00:06:39,680 Speaker 1: it's not that Airbnb and Uber and Twitter are unuseful. 99 00:06:39,960 --> 00:06:43,360 Speaker 1: Your point is it just doesn't give us that big 100 00:06:43,760 --> 00:06:46,800 Speaker 1: oph that this other stuff did. An Uber driver as 101 00:06:46,839 --> 00:06:49,400 Speaker 1: a driver in a car, just like a taxi driver 102 00:06:49,480 --> 00:06:51,120 Speaker 1: as a driver in a car, you don't get any 103 00:06:51,160 --> 00:06:54,360 Speaker 1: increase in productivity. You do get an increase in consumer 104 00:06:54,400 --> 00:06:59,000 Speaker 1: convenience UH and you do substantially increase the availability of 105 00:06:59,720 --> 00:07:02,520 Speaker 1: UH ride services when Uber will go into parts of 106 00:07:02,560 --> 00:07:06,560 Speaker 1: town that the taxis don't serve. So it's a bonus 107 00:07:06,560 --> 00:07:10,840 Speaker 1: for the consumer. And what we're seeing with social networks 108 00:07:10,840 --> 00:07:14,280 Speaker 1: and all the different uses of smartphones is an improvement 109 00:07:14,320 --> 00:07:17,560 Speaker 1: in consumer welfare. That's not part of our GDP statistics 110 00:07:17,560 --> 00:07:21,800 Speaker 1: and not part of business productivity. When you're trading pictures 111 00:07:21,880 --> 00:07:27,240 Speaker 1: with your friends through Facebook or Instagram or Snapchat, you're 112 00:07:27,280 --> 00:07:32,360 Speaker 1: not creating business output that generates productivity or wages. So 113 00:07:32,680 --> 00:07:37,840 Speaker 1: that disconnect between total economy, productivity and the consumers well 114 00:07:37,880 --> 00:07:40,800 Speaker 1: being is an old, old issue that goes all the 115 00:07:40,840 --> 00:07:44,480 Speaker 1: way back to things like running water and the transition 116 00:07:44,520 --> 00:07:48,360 Speaker 1: from the horse to the motor car. We've always missed 117 00:07:48,400 --> 00:07:52,000 Speaker 1: some of the benefits of inventions that consumers enjoy. Let's 118 00:07:52,040 --> 00:07:54,520 Speaker 1: talk a little bit more about something you just mentioned, 119 00:07:54,640 --> 00:07:59,080 Speaker 1: running water and indoor plumbing. Do you think they get 120 00:07:59,120 --> 00:08:03,120 Speaker 1: the credit that they deserved in terms of technological breakthroughs. 121 00:08:03,120 --> 00:08:06,800 Speaker 1: I mean, it's difficult to conceive people going on about 122 00:08:06,800 --> 00:08:10,920 Speaker 1: that at cocktail parties in Brooklyn or San Francisco. Well, 123 00:08:10,920 --> 00:08:15,400 Speaker 1: we've had we've had indoor bathrooms now for a hundred years, 124 00:08:15,400 --> 00:08:17,440 Speaker 1: so people take them for granted, and people take for 125 00:08:17,480 --> 00:08:20,440 Speaker 1: granted most of the things I mentioned that we're invented 126 00:08:20,440 --> 00:08:23,880 Speaker 1: in that special century between eighteen seventy and nineteen seventy. 127 00:08:24,560 --> 00:08:28,120 Speaker 1: But that century really does stand out when you compare 128 00:08:28,160 --> 00:08:31,400 Speaker 1: it with anything that happened before eighteen seventy or what's 129 00:08:31,400 --> 00:08:35,040 Speaker 1: happened since nineteen seventy. Look at the kitchen, all the 130 00:08:35,080 --> 00:08:38,240 Speaker 1: home appliances that we now enjoy, we're part of the 131 00:08:38,280 --> 00:08:41,520 Speaker 1: standard kitchen of the nineteen seventies or even the nineteen fifties, 132 00:08:41,920 --> 00:08:44,760 Speaker 1: with the exception of a single device called the microwave oven, 133 00:08:44,880 --> 00:08:47,440 Speaker 1: which came in in the nineteen seventies and nineteen eighties. 134 00:08:47,640 --> 00:08:50,120 Speaker 1: We've had a lot of things that we take for 135 00:08:50,160 --> 00:08:53,280 Speaker 1: granted now and that we'd hate to have to give 136 00:08:53,360 --> 00:08:57,400 Speaker 1: up if they weren't there. Okay, a quick word from 137 00:08:57,400 --> 00:09:05,480 Speaker 1: our sponsor. Brought to you by Sage Summit Live, the 138 00:09:05,559 --> 00:09:08,600 Speaker 1: virtual conference that provides all the highlights of Stage Summit 139 00:09:08,679 --> 00:09:13,120 Speaker 1: from the convenience of your desk, celebrity entrepreneurs, inciple workshops 140 00:09:13,240 --> 00:09:19,280 Speaker 1: absolutely free. Register at Stage Summit livestream dot com and 141 00:09:19,440 --> 00:09:22,679 Speaker 1: we're back, Professor. Is there any chance that we could 142 00:09:22,679 --> 00:09:26,520 Speaker 1: be on the cusp of another great century similar to 143 00:09:26,559 --> 00:09:29,000 Speaker 1: the one you describe. We're just not seeing the signs 144 00:09:29,040 --> 00:09:32,400 Speaker 1: of it yet. I'm very cautious. I don't predict out 145 00:09:32,640 --> 00:09:36,040 Speaker 1: fifty or a hundred years. I do limit my predictions 146 00:09:36,040 --> 00:09:39,600 Speaker 1: to twenty five years. And I think most of the 147 00:09:39,640 --> 00:09:43,720 Speaker 1: innovation and technology that's going to be permeating through the 148 00:09:43,760 --> 00:09:47,320 Speaker 1: economy over the next twenty five years is already evident. 149 00:09:47,880 --> 00:09:51,400 Speaker 1: We have robots, we have artificial intelligence, computers are learning 150 00:09:51,400 --> 00:09:53,920 Speaker 1: how to think, We have three D printing, and we 151 00:09:53,960 --> 00:09:59,000 Speaker 1: have the autonomous vehicle, with a lot of hoopla and 152 00:09:59,200 --> 00:10:03,880 Speaker 1: prediction of a very near term conversion to autonomous vehicles, 153 00:10:03,920 --> 00:10:07,840 Speaker 1: autonomous trucks, taxis, and cars. We have a lot of 154 00:10:08,360 --> 00:10:10,679 Speaker 1: fear mongering that the robots are going to take over 155 00:10:10,720 --> 00:10:13,640 Speaker 1: all the jobs. But if we look around us, go 156 00:10:13,840 --> 00:10:16,720 Speaker 1: through your daily life and count how many robots you meet, 157 00:10:17,440 --> 00:10:20,400 Speaker 1: it's very few, and in most days of my life 158 00:10:20,440 --> 00:10:23,520 Speaker 1: it's done. As a matter of fact, our local supermarket 159 00:10:23,600 --> 00:10:26,319 Speaker 1: is just in the process of taking out these self 160 00:10:26,400 --> 00:10:30,520 Speaker 1: checkout machines um and going back to relying entirely on 161 00:10:30,640 --> 00:10:33,680 Speaker 1: human cashiers. I'm not sure why they're doing that, but 162 00:10:33,760 --> 00:10:37,559 Speaker 1: it is a sign that computer driven technology is not 163 00:10:38,120 --> 00:10:40,880 Speaker 1: every probably probably because those things didn't work so well. 164 00:10:41,720 --> 00:10:44,959 Speaker 1: They've been there for years, and they're very handy when 165 00:10:44,960 --> 00:10:48,040 Speaker 1: you have a very small amount of just two or 166 00:10:48,080 --> 00:10:49,760 Speaker 1: three items and you don't want to wait in a 167 00:10:49,840 --> 00:10:53,600 Speaker 1: long line past people who have great, big market baskets. 168 00:10:53,640 --> 00:10:56,840 Speaker 1: So maybe they'll have an express line or something to 169 00:10:56,920 --> 00:11:02,080 Speaker 1: replace it. But the impact of robots has mainly been limiting, 170 00:11:02,160 --> 00:11:06,640 Speaker 1: too limited to manufacturing. General Motors introduced the first industrial 171 00:11:06,720 --> 00:11:11,480 Speaker 1: robot in so this is nothing new. We've had robots 172 00:11:11,480 --> 00:11:15,480 Speaker 1: and automobile factories welding the bodies doing the painting for 173 00:11:15,720 --> 00:11:20,040 Speaker 1: at least twenty years, and the new world of artificial 174 00:11:20,080 --> 00:11:24,960 Speaker 1: intelligence and computer driven intelligence is taking up a lot 175 00:11:25,040 --> 00:11:30,880 Speaker 1: of innovative energy, but so far the impact is in 176 00:11:31,440 --> 00:11:34,199 Speaker 1: little niches of the economy rather than across the board. 177 00:11:34,800 --> 00:11:40,680 Speaker 1: We've got voice recognition, language translation, reading, radiology, scans, some 178 00:11:40,840 --> 00:11:47,240 Speaker 1: of the uses of computer technology doing legal searches. Computers 179 00:11:47,240 --> 00:11:50,240 Speaker 1: are really good for doing searching and can do it 180 00:11:50,240 --> 00:11:54,400 Speaker 1: more efficiently than humans. So there's a very gradual transition 181 00:11:55,000 --> 00:11:58,640 Speaker 1: to take advantage of these new technologies. But to go 182 00:11:58,679 --> 00:12:01,560 Speaker 1: back to your original question, I don't see any great 183 00:12:01,600 --> 00:12:05,280 Speaker 1: breakthrough for the next twenty five years, and I'm humble 184 00:12:05,400 --> 00:12:08,960 Speaker 1: enough to resist any predictions of what's going to be 185 00:12:09,000 --> 00:12:13,000 Speaker 1: happening in hundred years now. The Professor, the history in 186 00:12:13,000 --> 00:12:16,040 Speaker 1: your book is really fascinating, and one of my favorite 187 00:12:16,360 --> 00:12:19,440 Speaker 1: images is when you discuss how horses were the primary 188 00:12:19,480 --> 00:12:22,920 Speaker 1: motive of transportation and the streets would just be filled 189 00:12:22,960 --> 00:12:26,280 Speaker 1: with horse manure and urine, and the stench would be 190 00:12:26,400 --> 00:12:29,280 Speaker 1: terrible and people would get stuck in it. And uh, 191 00:12:29,320 --> 00:12:32,240 Speaker 1: you know how much that has changed over since then. 192 00:12:32,240 --> 00:12:34,520 Speaker 1: It's just really amazing. You know. It sounds like in 193 00:12:34,600 --> 00:12:37,760 Speaker 1: one way where you know, the economy or productivity is 194 00:12:37,760 --> 00:12:41,480 Speaker 1: going to be stuck in horse manure for for some time, 195 00:12:41,520 --> 00:12:44,720 Speaker 1: which brings me to the point of uh, we we 196 00:12:44,760 --> 00:12:47,920 Speaker 1: spent a lot of time here at Bloomberg writing listening 197 00:12:47,920 --> 00:12:52,240 Speaker 1: to people talk about secular stagnation, debating that and whether 198 00:12:52,360 --> 00:12:57,680 Speaker 1: interest rates are are going are basically permanently lower, moving 199 00:12:57,760 --> 00:13:01,000 Speaker 1: permanently lower over time. It's a debate that the Fed, 200 00:13:01,120 --> 00:13:04,600 Speaker 1: is Federal Reserve is very actively having right now. Is 201 00:13:04,600 --> 00:13:06,520 Speaker 1: it fair to say that you come down on the 202 00:13:06,559 --> 00:13:10,480 Speaker 1: on the side of their being secular stechnation right now 203 00:13:10,520 --> 00:13:12,880 Speaker 1: and interest rates, you know, staying very low for a 204 00:13:12,920 --> 00:13:18,600 Speaker 1: long time. Yes. The diagnosis that I have developed is 205 00:13:18,640 --> 00:13:24,079 Speaker 1: that this lack of economy wide impact of today's innovations 206 00:13:24,760 --> 00:13:27,080 Speaker 1: is pulling down the rate of productivity growth and the 207 00:13:27,200 --> 00:13:30,600 Speaker 1: rate of growth of the economy overall. UH. And that's 208 00:13:30,720 --> 00:13:35,360 Speaker 1: led to a reduction in interest rates that is going 209 00:13:35,400 --> 00:13:39,280 Speaker 1: to be a long term phenomenon. This has a lot 210 00:13:39,320 --> 00:13:43,280 Speaker 1: of profound implications, starting with pension funds, which are no 211 00:13:43,360 --> 00:13:46,520 Speaker 1: longer going to be able to achieve rates of return 212 00:13:46,640 --> 00:13:49,040 Speaker 1: of seven or eight percent that are built into their 213 00:13:49,080 --> 00:13:54,280 Speaker 1: assumptions about the future. Indeed, we're going to have a 214 00:13:54,320 --> 00:13:57,360 Speaker 1: world in which it's much cheaper to borrow money. UH. 215 00:13:57,440 --> 00:14:01,560 Speaker 1: The effects of the federal debt are less ominous when 216 00:14:01,679 --> 00:14:05,480 Speaker 1: interest rates are going to continue to be down around 217 00:14:05,480 --> 00:14:07,439 Speaker 1: one and a half or two percent for the tenure 218 00:14:07,520 --> 00:14:12,959 Speaker 1: bond rate rather than at four or five. And the 219 00:14:13,040 --> 00:14:15,640 Speaker 1: latitude for the Fed to ray short term interest rates, 220 00:14:15,640 --> 00:14:20,400 Speaker 1: as they themselves are publicly recognizing, is much less than before. 221 00:14:21,240 --> 00:14:23,480 Speaker 1: If you ask people three or four years ago, they 222 00:14:23,480 --> 00:14:26,760 Speaker 1: were assuming that the Fed fairly shortly would be raising 223 00:14:26,760 --> 00:14:30,200 Speaker 1: interest rates gradually back up to four or five as 224 00:14:30,200 --> 00:14:33,440 Speaker 1: they did before two thousand and seven. But this time 225 00:14:33,800 --> 00:14:36,560 Speaker 1: they're not going to do it, and they're hesitating because 226 00:14:37,160 --> 00:14:41,080 Speaker 1: it appears that the economy's long term interest rate has 227 00:14:41,120 --> 00:14:48,200 Speaker 1: substantially declined. Leaving aside the absence of big bang breakthrough inventions, 228 00:14:48,240 --> 00:14:51,920 Speaker 1: what role does demographics have. It's a hot button issue 229 00:14:52,000 --> 00:14:55,560 Speaker 1: right now in the United States, but immigration, for example, 230 00:14:55,720 --> 00:14:59,600 Speaker 1: is at least renewing the population and the labor market here. 231 00:15:00,480 --> 00:15:04,880 Speaker 1: But we've had a major turnaround that can be described 232 00:15:04,920 --> 00:15:07,720 Speaker 1: under the heading of demographics. If you look at the 233 00:15:07,760 --> 00:15:10,720 Speaker 1: growth of the labor force in the last half of 234 00:15:10,760 --> 00:15:15,000 Speaker 1: the twentieth century, the last quarter of the twentieth century, UH, 235 00:15:15,200 --> 00:15:17,240 Speaker 1: it grew at about one and a half percent per year. 236 00:15:18,000 --> 00:15:20,040 Speaker 1: UH it's now growing in about a half a percent 237 00:15:20,080 --> 00:15:23,200 Speaker 1: per year. Slower than the rate of population growth because 238 00:15:23,200 --> 00:15:26,240 Speaker 1: of the retirement of the baby boom generation that pulls 239 00:15:26,280 --> 00:15:28,800 Speaker 1: people out of the labor force even though they're still 240 00:15:28,840 --> 00:15:32,880 Speaker 1: in the population um. If you take that turnaround in 241 00:15:32,880 --> 00:15:35,480 Speaker 1: the growth of the labor force, it accounts for a 242 00:15:35,520 --> 00:15:39,960 Speaker 1: full one percentage point of the decline and overall GDP growth, 243 00:15:40,440 --> 00:15:42,680 Speaker 1: and that's something that's not going to go away. The 244 00:15:42,720 --> 00:15:47,120 Speaker 1: baby boom generation will continue to be retiring starting around 245 00:15:47,160 --> 00:15:50,960 Speaker 1: two thousand and eight, and going through about we will 246 00:15:51,000 --> 00:15:54,880 Speaker 1: be having continuing downward drag on the growth of the 247 00:15:54,960 --> 00:15:58,000 Speaker 1: labor force um. And so when you put that together 248 00:15:58,040 --> 00:16:00,840 Speaker 1: with slow productivity growth, you see there's just not that 249 00:16:00,960 --> 00:16:05,000 Speaker 1: much room for robust economic growth of the type that 250 00:16:05,040 --> 00:16:08,920 Speaker 1: we had back before two thousand and seven. In the 251 00:16:08,960 --> 00:16:14,320 Speaker 1: next two longest economies, China and Japan, that demographic situation 252 00:16:14,600 --> 00:16:18,920 Speaker 1: is even dire than the one you've just described. That's right, 253 00:16:19,040 --> 00:16:22,880 Speaker 1: and one of the reasons that, of course China and 254 00:16:22,960 --> 00:16:27,160 Speaker 1: Japan have a rapidly aging population, much more, much larger 255 00:16:27,200 --> 00:16:29,720 Speaker 1: percent of their population is over the age of sixty, 256 00:16:30,040 --> 00:16:35,520 Speaker 1: and it's true for US and in China there uh, 257 00:16:35,560 --> 00:16:39,000 Speaker 1: they've imposed that on themselves with the one child policy 258 00:16:39,040 --> 00:16:43,080 Speaker 1: in Japan, they've imposed that on themselves, partly by low 259 00:16:43,120 --> 00:16:47,400 Speaker 1: fertility and also by a society that is absolutely impervious 260 00:16:47,440 --> 00:16:52,240 Speaker 1: to immigration. Um. Whereas we have a lot of latitude 261 00:16:52,400 --> 00:16:56,120 Speaker 1: to raise our own rate of population growth and with it, 262 00:16:56,200 --> 00:17:01,120 Speaker 1: the rate of economic growth by a reform in our 263 00:17:01,160 --> 00:17:05,600 Speaker 1: immigration policy. We could follow Canada in Australia by developing 264 00:17:05,640 --> 00:17:11,600 Speaker 1: a point system by which people are admitted, with points 265 00:17:11,600 --> 00:17:15,760 Speaker 1: based on their earning capacity, on their education. Um. People 266 00:17:15,840 --> 00:17:17,879 Speaker 1: who would come to the United States and be able 267 00:17:17,920 --> 00:17:22,840 Speaker 1: to start companies to get good, solid jobs, pay taxes, 268 00:17:23,000 --> 00:17:28,639 Speaker 1: and help our economy grow faster. So UM. In my mind, 269 00:17:29,400 --> 00:17:31,960 Speaker 1: those who were opposed to immigration and those who are 270 00:17:32,640 --> 00:17:38,800 Speaker 1: UM trying to deport um, those who are unofficially here 271 00:17:38,880 --> 00:17:43,800 Speaker 1: without proper without citizenship, are going in absolutely the wrong 272 00:17:43,880 --> 00:17:47,359 Speaker 1: direction if they're interested in future economic growth. Well, that's 273 00:17:47,400 --> 00:17:50,480 Speaker 1: a nice segue into into our next question, which is 274 00:17:50,520 --> 00:17:54,119 Speaker 1: of course on our minds the presidential election. Is there 275 00:17:54,160 --> 00:17:57,560 Speaker 1: anything that the next president can do about the slowdown 276 00:17:57,600 --> 00:18:01,440 Speaker 1: and productivity growth? Paul Krugman, for one, thinks not. It's 277 00:18:01,440 --> 00:18:05,920 Speaker 1: really about technology, not policy. What are your thoughts, Well, 278 00:18:05,960 --> 00:18:10,240 Speaker 1: there's a great call from both candidates and economists like 279 00:18:10,280 --> 00:18:13,720 Speaker 1: Paul Krugman and Larry Summers for a massive program of 280 00:18:13,760 --> 00:18:19,679 Speaker 1: infrastructure spending. UM. I think the case for that becomes 281 00:18:19,760 --> 00:18:22,200 Speaker 1: very strong when you consider how low interest rates are 282 00:18:22,840 --> 00:18:25,560 Speaker 1: and how we can the government can borrow at very 283 00:18:25,560 --> 00:18:31,280 Speaker 1: low interest rates to finance repairs of highways, bridges, subsidies 284 00:18:31,320 --> 00:18:37,320 Speaker 1: to improve and extend mass transit in many places where 285 00:18:37,320 --> 00:18:42,520 Speaker 1: it's lacking. UM. And caution I would have about more 286 00:18:42,560 --> 00:18:46,560 Speaker 1: infrastructure is that that's not necessarily going to revive UM 287 00:18:46,560 --> 00:18:50,520 Speaker 1: productivity growth. The construction industry that would benefit the most 288 00:18:50,560 --> 00:18:55,120 Speaker 1: from infrastructure spending is one of the most prehistoric industries 289 00:18:55,119 --> 00:18:59,600 Speaker 1: in terms of its productivity and technology. Most construction is 290 00:18:59,640 --> 00:19:03,080 Speaker 1: still be done with machines that look very similar to 291 00:19:03,119 --> 00:19:08,879 Speaker 1: those of the nineteen fifties, and that's just one kind 292 00:19:09,040 --> 00:19:13,600 Speaker 1: of public investment. UM. I'm a big believer and urge 293 00:19:13,640 --> 00:19:18,040 Speaker 1: in the last part of my book, UM major attention 294 00:19:18,080 --> 00:19:23,760 Speaker 1: to preschool education, especially through the poverty population going way 295 00:19:23,760 --> 00:19:26,960 Speaker 1: back but before age three and four and almost to birth, 296 00:19:27,640 --> 00:19:31,399 Speaker 1: in providing advice and counsel to mothers on how to 297 00:19:31,480 --> 00:19:34,920 Speaker 1: raise children and trying to get over this tremendous vocabulary 298 00:19:34,960 --> 00:19:38,920 Speaker 1: gap that afflicts poor children compared to middle class and 299 00:19:39,880 --> 00:19:46,440 Speaker 1: upper class children. The average poor child UM enters kindergarten 300 00:19:46,480 --> 00:19:52,200 Speaker 1: with about a third vocabulary of UM normal middle class children, 301 00:19:52,359 --> 00:19:56,879 Speaker 1: and that handicaps them throughout school and leads to dropping 302 00:19:56,880 --> 00:20:01,159 Speaker 1: out of high school, leads to more owness to crime, 303 00:20:02,000 --> 00:20:07,680 Speaker 1: and much less chance of getting a college education. This 304 00:20:07,760 --> 00:20:11,280 Speaker 1: is all pretty sobering stuff, Professor, Before we go, is 305 00:20:11,320 --> 00:20:15,959 Speaker 1: there anything that Americans can feel optimistic about, or at 306 00:20:16,040 --> 00:20:22,000 Speaker 1: least relatively optimistic compared with other countries? And in fact, 307 00:20:21,640 --> 00:20:24,840 Speaker 1: I just want to add that we have a story 308 00:20:25,119 --> 00:20:29,320 Speaker 1: just out that shows that US productivity and manufacturing is 309 00:20:29,359 --> 00:20:32,880 Speaker 1: actually the best in the world according to Boston consulting Group. 310 00:20:32,960 --> 00:20:37,040 Speaker 1: That's by my colleague, Shechelle jam Risco. Here. Yes, the 311 00:20:38,040 --> 00:20:41,000 Speaker 1: ray of optimism that we can end with is is 312 00:20:41,040 --> 00:20:44,200 Speaker 1: that the United States is still ahead in of all 313 00:20:44,240 --> 00:20:46,639 Speaker 1: but a couple of small countries in the level of 314 00:20:46,680 --> 00:20:51,040 Speaker 1: its productivity. And we are entering a period of the 315 00:20:51,080 --> 00:20:53,000 Speaker 1: next two or three years which I think will go 316 00:20:53,080 --> 00:20:56,000 Speaker 1: down in history as some of the best years of 317 00:20:56,040 --> 00:20:59,680 Speaker 1: American uh on the American economy. We're going to continue 318 00:20:59,720 --> 00:21:02,280 Speaker 1: to create eight jobs, the unemployment rate is going to 319 00:21:02,359 --> 00:21:07,360 Speaker 1: continue to go down toward where it was in two thousand, 320 00:21:07,480 --> 00:21:12,920 Speaker 1: down closer to than five and as a result, it's 321 00:21:12,920 --> 00:21:15,959 Speaker 1: going to be easier to get jobs. UM firms are 322 00:21:16,000 --> 00:21:19,080 Speaker 1: going to compete for workers and push up wages. So 323 00:21:19,119 --> 00:21:23,080 Speaker 1: we're gonna begin to see improving the wages and maybe 324 00:21:23,160 --> 00:21:26,560 Speaker 1: a little bit of a hiatus and the rise of inequality. 325 00:21:27,280 --> 00:21:30,159 Speaker 1: Uh So, I think we're in for a good period 326 00:21:30,200 --> 00:21:34,760 Speaker 1: of years with no uh no symptoms of an on 327 00:21:34,760 --> 00:21:38,800 Speaker 1: onset of a recession. We've made it through the UM 328 00:21:39,320 --> 00:21:43,480 Speaker 1: period of the strong dollar without the economy uh faltering. 329 00:21:44,240 --> 00:21:47,400 Speaker 1: UM job growth continues to be strong, and I think 330 00:21:47,400 --> 00:21:50,280 Speaker 1: it's going to bring many benefits to workers who have 331 00:21:50,359 --> 00:21:54,480 Speaker 1: been up to this point left behind. Professor, thank you 332 00:21:54,560 --> 00:21:57,359 Speaker 1: very much. You go. We have some housekeeping to do 333 00:21:57,440 --> 00:22:06,719 Speaker 1: to wrap it up, but thank you. Benchmark will be 334 00:22:06,720 --> 00:22:09,560 Speaker 1: back next week. Until then, you can find us on 335 00:22:09,560 --> 00:22:13,480 Speaker 1: the Bloomberg terminal and Bloomberg dot com, as well as iTunes, 336 00:22:13,560 --> 00:22:16,720 Speaker 1: pocket cast, and Stitcher. While you're there, take a minute 337 00:22:16,720 --> 00:22:19,400 Speaker 1: to rate and review the show. Some more listeners can 338 00:22:19,400 --> 00:22:22,320 Speaker 1: find us. You can also find me on Twitter at 339 00:22:22,400 --> 00:22:26,080 Speaker 1: at Scott Landman and Dan at at Daniel Moss d C. 340 00:22:26,800 --> 00:22:29,240 Speaker 1: Maybe next week we'll have something we can feel really 341 00:22:29,320 --> 00:22:39,080 Speaker 1: good about. See you next week. 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