The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War

If the automobile had followed the same development as the computer, a Rolls Royce would today cost $100 and get a million miles per gallon, and explode once a year killing everyone inside. —Robert X. Cringely, InfoWorld magazine

advances since 1970 have tended to be channeled into a narrow sphere of human activity having to do with entertainment, communications, and the collection and processing of information. For the rest of what humans care about—food, clothing, shelter, transportation, health, and working conditions both inside and outside the home—progress slowed down after 1970,

Don’t be too timid and squeamish about your actions. All life is an experiment. The more experiments you make the better. —Ralph Waldo Emerson, 1841

The combined effects of growing inequality, a faltering education system, demographic headwinds, and the strong likelihood of a fiscal correction imply that the real median disposable income will grow much more slowly in the future than in the past.

If the stock market continues to advance, we know that inequality will increase, for capital gains on equities accrue disproportionately to the top income brackets.

The new element in part III is the headwinds—inequality, education, demography, and debt repayment—that are buffeting the U.S. economy and pushing down the growth rate of the real disposable income of the bottom 99 percent of the income distribution to little above zero.

Compared to Canada, Japan, or any nation in western Europe, the United States combines by far the most expensive system with the shortest life expectancy.

Chief among these headwinds is the rise of inequality that since 1970 has steadily directed an ever larger share of the fruits of the American growth machine to the top of the income distribution.

Morris Kleiner has calculated that the percentage of jobs subject to occupational licensing has expanded from 10 percent in 1970 to 30 percent in 2008.

The post-2020 fiscal reckoning does not require higher payroll taxes or lower retirement benefits, as new sources of fiscal revenue are available from drug legalization, increased tax progressivity, tax reform that eliminates most tax deductions, and a carbon tax that provides incentives to reduce emissions.

Inequality can be alleviated and productivity growth promoted by combating overly zealous and regressive regulations

Unlike IR #2, the digital revolution IR #3 had a less powerful overall effect on productivity growth, and the main effect of its inventions occurred in the relatively short interval of 1996 to 2004, when the invention of the Internet, web browsers, search engines, and e-commerce created a fundamental change in business practices and procedures that was reflected in a temporary revival of productivity growth.

For instance, the degree of enjoyment provided by an hour of leisure spent watching a TV set in 1955 is greater than that provided by an hour listening to the radio in the same living room in 1935.

Hearst was eager to stoke the flames of conflict between Spain and the United States over Cuba and sent Frederick Remington the photographer, who could find no signs of war. In a famous exchange of cables, Hearst responded to Remington, “You provide the pictures; I’ll provide the war.

But the cable cars did not last long. They had disappeared from the streets of most cities by 1900 and from Chicago by 1906, and they remain to this day only in the single city of San Francisco, where they are primarily a tourist attraction.

The event happened at noon on May 10, 1869, at Promontory Summit, Utah. That moment was a pivotal episode in world history as Leland Stanford pounded a golden spike with a silver hammer and in an instant ended the isolation of California and the Great West from the eastern half of the United States.

This paradox is resolved when we recognize that advances since 1970 have tended to be channeled into a narrow sphere of human activity having to do with entertainment, communications, and the collection and processing of information. For the rest of what humans care about—food, clothing, shelter, transportation, health, and working conditions both inside and outside the home—progress slowed down after 1970, both qualitatively and quantitatively. Our

Third, the cumulative effect of these improvements from 1947 through 1983 was massive. Improvements in quality—that is, previously unmeasured components of consumer surplus that were not included in the GDP data—amounted to 100 percent of the cost of refrigerators and clothes dryers and 200 percent of the cost of room air conditioners.

The interstate highway system in its comprehensiveness was a belated attempt to duplicate not the Pennsylvania Turnpike but the German autobahn network over a spatial terrain roughly twenty times larger.

Striking was the absence of medium to large-sized cities that were typical in the northeast and Midwest. Most towns were merely crossroads.

This encouragement by the federal government pushed the frontier westward into Oklahoma, Kansas, Nebraska, and the Dakotas. But only about 40 percent of these claims were finalized. “Drought, insect plagues, low [farm] prices, and isolation caused thousands of farm sites to be abandoned.

before 1940.12 The rapid decline in working hours led John Maynard Keynes in 1931 to make a famous prediction that turned out to be quite wrong—that society would be so productive that each worker would only need to work for fifteen hours per week:

The ratio of disagreeable to nonroutine cognitive jobs shifted from 7.9 in 1870 to 2.1 in 1940 to 0.1 in 2010, one of the great achievements of American economic growth over the past fourteen decades.

Within the blue-collar category, skilled craft workers held their ground, declining only from 11.4 percent in 1870 to 8.2 percent in 2009.

In any case, it is clear that the phenomenon of retirement for males aged 65 or older began long before the New Deal’s invention of Social Security.

Historians have long recognized that “the automobile is European by birth, American by adoption.

Most of the developments that made possible the networked house of urban America in 1929 were achieved by anonymous and decentralized innovations in home appliances, bathroom fixtures, toilets, and furnaces, not to mention the hundreds of municipal officials who approved and financed the evolution of urban sanitation infrastructure.

Edison’s unique contribution was his solution of the double problem of inventing an efficient light bulb that could be manufactured in bulk while also establishing electric generating stations to bring power into the individual home.

teaches us that the invention of new services has been, if anything, more important than the invention of new goods.

Less speculative is the productivity-enhancing learning by doing that occurred during the high-pressure economy of World War II. Production miracles during 1941–45 taught firms and workers how to operate more efficiently, and the lessons of the wartime production miracle were not lost after the war: productivity continued to increase from 1945 to 1950.