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Saturday, January 12, 2013

Low hanging fruit and technological innovation

Have we picked all the low hanging fruit? GDP growth may not be the same as growth in "utils" (units of utility, as in happiness or utility function), but it's a reasonable proxy. Click graph below for larger version.

The util return per unit of technological effort is probably decreasing as the problems left to be solved become more challenging. But it's hard to put a util value on some things that are in the foreseeable future, like machine intelligence and genetic engineering. A GDP value will be assigned by definition of commerce (the market), but actual utility is harder to understand, as we may be altering ourselves and our civilization along the way! Singularitarians would have you believe that the graph below will reach a point of divergence in the near future ...

Economist: ... For most of human history, growth in output and overall economic welfare has been slow and halting. Over the past two centuries, first in Britain, Europe and America, then elsewhere, it took off. In the 19th century growth in output per person—a useful general measure of an economy’s productivity, and a good guide to growth in incomes—accelerated steadily in Britain. By 1906 it was more than 1% a year. By the middle of the 20th century, real output per person in America was growing at a scorching 2.5% a year, a pace at which productivity and incomes double once a generation (see chart 2). More than a century of increasingly powerful and sophisticated machines were obviously a part of that story, as was the rising amount of fossil-fuel energy available to drive them.

But in the 1970s America’s growth in real output per person dropped from its post-second-world-war peak of over 3% a year to just over 2% a year. In the 2000s it tumbled below 1%. Output per worker per hour shows a similar pattern, according to Robert Gordon, an economist at Northwestern University: it is pretty good for most of the 20th century, then slumps in the 1970s. It bounced back between 1996 and 2004, but since 2004 the annual rate has fallen to 1.33%, which is as low as it was from 1972 to 1996. Mr Gordon muses that the past two centuries of economic growth might actually amount to just “one big wave” of dramatic change rather than a new era of uninterrupted progress, and that the world is returning to a regime in which growth is mostly of the extensive sort (see chart 3).

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