Life advice from a professor

Robert Gordon’s official title is the Stanley G. Harris Professor in the Social Sciences at Northwestern University. Translation: he’s an economics badass, the kind you see quoted by media outlets every day. His new book, The Rise and Fall of American Growth, has made serious waves since it was published in January. NBN sat down with him to discuss Facebook, the job market and Dillo.

If you could condense your book into one or two sentences for someone without an economics background, what would it be?
We had a special century from 1870 to 1970, where an amazing number of things were invented that completely changed human existence both on the job and at home. Since 1970 we’ve had the computer revolution, but its impact has been narrower, and while profound, it has not affected human life in anything like the way the great inventions of the special century did.

So you wouldn’t call yourself an optimist looking forward?
Basically the real benefits of productivity from the digital revolution occurred primarily between 1980 and 2005. I wouldn’t say pessimist, but I’m a realist about the impact of innovation, which is not going to be as great in the next 25 years as it has been in the past 25. And on top of that, we have some additional problems that I call the headwinds: a slowing advancement of educational attainment; the demographic headwind, the aging of the population and the retirement of the baby boom generation; the inequality headwind, that [much of] the growth of average income per person is going to the top 1 percent; finally, we have the fiscal headwind, which is again a consequence of the aging population in causing financial difficulties for social security, Medicare and trust funds down the road. We have four headwinds... and they all will cause the growth in median per person disposable income to be slower than it has been in the last hundred years.

Do we have a lack of technological innovation?
I’m not saying there’s no innovation. We’re seeing amazing feats that computers are achieving, but they’re in a relatively narrow phase of human existence. I mean, what percentage of the labor force is working in language translation? Of course the innovation is occurring. What I emphasize is that it’s incremental, it’s slow, it’s occurring in a limited part of the economy, not in the entire economy.

Going forward you don’t see these larger breakthroughs happening again?
I think the difference with the techno-optimists is that they’re focusing on huge changes in a small part of the economy. The big innovation in the last 10 years has been social networks. It’s been the degree of communication and photo-sharing among ordinary people. You don’t gain the extra productivity to be able to pay higher wages just because your employees are shooting pictures back and forth to each other.

So Facebook doesn’t have the same social impact as the internal combustion engine?
No.

What does it mean for life in the U.S. if these breakthroughs were to slow down or stop happening all together?
At the extreme, with no growth at all, you’d have a zero-sum society. That means to have social programs to deal with problems like an aging infrastructure or the education deficits in poverty populations, you can’t have new resources coming from growth to address these problems. You’d have to give up something else to achieve anything new.

We wouldn’t be able to force these breakthroughs to happen, but is there anyway that we could make it more likely that they would?
We don’t have a shortage of innovation. The most valuable companies in the world—Google, Microsoft, Facebook, Apple—they’re all innovating like crazy. The issue is how important are these innovations that are going on? There’s enormous investment being made now in virtual reality. How important is that as a driver of the standard of living? It’s just another form of entertainment. I think a lot of these innovations are in the realm of consumer leisure and entertainment rather than things that are going to make the day to day practices of business more productive.

Is R&D (research and development) into this sort of stuff looking in the wrong direction? Are their priorities not set straight?
They’re looking just where they should, which is where they think they can make money. If consumers are willing to pay for virtual reality goggles and the latest coolest software, and their payments make some people rich then that’s where invention will go, even if it doesn’t raise productivity in the business part of the economy.

You seem to be one of the few people talking about this. Are people turning a blind eye to it?
There are two common reactions. One is that people say we can’t forecast the future at all. The other is the idea that people have said everything has already been invented 100 years ago, and clearly everything wasn’t invented. I’m not saying that everything’s already been invented. I’m getting down into a deeper level of detail here and talking about exactly what these inventions are. I think there’s a lot of faith among the techno-optimists that just because a lot of things have happened in the past they’re going to continue to happen. I know Bill Gates is very down on my ideas, for instance.

For Northwestern students graduating in the next five years, what does your theory mean for them?
Northwestern undergraduates should pay a lot of attention to the development of artificial intelligence and try to stay away from occupations that have prospects of being replaced by computers. If you have an expensive college education, you don’t want to be caught in an occupation where you’re competing with computers. Northwestern students are from an elite college, so they’re going to be favored in the job market compared to people from other places, but in terms of choosing their fields of study and choosing what kinds of jobs they take after graduation, they should certainly do as much reading as they can about the future of artificial intelligence and computers replacing jobs.

What can we do to bring back this era of American economic success?
I think we need much more aggressive federally financed preschool programs. The social distance in this country between the bottom and the top or the bottom and the middle is much different than in many countries. Here we are in Evanston, Illinois, and we have enormous gaps between the white and the black populations in school... even though it’s a well-funded school system. How we as a society can address that has been at the heart of sociology and the education literature going back for 50 years.

Have you ever been to Dillo Day?
No, I don’t even know what it is.