6 ms·

From the Bretton Woods system to global stagnation [pdf]

22 points by domofutu 2y ago

throw0101d 2y ago
Not sure if related, but there hasn't been much technological innovation since the 1970s: > The book describes the 100 years following 1870 as the "Special Century", a time of exceptional growth and prosperity, which it claims has been flatlining since 1970, marked by growing inequality and insecure working conditions. Gordon considers that the apparent increasing economic growth since 1970 is just a faint echo of a great wave of economic growth between 1920 and 1970. The first half of the book discusses the change in the American standard of living pre-WW2, with the second half dedicated to the remainder of the 'special century' and the years post-1970.[3][4] * https://en.wikipedia.org/wiki/The_Rise_and_Fall_of_American_Growth https://en.wikipedia.org/wiki/The_Rise_and_Fall_of_American_... Mainstreaming of computers and the Internet gave a productivity bump in the 1990s, but that had petered out by ~2004. Beside that aspect there haven't been major improvements in health, education, construction, transportation, etc since ~1960s. We got most of the gains in the early 1900s (water, sanitation, electronics, transportation (ICE, cars, planes), HVAC). Not many 'completely' new inventions since then, mostly refinements. Just look at the typical kitchen: going from no cold storage, to ice boxes, to refrigerator/freezers occurred from ~1900 to 1960. The last major invention was the microwave, which has mostly had refinements since the 1970s. Edit: The book is not arguing that invention has stopped, but rather there have not been major developments that show up in economic productivity or quality of life (e.g., health) metrics. For the last few decades, increases have been 'asymptotic' that they're basically 'crawling' up, as opposed to major rises in the decades pre-1970s. In general the book is a really interesting read. Worth checking out, if just for the history of 'progress' and how human life has changed post-1870 , even if you don't fully buy into their conclusions.
- asdasdsddd 2y ago
  Gordon wood always reminds me of that funny scene from Good Will Hunting
- pfdietz 2y ago
  > there hasn't been much technological innovation since the 1970s What the actual fuck?
  - foobarian 2y ago
    I'm with OP. Let's see some counterexamples.
    - wqaatwt 2y ago
      Did you send in your comment via fax? Also in what way are "refinements" not technological innovation? e.g. modern cars are massively safer, more reliable and comfortable.
      - pfdietz 2y ago
        I think the game being played is considering mere improvement in performance or cost to not count, vs. initial invention. The problem with that is there will be proto-inventions all around us that will later be improved and made economical, but we can't see them yet. So this approach is inherently biased, treating past and current innovation differently.
        foobarian 2y ago
        I don't know, I think things like refrigeration or electricity or antibiotics were pretty visible. The closest I can think of in more recent times is the invention of the blue LED, which, it was obvious would open floodgates to 10x more efficient lighting. Maybe power semiconductors too, which unlock inverters for EV or solar. But it still doesn't compare in quality or quantity to early 20th century IMO.
        throw0101c 2y ago
        > The closest I can think of in more recent times is the invention of the blue LED, which, it was obvious would open floodgates to 10x more efficient lighting. Not wrong, and I wouldn't want to 'regress', but compared that to going from using gas lighting and candles to the incandescent light, the introduction of LED lighting isn't as much of a step change. Also remember that there was a noticeable improvement in efficiency with fluorescent lamps pre-1970s: * https://en.wikipedia.org/wiki/Fluorescent_lamp https://en.wikipedia.org/wiki/Fluorescent_lamp
- kemotep 2y ago
  Are you saying nothing new has been invented since the 1970’s?
  - throw0101c 2y ago
    > Are you saying nothing new has been invented since the 1970’s? The book referenced argues there have been no major innovations that have changed society and the economy in large ways since that time period, or at least nothing that shows up in any economic metric. Transportation: in the US, the automobile hit >80 cars per 100 households by the late 1920s. Airplane invented in early 1900s, the 747 was designed and launch in the 1960s. Rocketry and satellites were developed in the 1960s, and culminated with landing on the moon in 1969. Trains developed in early 1800s, mainstreamed by late 1800s into early 1900s; electric trains in operation in late 1800s. Trams and subways/metros in operation in 1800s. The vacuum tube in early 1900s, computers in 1950s, transistor in 1960, and since then it's been miniaturization but nothing 'new'. ARPAnet was in 1970s, with the mainstream Internet in the 1990s hitting saturation in 2004, and per the book that's when productivity numbers stopped increasing. Or health metric: there was a step change when treated water and indoor plumbing (including sewage treatment) came in. We got penicillin in ~1945, and widespread vaccines in the 1950-60s. CT scans were invented in the 1960s, and MRIs in the 1970s. Honestly, I was kind of skeptical of the claims that the book was making at first, but the arguments and statistics that it puts forward are decently convincing. Really interesting read. Worth checking out, if just for the history of 'progress', even if you don't fully buy into their conclusions.
    - pfdietz 2y ago
      Slickwater fracking caused huge changes in the economy of the US. Look at natural gas as a fraction of energy use in 1970 vs. today. Achieving efficient combustion turbines (comparable to steam turbines) wasn't really possible until ~1980.
      - throw0101c 2y ago
        > Slickwater fracking caused huge changes in the economy of the US. Look at natural gas as a fraction of energy use in 1970 vs. today. But that's more of the same commodity that we've been using since the days of Standard Oil. Has fracking increased economic productivity or measurable gains in quality of life? > Achieving efficient combustion turbines (comparable to steam turbines) wasn't really possible until ~1980. And ~1980 is very close to the cut-off (1970s) that the book argues things haven't change much. The book does have chapters on transportation, including airplanes.
- wqaatwt 2y ago
  Also there hasn't been much innovation in aviation since the first passenger jet came out back in 1952. Cars were also pretty much perfected by the late ~40s or so, only insignificant refinements since then.
  - hugh-avherald 2y ago
    Electricity is basically how it was in the 19th century.
    - Isamu 2y ago
      Shocking!
    - bee_rider 2y ago
      What are they going to do, invent better electrons? I guess they could get the charge right this time.
      - nradov 2y ago
        Positrons are predicted to be crucial to the development of AI.
        bee_rider 2y ago
        Somebody downvoted your comment, they should be embarrassed for (I guess?) missing the reference.
  - ta_1138 2y ago
    Not if you look at safety, max performance, reliability or efficiency. Drive a 1940s car and compare. Hell, try a sports car from the early 80s.
    - throw0101c 2y ago
      > Not if you look at safety, max performance, reliability or efficiency. Drive a 1940s car and compare. Hell, try a sports car from the early 80s. By the late 1920s >80% of US households had at least one automobile, and even if they had stopped improving, the productivity change of going from (steam/oil-powered) train and animal power (the primary options pre-1910) had made a transportation step change in the US by the 1930s: * https://www.goodreads.com/book/show/2924825-fighting-traffic https://www.goodreads.com/book/show/2924825-fighting-traffic By the 1960s >60% of households had two cars. So yes, there have been incremental improvements, but the transformation change in society was done decades ago.
- xnx 2y ago
  I'd rather be middle class in 2024 than rich in 1970.
  - throw0101d 2y ago
    > I'd rather be middle class in 2024 than rich in 1970. Not wrong, but the point is still that growth has slowed, so progress since the 1970s (or at least 2004, when the economic effect of the Internet and computers seems to have peaked) may be asymptotic now.
bryanlarsen 2y ago
My personal belief is that the primary culprit is the price of energy. Energy prices dropped exponentially for 100 years, and then since the early 70s it has been relatively constant, roughly tracking inflation.
- thyrsus 2y ago
  That's a reason for optimism, given the decline in prices for solar/wind/hydro/geothermal.
- _heimdall 2y ago
  I've never managed to find a way to wrap my head around tracking price changes over time in a fiat currency system. When the money supply can be changed so dramatically, how do I know whether energy prices are stable because the comparative value of energy is stable or whether its because fiscal policy is being manipulated to keep the appearance of a stable price? I'd like to reach for inflation numbers and inflation adjusted prices. That requires an extremely reliable inflation metric though, and when I go down the rabbit hole of how inflation is tracked and how that has changed over time I just don't trust it enough to lean on it for comparison. "Hard money" based on a tangible asset has definite problems, but prices are much easier to track. Comparing energy prices to a gold backed currency seems much more reliable than comparing against a fist currency that has seems a huge growth in the money supply over the last 80ish years.
youainti 2y ago
Sorry for the frustration within this response. As an economist, this is has a lot of problems. - the main claim is that the growth rate post bretton woods is lower than during the bretton woods period. It fails to uphold the claim on two counts: 1. It does not provide evidence that the decline is statistically significant, instead it just shows a graph with overlaid lines. I double checked and the data is real, but it is missing the first years of data on world GDP under bretton woods. 2. It dismisses or ignores reasonable alternate explanations such as: - The 60s were the tail end of the recovery from WWII - Changes in technology - Changes in demand (both quantity and composition) - it raises a straw-man version of ricardian and when it tries to discredit it, it fails to discuss the main result from the ricardian model: gains from trade due to comparative advantage. The attempt to discredit it discusses trade deficits, but fails to account for financial markets in any meaningful way (for those who don't know, a trade deficit is offset by foreign investment) - It does not account for changes in purchasing power parity. - The alternative model it suggests is one where firms/countries (it never specifies) seek to export because the domestic market is weak, not because foreign demand is high, and decides to force lower wages across the board (including in foreign countries). My understanding of what the author is proposing is that it ignores supply and demand in an international context and the standard results of increasing wages in the producing and exporting country's export industry. - Some of the other claims appear to be mercantalist in nature, briefly arguing that the purpose of trade is not to get stuff, but money. Change "money" to gold or silver, and you'd have a pretty basic mercantalist claim. I would recommend that the author read a textbook on international trade and finance. Not only would this show them the basic level of rigour in describing their model they need at a to match, but would allow them to counter the standard theories of trade etc that are actually used. They would also be able to discuss the impact of trade on labor within different industries in a way that doesn't just handwave results they like.

22 points by domofutu 2y ago

Not sure if related, but there hasn't been much technological innovation since the 1970s: > The book describes the 100 years following 1870 as the "Special Century", a time of exceptional growth and prosperity, which it claims has been flatlining since 1970, marked by growing inequality and insecure working conditions. Gordon considers that the apparent increasing economic growth since 1970 is just a faint echo of a great wave of economic growth between 1920 and 1970. The first half of the book discusses the change in the American standard of living pre-WW2, with the second half dedicated to the remainder of the 'special century' and the years post-1970.[3][4] * https://en.wikipedia.org/wiki/The_Rise_and_Fall_of_American_Growth https://en.wikipedia.org/wiki/The_Rise_and_Fall_of_American_... Mainstreaming of computers and the Internet gave a productivity bump in the 1990s, but that had petered out by ~2004. Beside that aspect there haven't been major improvements in health, education, construction, transportation, etc since ~1960s. We got most of the gains in the early 1900s (water, sanitation, electronics, transportation (ICE, cars, planes), HVAC). Not many 'completely' new inventions since then, mostly refinements. Just look at the typical kitchen: going from no cold storage, to ice boxes, to refrigerator/freezers occurred from ~1900 to 1960. The last major invention was the microwave, which has mostly had refinements since the 1970s. Edit: The book is not arguing that invention has stopped, but rather there have not been major developments that show up in economic productivity or quality of life (e.g., health) metrics. For the last few decades, increases have been 'asymptotic' that they're basically 'crawling' up, as opposed to major rises in the decades pre-1970s. In general the book is a really interesting read. Worth checking out, if just for the history of 'progress' and how human life has changed post-1870 , even if you don't fully buy into their conclusions.

asdasdsddd 2y ago
Gordon wood always reminds me of that funny scene from Good Will Hunting
pfdietz 2y ago
> there hasn't been much technological innovation since the 1970s What the actual fuck?
- foobarian 2y ago
  I'm with OP. Let's see some counterexamples.
  - wqaatwt 2y ago
    Did you send in your comment via fax? Also in what way are "refinements" not technological innovation? e.g. modern cars are massively safer, more reliable and comfortable.
    - pfdietz 2y ago
      I think the game being played is considering mere improvement in performance or cost to not count, vs. initial invention. The problem with that is there will be proto-inventions all around us that will later be improved and made economical, but we can't see them yet. So this approach is inherently biased, treating past and current innovation differently.
      - foobarian 2y ago
        I don't know, I think things like refrigeration or electricity or antibiotics were pretty visible. The closest I can think of in more recent times is the invention of the blue LED, which, it was obvious would open floodgates to 10x more efficient lighting. Maybe power semiconductors too, which unlock inverters for EV or solar. But it still doesn't compare in quality or quantity to early 20th century IMO.
        throw0101c 2y ago
        > The closest I can think of in more recent times is the invention of the blue LED, which, it was obvious would open floodgates to 10x more efficient lighting. Not wrong, and I wouldn't want to 'regress', but compared that to going from using gas lighting and candles to the incandescent light, the introduction of LED lighting isn't as much of a step change. Also remember that there was a noticeable improvement in efficiency with fluorescent lamps pre-1970s: * https://en.wikipedia.org/wiki/Fluorescent_lamp https://en.wikipedia.org/wiki/Fluorescent_lamp
kemotep 2y ago
Are you saying nothing new has been invented since the 1970’s?
- throw0101c 2y ago
  > Are you saying nothing new has been invented since the 1970’s? The book referenced argues there have been no major innovations that have changed society and the economy in large ways since that time period, or at least nothing that shows up in any economic metric. Transportation: in the US, the automobile hit >80 cars per 100 households by the late 1920s. Airplane invented in early 1900s, the 747 was designed and launch in the 1960s. Rocketry and satellites were developed in the 1960s, and culminated with landing on the moon in 1969. Trains developed in early 1800s, mainstreamed by late 1800s into early 1900s; electric trains in operation in late 1800s. Trams and subways/metros in operation in 1800s. The vacuum tube in early 1900s, computers in 1950s, transistor in 1960, and since then it's been miniaturization but nothing 'new'. ARPAnet was in 1970s, with the mainstream Internet in the 1990s hitting saturation in 2004, and per the book that's when productivity numbers stopped increasing. Or health metric: there was a step change when treated water and indoor plumbing (including sewage treatment) came in. We got penicillin in ~1945, and widespread vaccines in the 1950-60s. CT scans were invented in the 1960s, and MRIs in the 1970s. Honestly, I was kind of skeptical of the claims that the book was making at first, but the arguments and statistics that it puts forward are decently convincing. Really interesting read. Worth checking out, if just for the history of 'progress', even if you don't fully buy into their conclusions.
  - pfdietz 2y ago
    Slickwater fracking caused huge changes in the economy of the US. Look at natural gas as a fraction of energy use in 1970 vs. today. Achieving efficient combustion turbines (comparable to steam turbines) wasn't really possible until ~1980.
    - throw0101c 2y ago
      > Slickwater fracking caused huge changes in the economy of the US. Look at natural gas as a fraction of energy use in 1970 vs. today. But that's more of the same commodity that we've been using since the days of Standard Oil. Has fracking increased economic productivity or measurable gains in quality of life? > Achieving efficient combustion turbines (comparable to steam turbines) wasn't really possible until ~1980. And ~1980 is very close to the cut-off (1970s) that the book argues things haven't change much. The book does have chapters on transportation, including airplanes.
wqaatwt 2y ago
Also there hasn't been much innovation in aviation since the first passenger jet came out back in 1952. Cars were also pretty much perfected by the late ~40s or so, only insignificant refinements since then.
- hugh-avherald 2y ago
  Electricity is basically how it was in the 19th century.
  - Isamu 2y ago
    Shocking!
  - bee_rider 2y ago
    What are they going to do, invent better electrons? I guess they could get the charge right this time.
    - nradov 2y ago
      Positrons are predicted to be crucial to the development of AI.
      - bee_rider 2y ago
        Somebody downvoted your comment, they should be embarrassed for (I guess?) missing the reference.
- ta_1138 2y ago
  Not if you look at safety, max performance, reliability or efficiency. Drive a 1940s car and compare. Hell, try a sports car from the early 80s.
  - throw0101c 2y ago
    > Not if you look at safety, max performance, reliability or efficiency. Drive a 1940s car and compare. Hell, try a sports car from the early 80s. By the late 1920s >80% of US households had at least one automobile, and even if they had stopped improving, the productivity change of going from (steam/oil-powered) train and animal power (the primary options pre-1910) had made a transportation step change in the US by the 1930s: * https://www.goodreads.com/book/show/2924825-fighting-traffic https://www.goodreads.com/book/show/2924825-fighting-traffic By the 1960s >60% of households had two cars. So yes, there have been incremental improvements, but the transformation change in society was done decades ago.
xnx 2y ago
I'd rather be middle class in 2024 than rich in 1970.
- throw0101d 2y ago
  > I'd rather be middle class in 2024 than rich in 1970. Not wrong, but the point is still that growth has slowed, so progress since the 1970s (or at least 2004, when the economic effect of the Internet and computers seems to have peaked) may be asymptotic now.

bryanlarsen 2y ago

My personal belief is that the primary culprit is the price of energy. Energy prices dropped exponentially for 100 years, and then since the early 70s it has been relatively constant, roughly tracking inflation.

thyrsus 2y ago
That's a reason for optimism, given the decline in prices for solar/wind/hydro/geothermal.
_heimdall 2y ago
I've never managed to find a way to wrap my head around tracking price changes over time in a fiat currency system. When the money supply can be changed so dramatically, how do I know whether energy prices are stable because the comparative value of energy is stable or whether its because fiscal policy is being manipulated to keep the appearance of a stable price? I'd like to reach for inflation numbers and inflation adjusted prices. That requires an extremely reliable inflation metric though, and when I go down the rabbit hole of how inflation is tracked and how that has changed over time I just don't trust it enough to lean on it for comparison. "Hard money" based on a tangible asset has definite problems, but prices are much easier to track. Comparing energy prices to a gold backed currency seems much more reliable than comparing against a fist currency that has seems a huge growth in the money supply over the last 80ish years.

youainti 2y ago

Sorry for the frustration within this response. As an economist, this is has a lot of problems. - the main claim is that the growth rate post bretton woods is lower than during the bretton woods period. It fails to uphold the claim on two counts: 1. It does not provide evidence that the decline is statistically significant, instead it just shows a graph with overlaid lines. I double checked and the data is real, but it is missing the first years of data on world GDP under bretton woods. 2. It dismisses or ignores reasonable alternate explanations such as: - The 60s were the tail end of the recovery from WWII - Changes in technology - Changes in demand (both quantity and composition) - it raises a straw-man version of ricardian and when it tries to discredit it, it fails to discuss the main result from the ricardian model: gains from trade due to comparative advantage. The attempt to discredit it discusses trade deficits, but fails to account for financial markets in any meaningful way (for those who don't know, a trade deficit is offset by foreign investment) - It does not account for changes in purchasing power parity. - The alternative model it suggests is one where firms/countries (it never specifies) seek to export because the domestic market is weak, not because foreign demand is high, and decides to force lower wages across the board (including in foreign countries). My understanding of what the author is proposing is that it ignores supply and demand in an international context and the standard results of increasing wages in the producing and exporting country's export industry. - Some of the other claims appear to be mercantalist in nature, briefly arguing that the purpose of trade is not to get stuff, but money. Change "money" to gold or silver, and you'd have a pretty basic mercantalist claim. I would recommend that the author read a textbook on international trade and finance. Not only would this show them the basic level of rigour in describing their model they need at a to match, but would allow them to counter the standard theories of trade etc that are actually used. They would also be able to discuss the impact of trade on labor within different industries in a way that doesn't just handwave results they like.