In the 21st century…all growth components have fallen off simultaneously
The number of hours worked per person has been falling secularly. Years of schooling per worker has grown slowly. Capital per worker is growing slowly. And the residual, or “total factor productivity,” has also grown slowly.
On the human capital issue, Alex Tabarrok points to a NYT story, which says
In the United States, young adults in particular fare poorly compared with their international competitors of the same ages — not just in math and technology, but also in literacy.
More surprisingly, even middle-aged Americans — who, on paper, are among the best-educated people of their generation anywhere in the world — are barely better than middle of the pack in skills.
My view is that growth will depend on luck in terms of discoveries. One possibility would be discovering a cure for obesity/diabetes. Another possibility would be discovering drugs that improve the ability of young people to learn, by increasing conscientiousness, cognitive ability, or both. Another possibility would be a discovery that makes solar power really inexpensive. Another possibility would be the development of very high skill at manipulating DNA, so that we can “grow a table,” in Rodney Brooks’ phrase.
I am not counting on any of these things happening. I am just saying that you need something really big in order to affect TFP growth.
As Brink points out, public policy could be changed in order to promote growth. However, I think we are less likely to have good luck on the policy front than on the discovery front. I think that policy has a lot of inertia.
I think you know the real problem. You pointed it out in the post above.
I think the world desperately needs the right kind of growth, but its not likely to come through the body politic.
Between the aging of the population and institutional inertia there’s not very much willpower to go beyond the immediate needs of the median voter. I think the bruhaha over the sequester proves that.
However, I think one of the biggest benefits of “Average Is Over” is there’s going to be an unprecedented amount of loose capitol waiting to be deployed without having to go through the political process.
The Gates Foundation is a good example, but most of today’s billionaires have pledged their life fortunes to charity and the deployment of non-profit agencies run on for-profit principles has really picked up steam the last decade.
Having big gobs of rich people can be a public good.
Public policies that do not retard experiments are good.
Here are three discoveries announced just this week that have truly transformative potential:
https://en.wikipedia.org/wiki/PERK_inhibitors (new path towards an Alzheimer’s cure)
https://en.wikipedia.org/wiki/Proton-boron_fusion (new path towards clean energy)
https://en.wikipedia.org/wiki/Angiocrine_growth_factors (new path towards healing damaged organs such as livers and kidneys)