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tv   Discussion on the U.S. Economy  CSPAN  December 3, 2016 7:30pm-8:46pm EST

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but the internet people are departing from one another at length speed. they can live in their own little world, they do not have to hear anybody that disagrees with them, they do not have to try to compromise, they don't have to, here they are in their own self confirming universe. and democracy is about friction, change, arguments, it's a very hard thing to pull off and it depends on friction. even as democracy depends on the free flow of information.
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>> the trouble with the internet is it drives people into many different little worlds of their own and it is hard to get that moving in one direction. here's my story i'll end with this, lewis is a great, great golfer. he doesn't brag about this, he's very fine scratch golfer. he has been for years and years. when i was at "sports illustrated" i met donald trump because of his interest in golf and golf courses and donald trump cheetah golf. the other politician whose famous for cheating at golf is bill clinton. this little bit of information i
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am part of you to simulate and underline the fact that lewis' book has that kind of fun with conservatives, liberals, radicals or whatever, it arches over the whole thing to point out really who is cheating. it is a great book. so thank you. [applause] >> thank you everybody. we are going to move the speakers to the front for signing. if you could give us maybe ten seconds to get moved to before we get up we would appreciate it. thank you. [inaudible] [inaudible]
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[inaudible] >> this is book tv on c-span two. television for serious readers. here's our primetime lineup. starting shortly a debate on the future of the u.s. economy with robert gordon in joal. heather provides a history of william f buckley's long-running television program, firing line. a book tv's afterwards program at 10:00 p.m. eastern, former senate majority leader george mitchell offers his thoughts on a path for peace between israel and palestine. we wrap up with saturday primetime lineup at 1150 with medea benjamin on the relationship between the united states and saudi arabia. that happens next arabia. that happens next on c-span twos book tv, first up a debate on the economy.
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>> good evening everybody. welcome to the program. thank you for forsaking hollowing to learn about innovation. when i competing with the cubs tonight. were delighted to have robert and joel here to debate the future of innovation in the economy. both have books here, professor godin's book is here, rise is here, rise and fall of the american growth. i see michael is in our audience here, we had a dinner there about nine months ago and your book was the hottest topic so i'm delayed we could host you. tomorrow professor's book is coming up you can get a copy of it tonight if you like, a culture of growth, the origins of the modern economy. think hr partners northwestern university. thank you for coming here.
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we are filming for c-span so make sure your phones are silenced. you're welcome to participate in social media. this is what i'd like to think of as a booster for some program that will be doing after the election is over. we'll do focus on innovation for the spring across sectors everything from global health to the economy. were thrilled to have these titans of thinking about innovation. tomorrow at at lunch time if you are inclined we have a panel on the election 2016 and implication for the women's movement. friday morning will have a program with leading advisers to president obama and bush on china. that will will be hosted with the paulson institute. and if you know for nearly a century that counsel has provided an independent, nonpartisan platform for views in different voices to promote
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to understanding engagement with the world. we convene global voices, conduct independent resource and engage the public on discourse and critical issues. the views expressed by individuals we host our their own and do not represent institutional use of the council. but if you know the economy continues to play critical role in the campaign and beyond. in 2016 our recent survey showed that 57% of americans believe the next generation will be worse off economically than today's workers. professor gordon contends that economic progress will be slow. however they argue that the future looks bright and it's a new age of invention. so is the best yet to come or the heydays of economic growth over? we? we look forward to a debate on this discussion. robert gordon is an economist who specializes in honoring on appointment. his a stanley j harris professor in the social science at northwestern and a fellow of the american academy
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of arts and sciences and the american economic association and a member of the national bureau. joe is an economic historian, a professor of arts and sciences at northwestern and president of the historian association and editor-in-chief of the economic history and co- editor of the journal of economic history. that's quite a lot of credentials to be having the discussion tonight. please join me in welcoming to the council. [applause] >> marken economic growth has really slowdown. professor has professor has a tough road ahead of him if he wants to try to put a happy face on this. this just look at the numbers.
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the 30 years up until 2000 for the u.s. economy gdp grew at 3.12 percent. by coincidence, if we if we take the 11 year since 2004 the crew at exactly half to the second decimal point. 1.56%. by 2015 going back to normal economy and employment rate you cannot blame the slackening off of growth on the great recession of ten years ago. so we have slowly and potential gdp growth. that's the growth of the economy when it's operating at full employment. the reason for this that will talk mainly about are the slowing of potential productivity. potential growth per hour. let's not forget that were than
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half of the slowing of gdp growth is actually because ours are growing more slowly. part of it is the population is growing slower, a, a big part is that we have had a turnaround and laborforce participation in the last quarter of the 20th century women flooded into the labor force and the number of hours of work for members of the population would not. in the last ten years, the number of hours has gone down, partly because of the retirement ongoing of the baby boomers and probably because a lot of discouraged workers have dropped out of the labor force. the best organizing principle to think about, the reasons for growth slowing down our sequence of three industrial revolution familiar to the economic historian. the first one on which joe is one of the world's greatest experts occurred starting in the late 18th-century and we think of it as the industrial revolution revolution associated with steam, the steamboat, the locomotive, cotton spinning and weaving. the the one that i like to talk about the second
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industrial revolution. this is the big one in terms of impact on the economy's productivity. think of all the things that were implanted at the same time. within three months we had thomas edison's lightbulb in october 1879 and karl benz is perfection of the internal combustion engine in december of the same year. electricity may possible, electric machines, home appliances, even air conditioning which had a tremendous effect on productivity. the internal combustion engine made possible motor and air transport. we had inventions that changed entertainment and communication starting with the telephone in 1875 and going through the phonograph radio movies and tv. in the olden pension going back to the romans it became common
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instead of on, in 1870 there's only a few minutes upon water works in the united states bringing fresh water to the home. by 1929 there were 9000 municipal waterworks emotionally constructed homes had bathrooms. we had a revolution in chemical starting in germany and also the united states in the late 19th century bringing us plastic, antibiotics and modern medicine. we had an an utter charge and working conditions. in 1870 half of the population was working on farms, victims of the weather, insects line in and out of houses, the third industrial revolution familiar to us has occurred since about 1960. it's when we associate with television and all of its manifestations, cable, color, streaming the information revolution going from the mainframe and minicomputer going to the personal computer into the internet.
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if have mobile phones and smart phones and little inventions that made a big difference to productivity including the atm cash machine a barcode scanning when you checkout from retail. what did all of this revolution contribute to productivity growth? the height of the three bars is the growth in labor productivity in the three bars from your left 18921920, and the time since 1970. it's conventional among growth economist to decompose the growth of productivity into the contribution of human capital or education that was pretty much the same. then the contribution of physical capital, with equipment with equipment and machinery that was pretty much the same through all three so that leaves us with the black area which we call total productivity represented the impact of technology and innovation, all of these
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inventions, as you can see as you look at the block area, the middle time wins hands-down, much faster growth in productivity suggesting the payoff from the second industrial revolution was delayed, didn't actually start boosting productivity until after 1920 is also much bigger in magnitude than anything the computer has created since 1970. looking more closely this goes back to 1950 and these are five-year moving averages of total productivity, is basically the contribution of technology and innovation everything was doing great in the 50s and sixties, the slowdown started in the 70s and eighties, we had a revival of productivity rick growth that most people associate with the coming of the internet of the.com era the.com era but in the last ten years or
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back again with is a better record as you can find going back in history. in my my view the third industrial revolution has failed the test of tmp growth both in terms of overall impact over the last 45 years and the fact that the revival they created only lasted a decade. and so i so i ask in a skeptical way, could we conclude that the main fruits of the third industrial revolution have already happened. when i look around i see a lot of standing still. we have e-commerce, that's up to about 8% of retail fails. >> we have removed electronic self checkout and gone back to
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humans. so so we're going backwards in that example. we've had spaces in finance, is 20 years ago that we went from a million share days 2 billion shared ace on the new york stock exchange and nasdaq. more than 30 years since cash machines became common. in medicine their small improvements but basically what doctors and nurses are doing everyday is at the same as it was ten years ago with the exception of electronic medical records. that means when you go to see the dr. instead of looking at you he's looking at a computer screen. what about higher education? we are here tell you that we were good teachers back in the 1970s and eighties, our students learned as much from us back then as they do now. but the universities have become much more expensive. northwestern with all of its fancy facilities and the ratio to instructional staff has
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increased. lots of innovating going on now 3d printing has made remarkable moves. it is becoming more useful. in high fashion they're using 3d printing to make garments. it is not mass production. you you cannot make 17 million automobiles here with 3d printing. robots stay back to 1961 when i took i took several tours several years ago. robots were already welding bodies together and dominating work and paint shops. how far have robots come? for a wake-up call i wanted to
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cast a little doubt on the progress that robots are making. have a quote from the new york times exactly one year ago that i wanted to read from. an interesting reality check took place in june 2015 when two dozen teams of leader robotic engineers assembled under the sponsorship of the pentagon's research agency. robots had to do simple tasks, walk up steps, turnabout, operate a power drill. the task would've taken a human five or ten minutes at most. the leading winning robot took 45 minutes and that was with remote-controlled help from the humans. most struggle badly falling down steps and taking long pauses to figure things out. turning a knob to open a door proved daunting. one young young man in the audience said, if you're worried about the terminating just keep your door close.
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what about driverless cars and trucks? they seem to have arrived very fast. we hear hear a lot about them. but driverless cars and trucks are truly, in terms of actually getting the human away from the steering wheel a decade or more away. we have a fleet of 200 million or more cars that require drivers that are not going to disappear overnight. this is something that will have a main impact in 20 or 30 years from now. don't forget truck drivers do more than just drive a truck. they unload the beer and the soda pop, and the bread at the supermarket and carry it in and arranged on the shelf. arranging on shelves is something that humans do today as i did a century ago. i think the big progress is being made in artificial intelligence. the qualification is the one we take the analysis of big data which is a main function of artificial intelligence, by far
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far the largest expenditure is occurring in marketing departments and companies are studying hard how to silk customers away from their rivals. that's interesting but not productive for the economy as a whole. when were merely shifting market share back and forth. there is change, voice recognition has improved, radiology reading, language translation, were beginning to see the effects of rubble financial advisors replacing her working a complement to personal financial advisors. there's innovations occurring all of the time that i would classify as of marginal importance. what you think a virtual reality goggles? or the internet of things. sensors inside your refrigerator to tell you you're running out of milk created an automatic shopping list on your cell phone. it's that equivalent to the invention of the telephone
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itself. joe has a very impressive list of ten important innovations that are going on now that he emphasizes a nice story about him in the wall street journal last week, a phenomenon called bite back that many innovations are fighting negative consequences of past innovations. some of the list, global warming , fresh water scarcity, drug resistance to antibiotics, growing impact on alzheimer's as people age, great burden on the medical profession to learn how to deal with that. the effects of increasing obesity which is more rampant in the united states and other countries. information overload which you could also add hacking, cyber security, and all the things that go with the computer age.
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this is what were talking about tonight, innovation and how important it is. i wanted to mention my story about slowing growth is not about innovation it's also about the four headwinds, it's about a slowing down in the growth of educational attainment, in part because of high rising tuition and student debt. education was a linchpin of productivity growth. we have a demographic had went i already mentioned as instead of having more hours per person as women went into the labor force we have fewer hours as the baby boom generation retires. we have rising inequality, if you compare the bottom 99% in the top 1% of the last 20 years the top 1% got 52% of income gain. their growth and income was 95 percent, the rest of the population had, the rest of the
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population had a growth of 15% by one calculation. that means the median growth of per capita income is slower than the average. and finally we have a fiscal head when that came up in the third debate when a question was how do you deal with the rise of the federal government's debt to gdp ratio that's going to go from 75 to 85% over the next decade and well over 100% in the 2030s and 20 forties. the. the candidates dodged it but society cannot dodge it forever. so education, we had a downward drift in productivity growth in part because education isn't the stimulus it once was. we have the headwind that reduces hours per person. we have any quality that reduces medium growth compared to average growth and we have a fiscal head when that ultimately will have to lead to a reduction in benefits for people who are retired or increase in taxes to pay for it.
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the red and the blue bars contrasts less 100 years going back to 1920 up 20 up to 2014 shown in red with the blue bars which are disparate concepts of economic growth over the next 25 years. in each case you'll see our past is more impressive that our future. the the most optimistic prediction is for productivity growth itself. i estimate it will be 1.2% over the next 25 years. the problem is that it's only been half of that for the past six years. so i'm an optimist. i am prediction suggests productivity growth will pick up from what we been observing in the past half decade. the way move on to income per capita, the blue bar is slower because of the retirement of the baby boomers, the reduction of hours per person. then we move on to the median compared to the average. if inequality continues to grow and there's no end to talented people in the stagnation of income for people who are high school graduates or dropouts.
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we end up with a story not optimistic. medium growth and income perhaps only .3% per year over the next 25 years. that's radically different than history. so here my conclusions, 70% of all growth and the impact of technology and innovation that we've had since 1890 occurred in the middle five decades of the 20th century. most of the big impacts of the computer age were in place by 2005, ten years ago. ten years ago. innovation continues now but it's having less impact for all reasons suggested. much is caused by the headwinds not the slackening of innovation all by itself. finally the fact that innovation is incremental and not revolutionary means that we should not be scared about the future of climate. we have crated created 15 million new
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jobs since 2009. not all the jobs are great jobs. but i think this scare mongering about computers taking over in one estimate 47% of the jobs are supposed to be eliminated in the next ten years it's just fantasy. if you look at the diagnoses of future employment they fall apart this scare mongers to say have a jobs will be sorry to tell you the commercial -- [inaudible] thank you.
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>> wonder toots types of pessimists in the world half of our innovations have not fully work themselves out . .
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>> also there's, of course, wasn't bad enough but the notion of the stagnation an a different argument than bob is making but awful, you know, unemployment and you know, aggregate demand and i'm only going to talk
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display because it is more interesting and bob is a more wealthy -- opponent than summers, and so there's bob's book on the table it's a very nice book. now -- we've been here before ladies and gentlemen. here's a quote from a very well-known english historian called thomas who wrote in 1830, and i >> you to read this because this is the kind it be i think he's almost talking about the bob gordon of his time. nobody seems to reckon in the next generation now we cannot prove to qualify but those face a turning point and we've seen our best days but it all came before us and just as much a parent reason on what had principle he's asking nothing proven behind us.
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we are to expect nothing but deterioration before us. now mind you, this is written the year in which the first flame ran between liverpool and manchester. now, bob of the time would have looked at it and said never worth -- looking at smoke, you know, it's unreliable the new jerseys break down we can only maybe had the few passengers you know, but there will never amount to anything. that's you know this is 1830 mind you it is the beginning of the age of railroad and i think a generation we have had people who said oh, this has been fine until thousand but from now it's over so my bottom line on the future is quite different from bob's it is very simple. this is it. we ain't seen nothing yet and i say this you know without necessarily saying exactly the way it is going to go because if i knew it i would be investor as they famously said but you may
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want to reflect a little bit on what is known as the law, and amara law we overestimate the new technology in the short is run and underestimate the effect in the long run. i think in the long run, we are going to look at change it is in the human condition whatever they will be, it will make everything that bob has been had talking about in his book look like just the prologue. can i be sure? ok not. or else it would be a prophet but what i can do. is i can try to identify the kind of factor that has made for technological change in the past and i ask myself what is it going to look like in the next not three years, not five, next 25 years. the next 50 years, next hundred years. and that's what i want to take
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you through and a model how technological comes about. so basically the standard story that we used to talk about in the past is something like this. signs evolve so we understand more about natural phenomenon and natural regular regularity e apply this, to find some use for it and becomes engineering and in the end has presumption and bingo we have economic growth, we have total factor productivity and new product as we get something. but this has been debunked decades ago by people pointing us to something quite elementary and that is their feedback. their feedback going from production and from -- engineering back to pure science. once you have positive feedback working between two processes, okay, they can actually die verge in the resettle down because they reenforce one another.
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and so what you get is sort of the dynamic puzzle of the feedback model to diverge and explode and doesn't settle on equilibrium so what it means is something like that and invent technique or that leave it is to a insight inside the x besides it is done supporting new technique call it technique b and it follows leads to inside y, and so on and so forth. that is, you know, very the way to look at the development of the western world and, of course, the rest of the world in the say -- the time since beginning of say -- maybe age of columbus or something like that so from 60 to 17th century this has been building on itself going faster and faster and faster.
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now, here is an example that you should all keep in mind and that is we talk about the scientific revolution of the late 17th century as a -- revolutionary feared in which people start to understand the world around them far better. that revolution ladies and gentlemen, was built on two instrument built by artisan here is an example. this is galilee telescope by the way first time you learn in school moon of jupiter the face of venus and establish a structure of our -- astronomical system. right to have the microscope one of the first ones built in 17th century essentially allowed us to understand much better the kind world that animal and plants consistent of. this third one and particularly fond of and built in the 1650s
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which basically showed for once and for all and scientific insight it is come placed with which is a vacuum is possible in conclusion what aristotle has been teaching for 2500 years so the matters because without a vacuum you don't get, of course, a vacuum machine which is first engines wear. so what about today? now the telescope and microscopes we have today make all of these scientific instruments look like amusing toys. okay, louie would never have dreamed of this. this is -- betsy type of stimulated emission microscope used today or variance by all people working in -- nonelectronic and nano technology. this compared to that, you know, what is to work with is really a toy. but we have so much more. scientists today work with those so pee mincely powerful that
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even four years ago we kopght have dreamed of it. one of those is lasers, lasers is one of the most powerful tool of scientific that scientists can work o with you know, it's working scores of scientific obligation some of which quite apply and some of it like gravitational waves applied last year. so it is still remote but who knows where that is going to lead. weaver something else and we tend to chief computers affecting productivity for the boom of clinton years bob said less to computers. but what we forget is that computers have an indirect effect because computer it is allow better research to be carried out at a scale and a level that nobody would have dreamed of. as late at 1960 we have today entire field called
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computational chemistry and biology that have opened it new horizons in the material science. in -- you name it in areas that we didn't even -- didn't even exist a few decades ago. and what is more -- revolution is brewing in this type of computer, form of computing it is going to allow you to play a computer game better. it will be revolutionary in computational analytics. and so what we with came to do is look at computer and say well product iivity here or there and it will affect everything because of the indirector effect on ten, 20, 30 different field of research that are are all growing at unprecedented rates. so think about what is happening today in biology. the new techniques that we have -- so-called gene drive technique
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so 9 -- no. that's not just going to help us overcome genetic diseases much as porpt as that is but allow us for the first time to play god at the level that nobody ever dreamed about. we will be able to design, plant and animals according to specification. that's may sound scary to you and to me on a bad day. but i see no other way of us adapt together great threat of global warming that is upon us. now we have the tools to do so. this will be, ladies and gentlemen, economic growth, it will be economic growth of a different kind that we've had but it will be just as we've been. so beyond that on what it will do to material science. here's something to think about. every age if is to call itself after the main material that it use sod we have the stone age.
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we have bronze, iron age, we have the steel age. our age will not be named after any raw material that becomes available to us because we're going to make the stuff that we need by using techniques in silco with powerful computers using computational history and physics. now what about productivity, so we help productivity through answers yeah, it may. but i don't particularly care because -- you know, the first thing i teach in my economic history class we talk about that productivity which showed you from grass up. total factor productivity and change is quite different things. what counts in the long run is innovation and what happens in the productivity is the way it is calculated bob knows it better than i do is sort of dicey at betz.
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but more important lots of things don't end up in the new which is to allow it. to give some example, you know, two of the most interesting they thinks they thinks that they have given us in last ten years -- [laughter] as spotify and wikipedia, their contribution to gdf is close to zero. why? because they're free. and everything that is free enters the national income account with almost a price of zero. there's some, you know, commercial and sales but the value to us is vastly larger. we can multiply this example and so i want them by bob -- not because he's doing it wrong because they were designed for a different economy than ours. they were represent for the economy produced wheat and steel and cotton and ours use for digital product they play by different rules, and so --
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now innovation other ways to measure innovation, i'm not mad about this. this graph but i think bob shows you, one will show you a graph. this is the total number that, you know, filed for in the u.s. since 1960 so which everybody supposed to be going down and collapsing people are still inventing things and pattening they thinks it eighty innovation. some thinks patents are frivolous but the first approximatey is probably not all that much worse than bob's total factor productivity bar soy stand by this. i don't see any evidence of this -- is going down. if you look at the period in which total productivity is growing so rapid lid and saying it about constant, and growing about 4.4% a year. not -- great but not bead.
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so what is measuring here go on and on it be this. lots of things that are not entering bob's numbers. should be important to us because they matter to how we feel how we are, how we live and how many quality adjusted life years we have, but all of the small thing, you know, for instance i give you one example. which is bob's stock. gdp statistic don't handle leisure so if you work less but per person there'sless. now leisure isn't valued that question was asked when i was a groont graduate student by james tobin and we should have leisure in our account. we don't. we still don't. lots of other things aren't in there so my sense is -- yes.
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i wish productivity would go higher but i'm not staying awake of it overnight. so to conclude the roman empire and china, and we're about to land in a age of economic decline and barbarism is probably overstated -- [inaudible] you implied it, no i'm kidding. but no technological progress is not going to reach a ceil aring. it won't. there's not a bit of evidence that flew out the history people who said everything that can be inventedded and known and has been discovered there's been turned out to belong over and over and over again. i mean scientists tell us you know we know so little. there's still so much to discover and i agree.
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economic growth this a meaningful way maybe not in a accounting way will continue. and the digital age will be to the ant log age what iron age was to stone age and nobody in this room at least of myself -- can imagine what the post dejal age will look like anymore than our communities who imagine, thank you. now, we're supposed to have a chat. [laughter] that was a good thought you gave bob -- let me -- let me start out -- >> i'm the almost convinced half way and then -- >> let me start at the end -- i've heard this before. >> yes. [laughter] so --
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yes things are left out in gdp that is true we're now leaving out value of wikipedia and wonderful things of smartphones do don't forget we pay for smartphones we pay quite a bit. my cell phone bill is 121 ab month so it is not exactly free. but it does give us lots of i remember how excited you remember when you got your first smartphone. and -- [inaudible] i value it perhaps most of all for giving me something to do in dark tax season when i'm driving downtown. but think of all of the thing that were left out of the gdp years ago transition from horses to motor cars the remost of all of ma knewer from the streets. eliminate of infectious it hases, the conquest of child it shall insignificant mortality. you know in 1890, 22% of american children died before
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the age of 1. by 1950 that was down to 1% or less. joe mentionedded leisure is something that is left out of the gdp yes leisure is left out of gdp but when did we get the biggest change in leisure not in the current age working hours at the urn it of last century in 1900s were 60 hours a week in manufacturing. 72 hours a week standard shift in the steel industry they wanted to run the steel shift twice a day and they wanted to keep the steel mills going 24 hours a day. so 24 divided by two was 12. they made the workers work is 12 hours a day six days week. the big decline in average hours of work occurred between 1900 and 1940 a reduction from 60 to 40 hours a week. we still do not duplicate western europe in our vacations. we still have only two weeks of vacation. they have five. maybe that's an area where we'll
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get unmeasured growth of gdp in the future. >> think about life expectancy. joel's teacher bill wood house who is my office mate and graduate school has done a number of stunning papers in his life and one of the most important was called the health of nations. in which he measured the value in terms of consumer goods of increases in life expectancy and health and according to his had data, the -- effect of rising life expectancy was to more than double the value of all of the gain and consumption that were gained in the 20th century but rate of yo. was twice as fast in the first half of the 20th century as in the last half. because getting rid of infectious it hases was actually more important in extending people's lives than all of the wonderful things that have happened since then. so --
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gdp left out a lot back then and something you agree with. >> of course i agree with that. there is something, however, missing in your comment which i would like to point out that is that you showed us bars for a total fact of productivity and -- it is well understood basically what we do is factor productivity is we look at growth of output and subtract off weighted index of the growth of input so now, what an important it shall to understand is that had if you are leaving out -- but don't appear to calculation then your productivity statistics are, obviously, overstated. now, i think this is something which we haven't paid enough attention to and there may be some unfortunate ph.d. student who will revise national income account basically taking to account the fact that a lot of
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people that are -- important in bringing back output growth aren't fully accounted for and bob mentioned that -- as i call bite back and i want to find out revolution that he talked about is to -- a large extent based on the use of fossil fuel. so started off with coal and then you know, later 19th century moved into -- into oil and then subsequently to natural gas and we remember basically calculated the cost of these a total amount of labor, capitol whatever we're used and calculate that index subtract out -- and well total productivity. wasn't realized at the time it was ore inputs that are used up in this mainly --
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its impact on air quality and eventually, of course, on the very careful balance ecological blafnts planet so take that as a cost that had to be paid for that wasn't. maybe after -- productivity calculation don't look nearly as rosy as that it did in his bar so that would be true for almost anything so antibiotics you know great invention you know people live longer, with fantastic. what wasn't realized that antibiotics was a built in mechanism attempt to become ineffective and we have to run faster and faster to stay is in place. so again these productivity calculations look a bit dicey to me and a lot of growth in the next 50 years will be to some extent to pay the cost that the
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generation -- didn't pay in part because of the market failed and in part because they have a good property right and weren't aware of it. so that's one thing that -- that make me worry about his productivity comparison. the other thing is, and there kind of takes me back to bob's point about leisure, yes we can measure amount of people work and roughly speaking correct and on eve of world war i say around 1900, 1910 average work in the western world work somewhere around 2900 for a year and today in the united states we're about at 1750 and in europe in some places below 1500. people work less not only that they work few hours year but start later. they end earlier. they have many golden years after they retire because if you're not condemn you go on forever but that's a different story.
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but what we haven't about thed for is the change in quality of leisure. the choices that people have. not just looking at, you know, 250 cable channels but the hundreds of other things that people can do today. i mean, in the past -- leisure available was dull. people played cards if you want to go a show in the united states in the 19th century you can go to eye gouging contest that sounds like real fun. today the choices that people have -- in term was what to watch i can push any button on this cell phone that bob thinks is such mundane invention not only that i can make phone call and communicate. i can play any mozart quartet and he couldn't do that or 20 years ago.
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leisure ain't what it used to be. now not all of this is something that intellectual feel happy about. one of the interesting papers in the last few months is work by eric hurst and those in chicago pointing out a labor about force is happening because -- people in labor force are staying home and playing video games. [laughter] so you think -- is this the good news or the bad news? >> now wait a minute -- >> that's i can send you it shall >> no, link to the facebook -- >> i know eric hurst and the paper. question is which way is the car facing? >> i was going to come to that. i don't know. >> you've been talking long enough. let me make that clear. [laughter] we've had had a very unfortunate reduction in good middle-class
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blue collar jobs due partly to degloballization and advance of the machine and outsourcing, as a result there are people middle aged men who have lost their job and they don't have skills to take up another one or may be in the wrong location, many of the so-called belt cities of the united states leak youngs town, ohio, are too small to provide ample opportunities. we lack the german style of apprenticeship vocational training system that provides good high skill jobs for college, and as a result are these people who cannot find new jobs are left idle. some of them have been able to qualify for social security stability based on a mental or physical disability and others, and they, however, they're being paid social security or not are idled and are playing video game
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ares that are many other things but it's a consequence of the -- side effects of globalization and don't forget the machine age itself. and you know, economists will tell all of their elementary students that globalization and trade provide two kinds of gain and one kind of loss a game to consumer getting cheaper imported product and gain to those who work or stock in exporting industry and a loss to those who compete with the infort, and the winners gain bs outweigh losers and there are enough gains so that losers should be compensated with help and retraining unemployment compensation. whanch you just said undermined your own argument what you're describing is a process of rapid technological change and historically speaking that is what technological change has done. it has taken people who had --
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jobs who had occupations whether farmers or whether they were coal miners or whether they were, you know, weavers and they said, your skills are no longer needed. go do something else and if they could find something else, they did and otherwise they went victims of progress. nobody has ever said that they are losers it always does. but is it the very nature of the process and what you describe because yes it is technological change going on people are losing good middle class jobs because they are farmed out overseas thanks to better technology. that is presentable and -- sad. but it is the nature of the beast. in societies of technological stagnant this doesn't happen but only happens -- >> you said dynamic and this is us -- >> let's do economic history. we've had the labor force participation rate of prime age males age 25 to 54 was 96% in
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1950 and it is now down to 85% so that's about 10% of all of the prime age males are no longer in the labor force. so what happened between 1920 and 1950? they all made progress middle skill, middle income people were the beneficiary of what two economic historians called great compression in the income distribution. a move toward equality of income instead of the lack of equality that we've experienced now. labor unions were a big part of it. labor unions in part of product of new deal legislation in the 1930s and we're at their hay day in the 1950s so things were getting people will middle skill and income in the 40s and 50s. as their hours of work were declining these same people are experiencing unpress -- historically unpress deputied
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decline in their ability to find jobs so another jaunt classify this as a headwind so let's make that number five. >> well it is not different from your inequality and your question that -- even if it will continue there will be problem on the hordes inequality is a serious one. but i -- am i tend to be bullish on unemployment prospect and the reason i am is largely because technology jobs and it creates jobs unfortunately people jobs who are destroyed can't always move organically and naturally to other jobs and that's a big tragedy occurs but i challenge anybody to think about jobs that are occupations today and act -- try to make -- go back in time mentally speaking and ask your great,
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great grandmother in 1900s you know your great, great grandson will be a video game expert. they won the have what you're talking about these jobs came out of a totally novel technological paradigm and we're creating new such paradigm i don't know where these jobs exactly are going to -- what they're going to be. but it's quite clear that new jobs are being created. that is not a consolation for the blue collar workers in areas that bob is so concerned about. but in the long run, in the long run that children, grandchildren of these blue collar workers will be able to find new jobses in occupations that we cannot even yet imagine anymore than anybody in 1914 could imagine what a cybersecurity expert was going to do. >> so by talking about cybersecurity experts with the emphasis on cyberthese are
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highly skilled jobs that require great familiarity with computers and computer programs they're just the kinds of jobs that are being created for the people in the top one-third of the labor force. we have jobs that are being created in their millions for people in the bottom half of the labor force. what is missing is the jobs in the middle famous m.i.t. economist several of them call this polarization. the splitting apart of labor force between the low and high with the middle hallowed out. let me mention something else that worries me a lot. ...
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i put a particular emphasis on that at the end of my book. government supported preschool and we have children growing up
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arriving in kindergarten with a vocabulary gap of 5 - 1 compared to middle-class children. there's no way we will improve that. this is very connected to the fact that i just read about yesterday that the percentage of chicago public school students are at reading level was at one quarter, three quarters are below that level. so preschool, we will never get this because it's a matter of local control, it's not the hands of the federal government, but we have elementary and secondary education that is financed by local property taxes making it inevitable that suburban school districts lavish their children with facilities and equipment that inner-city schoolchildren only dream about. we read about detroit or the schools like books, they're overrun by rats and mice, go on to college, i'm not for making
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college tuition free for all state universities, coming from from a private university that's unfair competition. but, we do need to move over to a very different method of student loan repayment, that something that the government has a lot to do with an australian britain they have gone far down the road to income contingent, one repayment where he don't have to repay your student loan if you're unemployed or in a low-paying public service job. so just one of many things i could talk about, what is our political system of the federal level to be able to do about this, they too have a potential role in preschool education, i think financing of elementary and secondary school education which is out of the hands of the federal government is a hopeless cause in the federal government can do something about college loan repayment. that's just a starter. >> i don't disagree with
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anything, unfortunately for you there's not can be much disagreement, i would add one thing and that is that i think creativity of all kinds including is stimulated and enhanced by openness. when i say openness i mean openness at many levels, not just openness in terms of we should basically trade with companies that make things better than we are and perhaps if we can learn from the product they're selling us all the better. if not will buy them cheaper, but we should also openness and allowing talent from other countries to flow into the united states. one of the great booms of the american continent has this fantastic inflow of human capital produced elsewhere and you go and you look at places like silicon valley and the boston high-tech areas, so they should have science, english spoken here because most
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places people is a mixture of hebrew, chinese, german and so on, openness and the realization that the people coming into this country are bringing a freshman freshness and initiative that we badly need. that i think is something that is a matter of government policy. in just one other thing, this cannot be enough. the government should do and come to the conclusion that the age of fossil fuels is coming to an end. now how are we going to make that position is the biggest challenge we have before but fossil fuels, that ages come into an age, most of the fossil fuels in the ground today will not be used, should not be used, cannot be be used, cannot be used. we have to come up with alternatives.
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some of them will be evolutionary like solar wind, it's possible the revolutionary technique is still coming, it could come tomorrow, can never come, but the age of fossil fuels is over. >> let me get back to immigration, the cover story of this week's economist is about canada. canada admits three times a population it does so with a point system, points for education, points for employability, and their culture is diverse and thriving, we could go much further than this would incorporate joel's desire to have more high skilled people the canadians system brings in high skilled people automatically, that's what it's about, and it's a way of offsetting. >> bringing in young immigrants
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you will reduce the average age. >> amen to that part. >> i have a question, some of your optimism comes from the quality and quantity measure in the free stuff that we can enjoy, that's all good for welfare, but as an investor, it doesn't imply the i don't get much return on capital. is there reason reason for me to be optimistic? >> well i'm not sure that is at the center concern of most economists, the return to capital is going to be in for us what we are clearly interested above all is some measure of self social. there's a sharp decline in the return of capital and low interest which results -- they
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are reflecting the fact that the capital needs of these new technologies are much lower then they have been in the past, that said, it is also quite clear that what our country needs and what much of the world needs is more investment in infrastructure, it is been repeated over and over by both candidates are infrastructure is crumbling, the problem of course is that much investment in infrastructure is hard to extract a rate of return on. so one thing that i have been an advocate of is to try to privatize more infrastructure. this is happening at some level but not fast enough. technology you technology allows us to do this because we can stake on every car that says you have just cross that bridge and we
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are going to charge you a dollar because the bridge needs repair. we do very, very little of that now, we could do far more. what is good for true for transportation is true for the water supply and electricity grade. that is where the capital should go. if we can privatize it that i think would be good news for investors, because they they would be able to buy more and more shares or ownership then part of our and superstructure are airports are a disgrace. you fly to lax from singapore and you think she, and landed in a third world country. it's that embarrassing. now why is that? because that has to come from
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the public sector. public investment in this country has not been doing well in the last 20 years because people in power feel that their raising taxes for the purpose is not a good investment. were paying a high price for that in public health and transportation, but it can be done. in modern technology allows it to do things that you never could do before, i actually think this kind of privatization is one of the great booms of modern technology, even some afraid they may not show up. >> we have time for one more question place. let's go to the back can you come out on watson referred to as the financial is asian of the economy. finances outgrowth and influences that inhibiting productivity? is it exacerbating inequality?
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>> yes. i've been reading an interesting new book called the innovation illusion. you can can see why you might be attracted to the title. this by two swedish economists and they coined the phrase which is related to your question, great capitalism. they point out that the age of the entrepreneur leaving aside the wonderful inventions that joel and i carry around, smart phones and you do to has been diluted by the fact that so many corporate shares are owned indirectly in vanguard and fidelity type no loan index funds with ownership of the corporation so spread among decision-makers that there is no impetus for risky bets, long-run gambles, and in excess emphasis
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by those who run corporations on short-term payoffs. we know part of the productivity problem at the moment in the united states is low investment. now that the corporation has plenty of money. they're sitting on 2,000,000,000,000 cash, buying, buying back shares, paying big dividends, and not investing in plants, equipment, and r&d to the extent they use to. i think these are all connected. the emphasis connected. the emphasis on short-term profits and stock market returns which was a question that we just had is detracting from the potential of innovation economy. >> i'm a little bit concerned myself about the fact of what financial has led to the thing is a sharp decline in the competitive level of the economy
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in many sectors i'm not the first one to -- this is been known for a long time. and this is a basic concern. comes back to the question of policy. i think competition is an endangered species that always need support. this is been realized in this country since 1890 and it's still true today as it was then. so there are things about financial world that are good for competition. the fact that you can be bought up by private equity firms if you don't perform. that's always hanging over the head, by and large. >> that answers for short-term profit. >> well yes, but companies are able to elevate themselves. you you think about a company like amazon.com which never makes a

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