Stories of Progress and Stagnation

July 24th, 2012

Adam Gurri on stagnation:

Still, the productive capacity of these technologies was such that we coasted all the way into the 1970?s before the deadweight of government regulation and taxation slowed us down. Since then, our resources have shifted to developing technologies of resistance, which is why Brynjolfsson and McAfee see accelerating innovation. It is accelerating, but it’s accelerating in a very specific area because of how difficult it is to control that particular area.

We do see welfare gains from innovation in the technologies of resistance, but they are not nearly as big as we could get with the technologies of control, were they not so bogged down with regulation. Resources are spent on creating robustness against control that would have otherwise been spent on maximizing pure economic growth, in the absence of efficiency-reducing regulation.

Software and finance.

(Via Tyler Cowen.)