Anyone remotely familiar with the work of Marshall McLuhan would make easy work of dismantling much that underwrites the work of Robert J. Gordon. Dr. Gordon is an economist at Northwestern whose work is primarily used to justify institutionalized opacity that has become the canard of secular stagnation. According to Gordon and the legion of bean counters working at govmint, the arrival of digital technology is to blame for sluggish growth. He’s only partially true, for the real answer rests politically.
Anyone over the age of 50 remembers how members of the Carter administration sought refuge in a determinist frame of mind, citing limits to growth. For Carter, the U.S. had become too big to govern, we simply had to live with the malaise that underwrote stagflation.
Reagan thought differently. And because of it, we’er better off today. Reagan and his team of advisers thought of a policy framework whose sources drew from the moral foundations of liberty.
For Gordon and the technocrats at the FED, intensive growth is that of output per unit of input. This is called productivity. Extensive growth refers to total output. A standard productivity measure that encompasses all inputs is called total factor productivity or TFP.
Why is this important?
When a nation states political economy is no longer characterized as a center-margin based framework, then the commanding heights of the center lose the ability to measure. The U.S. economy isn’t a steal and wheat economy anymore, we’re a service based economy whose center is dispersed. This means GDP isn’t measuring objects anymore but velocities, magnitudes, even relations whose components aren’t alloyed from a commanding center. What digital technology confers upon us is a new sphere of autonomy that hinders traditional methodologies of econometrics.
Previous administrations had it harder than we do. Reagan and Robert Bartley of the Wall Street Journal implicitly knew that U.S. stagnation had multiple sources, chiefly Nixon’s closing of the gold window and OPEC. The former had to be fixed politically, sourced to an engaged executive who anchored the new regime of floating exchange rates. The latter was geopolitical even though it masked the former. Nevertheless, rising energy costs, growing regulatory burdens and structural shifts out from manufacturing did hamper U.S. growth for decades.
For Gordon, the input components of GDP underestimate growth in that real income is understated in flawed price indexes. The price indexes used to convert dollars of output into inflation corrected ‘real’ output underestimates ‘real’ output growth. Also, GDP omits economic activity that cannot be measured nor captured in market transactions.
All of this serves to obscure the reality that economic policy matters.
For Gordon and his cohort of Keynesians, there remain two variants of secular stagnation. The first emphasizes a demand side saving glut in China with low inflation leading to weak aggregate demand in high income regions. Never mind that this Chinese savings glut occurs in a nation state without a social safety net!
The second variant views stagnation as occurring from a supply side dynamics. For this group of economists, first world political economies possess a dearth of productivity and persistent weaknesses caused by the business cycle, high unemployment and almost neo-Malthusian group think that current policy remains optimal and therefore non subject to change.
Both variants are incapable of thinking about the social, political even revolutionary technological advances embodied in digital nano-technology and other variants of emerging miniature technologies.
My monies on the hard working stiff cut off from D.C. enjoying the miraculous gifts of secular life.