Here is the question I think you must answer before formulating a strong opinion on technology and growth: what do you think are the real binding constraints that limit our productive future? Are they labour, technology, energy, food, environmental sustainability, a decent level of security or something else?
Professor Richard Jones, a polymath able to moonlight as a thinker on science/growth while conducting fundamental physics research, put it pithily in recent blog (“Productivity and artificial intelligence”). Musing about why our technological advance has not generated outstanding growth recently, he writes this:
The lesson here, then, is that AI is very good at the solving the problems that it is well adapted for – well posed problems, where there exist big and well-curated datasets that span the problem space. Its contribution to overall productivity growth, though, will depend on whether those AI-susceptible parts of the overall problem are in fact the rate-limiting steps. (my emphasis)
We have all had this thought when playing around with ChatGPT: this is a lot of fun, and yeah sure I can imagine it taking some tedium out of my white-collar work, or even helping me being creative – but does it strike at what is really limiting my potential, and that of the economy as a whole?
Or take this angle on the question: the British state is facing an unenviable crunch in the years ahead. The tax burden is at a historic high, the public paying those taxes suffering a horrible cost of living crisis, and yet public services are starved of cash – if you find this hard to believe, just read carefully the IfG’s Performance Tracker.* By my rough calculations, we need £20-30bn just to restore funding in real terms to where it was planned in the last spending review. Now ask yourself: what recent technological breakthroughs might ride to the rescue and close these funding gaps, improve people’s quality of life, restore public finances to something less scary? When you read a PwC report that Artificial Intelligence might “contribute $15.7tn to the global economy by 2030”, do you emit a sigh of relief, tot up the UK’s modest share (call it 1%, or $157bn) and conclude that we just need the right AI policy for prosperity to follow?
I would suggest the answer is no, the simple reason being that whatever AI is set to achieve in the next 5-10 years does not address the rate-limiting barriers holding us back. One of the motivations for blog posts like the last one I wrote on the public’s evolving consumption basket (trust me, it is more fun than it sounds) is to get at the facts about what it is we want or need. Demand is a neglected topic in discussions of economic growth! It is of limited use that society demonstrates stupendous, Moore’s Law-driven advances in the ability to supply cat videos, look up our mates on social media, or that the cost of taking a photo or listening to a string quartet has dropped from pounds to pence to nothing; these are small shares of our consumption, and the other stuff rises in relative price (read Richard on Baumol, too).
What you need for incredible, sustained rises in economic prosperity is a combination of rising demand and supply. Energy breakthroughs epitomise this: for two centuries, economic progress and the ability to generate more useful energy went hand in hand. But material progress more generally captures the substance of economic growth. Material of some kind or other is very, very often the limiting factor in determining growth.
And that is why I think Ed Conway’s wonderful book, Material World, is such an influential read for me. I don’t have a copy to hand, so have to put this down from memory, but somehow in the course of three years’ research Ed visited copper mines, semiconductor foundries, blast furnaces, shale wells, lithium salt flats, the place where polythene was invented, and so much more to build for the reader an astounding account of the incredible materiality of the world around us (the title really wrote itself). The book combines history, technology, analysis and really vibrant description. You are frequently astonished at the virtuosity of the materials geniuses that have laid the foundations for the world we live in. It also reminds the reader constantly of the interconnectedness of everything – how different commodities and manufactures combine to create the objects that make modern life what it is. Our world is a miracle of interdependence. Ed gives you a flavour of all this, without fallaciously pretending at any point that he can capture all of it. It really is such a wonderful achievement that I have quite passed through the envy stage to one of pure admiration.
I am guessing that Ed did not intend to write the book as an argument, but as my overlong preamble suggests I think it can be read as one. Most of its subject matter touches upon the limits of the material commodities in question, even if those limits have been locked in a tight, competitive race with humanity’s ingenuity at getting more out of less. Material limits, either gradually realised or suddenly imposed (2022!) are all too frequently the limits that matter – the “rate limiting” variables Richard Jones refers to. Conversely, material breakthroughs are a key part of the puzzle we must solve if we want to break back into a higher-growth plane. Even if AI, the Internet and the rest somehow generate sustainable productivity growth in ineradicable human services (social care, healthcare, security, education and the rest) my conclusion from the past few years is that the material limits will continue to bite. The green transition alone, which brings its own limit (carbon) and material demands (the multi-trillion revamp of industry, energy, agriculture and transport) is going to ensure that we will worry about stuff for a long while yet.
If I were to recommend books to help us understand the world we live in today, one pair I would give to students would be Ed’s Material World, to be read in conjunction with Westlake and Haskel on Intangible Capital.** (I am not so simple-minded as to promulgate an either-or vision of our world: you need both perspectives. They are intertwined: perhaps better institutions for the intangible capital world will be what unlocks material limits. And intangible progress certainly needs its physical inputs). I rave more about Ed’s book right now, because he has made the very familiar both new and surprising: the stuff all around us, and how it got there.
Like I said, read it.
(ps: if you think I am repeating myself, you are probably right: a lot of these thoughts were expressed in other piece like “Umpteen reasons I am so uncertain about growth“. But that is what makes these books useful: they elucidate things we are struggling to articulate.)
*if you are the kind of person who thinks you can counter this kind of information with some lazy jibes about something or other you read about civil service salaries on the Daily Mail then this probably isn’t the blog for you
** a third book would have to cover the other key input, labour: something like The Wealth of Humans by Ryan Avent. But labour is a unique, Janus-faced input to the economy: it provides both a factor of production and the means by which people gain the right to what is produced. Makes it a different topic altogether.
Freethinking Economist 