Economists worry that we have entered in a secular stagnation called the Great Stagnation. To summarize: whereas industrial productivity grew steadily for most of the XXth century, it started to flatten out in the 1970s. We have now entered an era where, on paper, we are not getting very much richer.
Houses are getting a bit larger. We can afford a few more clothes. But the gains from year to year are modest. Viewed from this angle, the stagnation looks evident.
Why is this happening? Economists have various explanations. Some believe that government regulations are to blame. Others point out that we have taken all the good ideas, and that the problems that remain are too hard to solve. Others yet blame inequality.
But there is another explanation that feels a lot more satisfying. We have entered the post-industrial era. We care less and less about producing “more stuff” and we are in a process of trimming down.
Young people today are less likely to own a car. Instead, they pay a few dozen dollars a month for a smartphone. They are not paying for the smartphone itself, they are paying for what it gives them access to.
Let us imagine the future, in 10, 20 or 30 years. What I imagine is that we are going to trim down, in every sense. People will own less stuff. Their houses won’t be much larger. They may even choose not to own cars anymore. They may choose to fly less often. If we are lucky, people will eat less. They may be less likely to be sick, and when sickness strikes, the remedy might be cheaper. They will use less power.
We are moving to a more abstract world. It is a world where it becomes harder to think about “productivity”, a concept that was invented to measure the output of factories. What is the “productivity” of a given Google engineer? The question is much less meaningful than if you had asked about the productivity of the average factory worker from 1950.
Suppose that, tomorrow, scientists discover that they have a cure for cancer. Just eat some kale daily and it will cure any cancer you have (say). This knowledge would greatly improve our lives… we would all be substantially richer. Yet how would economists see this gain? These scientists have just made a discovery that is almost without price… they have produced something of a very great value… how is it reflected in the GDP? Would you see a huge bump? You would not. In fact, you might see a net decrease in the GDP!
We won’t cure cancer next year, at least not by eating kale… but our lives are made better year after year by thousands of small innovations of this sort. In many cases, these cannot be measured by economists. And that’s increasingly what progress will look like.
Measuring progress in a post-industrial world is going to get tricky.