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The Roaring 20's Are Upon Us

In his much-heralded 2016 book, The Rise and Fall of American Growth, economist Robert Gordon argues that the 100-year period following the American Civil War created an unprecedented era of economic growth. He argues the invention of the internal combustion engine, electric lighting and antibiotics did more to improve our economic productivity than digital technology has brought us since. The argument has merit but fails to take into account the ways in which the inventions he mentions affected our productivity over that 100-year period. Gordon fails to take into account the mundane activities of implementing and refining new technologies.

The innovative improvements cited by Gordon were invented during the early part of the 100-year period he examines. But no one would argue that the invention of the light bulb in 1879 or the internal combustion engine in 1876 had dramatic effects immediately after their patents were filed. Few people owned cars in the late 19th and early 20th Centuries and centrally distributed electricity didn’t reach 70% of the households in the U.S. until 1930.

He may be correct about the impact of digital technology thus far. However, it’s fair to say the next half century will tell the tale. Take, for example, the silicon chip. It was a breakthrough invention in the 1960’s. But it’s the iPhone that put a travel agent, the encyclopedia and GPS in your pocket some forty years later. And, even that would not have been possible if we did not have broadband internet distributed throughout most of the country. Economists haven’t yet figured out how to measure the macro improvements to productivity from those innovations.

Much like the 100-year period cited by Gordon, the second half will see dramatic productivity improvement. To wit:

· Drones are now used to assess the status of crops across huge swaths of land enabling farmers to improve food production, using data and analytical tools unavailable at the turn of the century.

· IBM’s Watson has not only become a Jeopardy champion but also has and will continue to improve medical diagnostics.

· Nanotechnology has led to the invention of graphene which, in turn, has resulted in lighter weight prosthetics and more efficient solar panels.

· We would not understand the human genome without the digital technology to analyze it. Leveraging our new understanding, leading medical institutions are working to cure for cancer and reduce the incidence of genetic diseases.

The next two decades are likely to produce the biggest technological advances in history. Couple those improvements with the economic impact of the maturing Millennial generation -- now buying houses and reaching their peak consuming years -- and we should prepare for the Roaring 20’s version 2.0.

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