Friday, February 18, 2011

Hitting the (Mirrored) Wall 3

We will start where we have been before, but are going to wind our way toward other subjects.  We may ramble a bit.  Eventually we will try and close the loop on diminishing returns on the industrial revolution, and our current narcissism.  It could be said in two sentences (to paraphrase Freya) but there would be no supporting information and links.
Tyler Cowen has had out an e-book, The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better.  I have mentioned on an earlier  post.  In it he discusses U.S. income stagnation since the 1970s and attributes it to a deceleration of scientific and technical advances within the U.S. economy.
He commented on Alexander J. Fields work on Total Factor Productivity (TFP) which is total output not caused by inputs.  So if you put 1 in, and get 2 out, you have TFP.  Technology growth and efficiency are two of the biggest factors in TFP.
Fields in his study History of U.S. Productivity in a Nutshell   (ht to MR) noted the following:
TFP growth virtually disappeared in the US between 1973 and 1995. TFP growth was in fact quite robust between the end of the Civil War and 1906.
In a study I found, also by Fields,  The Most Technologically Progressive Decade of the Century he commented further:
Because of the Depression’s place in both the popular and academic imagination, and the repeated and justifiable emphasis on output that was not produced, income that was not earned, and expenditure that did not take place, it will seem startling to propose the following hypothesis: the years 1929–1941 were, in the aggregate, the most technologically progressive of any comparable period in U.S. economic history.

[D]uring this period businesses and government  contractors implemented or adopted on a more widespread basis a wide range of new technologies and practices, resulting in the highest rate of measured peacetime peak-to-peak multifactor productivity growth in the century, and secondly, that the Depression years produced advances that replenished and expanded the larder of unexploited or only partially exploited techniques, thus providing the basis for much of the labor and multifactor productivity improvement of the 1950’s and 1960’s.

All of this is very interesting.  Of course most people are familiar with Ford and his assembly lines,  Edison (really Tesla and Westinghouse) and his electricity, and the Wright Brothers.  It is just not obvious when all of this inventiveness came to its peak fruition.
There is now an emerging consensus that, looking back over the course of U.S. history, the period between roughly 1905 and 1966 experienced exceptionally high rates of multifactor productivity growth, substantially higher than those evidenced in the decades preceding and following, when a much higher fraction of labor productivity growth is to be attributed simply to capital deepening (Abramovitz and David, 1999, 2000; Gordon, 1999, 2000a, b, c).

If I am understanding him correctly, what he is saying is that the low hanging fruit of the industrial economy was captured in the 1930s and 40s.  But there was still a lot of applications to apply after that period.  So there was growth, just not as extreme.    Also many of the improvement put in place in the 1920s (a lot of it being automobile related) began to bear fruit in later.

Although not as extreme of a drop off as with the productivity numbers, they do indicate a tailing off period.

One side note we should make,  extreme advances in manufacturing productivity have been discussed as one of the reasons that the United States was so slow to come out ot the Great Depression.  Even when demand would pick up, you needed less workers to perform the same amount of work.  But this is not popular with Economists who seem to like money measure and output measure explanations.
Earlier we were discussing the narcissism of the Greatest Generation 2.   Here is one of the key seeds in the process. 

The United States through the 19602 in its own estimation had been the ever-optimistic, ever-expanding, ever-growing forever.  We were proud of our country.  We had conquered Jim Crow, spawned The Great Society, and The Go Go yearsThere had been  a lot of new technology and growth that paid back dividends for this optimism and self-pride.
Well along comes the 1970s, you have the Kent State massacres, Nixon resigning, and the Arab Oil Embargo.  All of these events point to a variety of problems.   But every age has its problems.  In my opinion it was the slowdown in output, timed extremely poorly with the post war demographic bubble that really caused the problems.
But we are an optimistic crowd.  In the past, when you went in debt it paid itself off (we will pretend that the 1920s consumer finance bubble occurred), and our government will go on a huge spending binge and continually devalue the dollar.  The long-serving,  conqueror of inflation, Greenspan, will leave the dollar at half its value as when he started his term.  Eventually we will begin using our homes as piggy banks.
Business drives forward on this spending.  It has its usual cycles, but it keeps churning along.  But while the children are doing well, most of them will notice that it is not as easy as it was for their post war parents.  You went to school, but the automatic 30 year career track was a lot harder to achieve.  Companies became much quicker to layoff, and if you were laid off you had a very hard time ever recovering those wages.  If you were union labor, a lot of your work went to the non-union, low wage south, or eventually, overseas.
But you are within a very optimistic society.  If you are not an optimist, you are bad.  One of  Reagan’s (and Rush Limbaugh’s) most effective attacks against the Liberals was that they were a bunch of whiny losers.  That the Democrats presided over much of the growth period (and in fairness some of the downturns as well)  was beside the point.  You needed to think positively.
So in a society where success is difficult, you begin to value the feelings of success, the self esteem, more highly then the success.  If you cannot be successful, at least you can feel good about yourself.
And thus we train ourselves a wonderful group of high self esteem narcissists.
I suppose you could view it as a blessing.  If the whole edifice comes crashing down, they may not do much about it, but they will feel good about themselves.


Waldow said...

You keep posting numbers that shed light on smoke I've smelt from novels & poetry.

Re: Depression era productivity

John Dillinger marches on

I sometimes write about the 30's because
they were a good training ground.
people learned to live with adversity
as a common everyday thing
when trouble came
they adjusted and made the next move,
and if there wasn't one
they often created

and the people who HAD jobs
did them with artistry.
a garage mechanic could FIX your
doctors made house calls.
cab drivers not only knew every
street in town
but they were also versed in
pharmacists would walk up to you
in drugstores and ask you what you
the ushers in moviehouses were more
handsome than the movie
people made their own clothes,
repaired their own shoes.
almost everybody did things well.

now people in and out of their
professions are totally
how they even wipe their own asses
is beyond me.
and when adversity arrives they are
they quit,
spit it out,
lay down.
these, coddled to the extremes
are only used to victory or
the soft way.

it's not their fault, I suppose,
that they didn't live
through the 30's
but I'm still hardly tempted to

By Charles Bukowski

No numbers to back it up, but I get the sense from my friends still in computer science that the rate of innovation has picked up in that field over the last 5 years (The begining of The Greater Depression).

Likely in this generation there will come a point where the integration between people's brains and a descendant of the internet will become so seamless as to essentially weld a huge number of human consciousnesses into one material mind. To go out on a limb here, to me this transmogrification of the human spirit will be accepted by many as an answer to the declining material standards of real existence, ironically trapping the mind in a material dimension. Hell.

russell1200 said...

I like that poem. But I have a hard time identifying it as a poem. I am guessing it is based on the very sparse word structure: which he does extremely well. But I do not understand what rhythm (meter) he is trying for. Not faulting him mind you, just noting my own limitations.

Truthfully, I find the innovation argument interesting, but not overly compelling. A lot of times what you need is one really big innovation (steam power, electricity, interchangeable tooling) and then you can hive a whole lot of cool stuff off of it. I think the jury would have to sill be out on computers.

It took about 50 years for electrical power to become a mainstream technology. But a lot of the really innovative stuff came later.

That is where we are with computers. They are mainstream, but there is still a lot of additional cool stuff that could be done.

I certainly hope that is the case. The bad news is that the straight line trends are very troubling. The silver lining is that straight line trends are rarely predictive in the long run. The bad news is that the non-linear path does not have to veer off in the direction you would like; it can go the other way as well.

It may take a while, but I am trying to work up a somewhat positive post.