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Home » Uncategorized » 20161029 The rise and fall of American Growth

20161029 The rise and fall of American Growth




The main idea of this book is that century and a half from 1870 until 2014 USA went through periods of huge growth and dramatic changes in Total Factors of Production (TFP) and consequently quality of life. However level of growth and improvement was unequal concentrating in period 1870-1970 with dramatic slow down in period 1970-2014 despite temporary spike in 1990s. This slowdown is inevitable due to multiple headwinds that American society encountered and so far failed to overcome. Author proposes a number of ways to fight these headwinds, but he seems to be not very optimistic that they will be implemented and would really help.


  1. Introduction: The Ascent and Descent of Growth

This is the book about change in the temp of American growth from high levels of change in productivity, output, and living standard in century from 1870 to 1970 and dramatic slowdown afterword. The main point is that this special century brought in changes in productivity and quality of live that could be implemented only once and would not be possible to match in the future such as implementation of electricity, automated water supply, sewer, and substitution of animal power of humans and horses with mechanical power. All following up progress that occurred after 1970 is a lot less dramatic, occurring at much lower speed, and mainly incremental. Author believes that it is the way things will continue to be in the future.


  1. The Starting Point: Life and Work in 1870

This chapter describes demographic, production and consumption situation in 1870. All of this changed dramatically over the next 140 years from work being mainly manual in agriculture to work being mainly cognitive and in services, while consumption from food and clothing as main items to services and entertainment and communication goods that did not existed in 1870. Here are a couple of tables:



The next 7 chapters provide detailed review of all aspects of human live in America and how they dramatically changed over this period:

  1. What They Ate and Wore and Where They Bought it
  2. The American Home: From Dark and Isolated to Bright and Networked
  3. Motors Overtake Horses and Rail: Inventions and Incremental Improvements
  4. From Telegraph to Talkies: Information, Communication, and Entertainment
  5. Nasty, Brutish, and Short: Illness and Early Death
  6. Working Conditions on the Job and at Home
  7. Taking and Mitigating Risks: Consumer Credit, Insurance, and the Government

 Entr’acte. The Midcentury Shift from Revolution to Evolution

This is about unevenness of progress that occurred, from high level of growth in productivity and output to stalling and then decline of speed of growth:



This part provides detailed review of the qualitatively new goods and services that were invented and implemented during these 140 years and how they dramatically changed quality of live:

  1. Fast Food, Synthetic Fibers, and Split-Level Subdivisions: The Slowing Transformation of Food, Clothing, and Housing
  2. See the USA in Your Chevrolet or from a Plane Flying Above
  3. Entertainment and Communications from Milton Berle to the iPhone
  4. Computers and the Internet from the Mainframe to Facebook
  5. Antibiotics, CT Scans, and the Evolution of Health and Medicine
  6. Work. Youth, and Retirement at Home and on the Job

Entr’acte. Toward an Understanding of Slower Growth

Here author restated the important point of growth stalling starting in 1970s mainly because of dramatic changes such as electricity, water, sewer, cars, and instant communication that can happen only once and further improvement such as computers, smart phones and such being intrinsically of significantly lower value.


This designed to demonstrate that slower growth and improvement is inevitable and we should learn to leave with it and maybe even love it.

  1. The Great Leap forward from the 1920s to the 1950s: What Set of Miracles Created It?

This is look back at 1920-70s as the period of fast growth of TFP and implementation of the second industrial revolution based o electricity and mass manufacturing.

  1. Innovation: Can the Future Match the Great Inventions of the Past?

The brief answer is “No” because Internet, computers, smartphones, and such are inferior to previous achievement in their impact on human lives. Author also discounted fast growth of 1990 as somewhat temporary deviation from overpowering trend for growth slowing.

  1. Inequality and the Other Headwinds: Long-Run American Economic Growth Slows to a Crawl

The final chapter analyses in details what author calls headwinds: inequality, education, demographics, and fiscal problems and concludes that they will cause slowdown of increase in productivity and consequently improvement in income.

Here are a couple of nice graphs demonstrating changes in growth of productivity, compensation, and Total Factor Productivity (TFP):


Postscript: America’s Growth Achievement and the Path Ahead

Here author provides what he believes would be effective remedy against headwind factors, which are typical for moderately leftist approach: decrease inequality by taxing more, increase minimum wage and earned income tax credits, legalize drags, and decrease incarceration; provide better equality of opportunity via increase in educational spending and further nationalization of education. Author also proposes non-leftist measures of decreasing regulations and licensing requirements to provide for more opportunities. Here is a nice summation for his recommendations.



This is a wonderful and very well documented account of changes in productive abilities and quality of live in American society, albeit somewhat pessimistic in regards to its future. From my point of view this pessimism is not justified. One reason is the mistake of measurement: there is huge improvement between having no electricity and its availability, which is the unique event that should be put outside of measurement of progressive improvement. From this point on increase in availability of electricity at decreasing price is measurable as amount of money spent per unit of energy including minimization of environmental impact. This way it could be demonstrated that we have still lots of space for improvement. It is quite conceivable that traditional material needs could be fully satisfied at negligible price so no more improvement will be feasible and Artificial Intelligence would completely substitute humans in all routine tasks, even complex cognitive task in legal and medical professions. However the human need for intellectual and emotional consumption from self-actualization in interaction with other people could not have any conceivable limit, leaving plenty space for progress. The only real barrier that had to be overcome is the structure of society currently built on selling and buying labor, the process that rapidly becoming meaningless. In my view as soon as it would be supplemented by equal and marketable property rights for natural resources, the shackles will be taken away and improvement in quality of live will grow at increasing rate.

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