Last month Prospect published two articles about economic growth by two of the world’s most distinguished economists, Robert Gordon and Lawrence Summers. These reminded me of why, 40 years ago, I decided not to become an academic economist and drop out of the Harvard PhD programme where, as it happens, Summers was my fellow student. Instead of shedding light on business and social realities, academic economists seem to prefer to debate among themselves over the intricacies of statistical methods and largely spurious mathematical models. As the joke most famously made by Ronald Reagan runs, an economist is someone who, when he or she sees something working in practice, then wonders if it works in theory too.
A good example of this intellectual distortion is the question whether technological progress has accelerated or slowed to a crawl. For anyone except economists, the answer is so obvious it is hardly worth debating—technological progress is shooting forward. But Robert Gordon assumes that weak economic statistics are proof that, however much new technology we see around us, progress has slowed down.
Gordon is the most influential proponent of the view that he describes as “technological pessimism,” developed in his new 700-page book, The Rise and Fall of American Growth. Summers, a former United States Treasury Secretary, is neither a technological pessimist nor optimist, but believes that the world faces “secular stagnation”: a broad slowdown caused by a combination of changing demographics, globalisation and economic policy mistakes.