Shocks, Crises, and False Alarms

CHAPTER 7 When Technology Lifts Growth and When It Doesn’t

Technological progress is a critical engine of growth. But their relationship is anything but straightforward, as we see in simplified form in figure 7.1.¹ Over the last 50 years, US productivity growth has decelerated unmistakably—even as investment in technology (particularly the intangibles like software) has grown steadily. Frustratingly, simple extrapolations from technological marvel to strong growth have not and will not work.

That disconnect is all the more pertinent as the advance of artificial intelligence has put us on the cusp of a new technological age. A few critical questions arise: When does technology lift growth—and when does it not? Facing a new generation of technology, ...