These slides discuss Robert Gordon's recent book, The Rise and Fall of American Growth. He argues that growth was faster between 1870 and 1940 than between 1940 and 2010. Simply put, an American in 1870 would not have recognized life in 1940 but an American in 1940 would recognize life today. These slides discuss what would be needed to change these results and thus make the improvements since 1940 equivalent to those between 1870 and 1940

1. A/Prof Jeffrey Funk
Division of Engineering and Technology Management
National University of Singapore

2.  39% admin, 31% salaries, 14% too many tests. Rreasons
for highercost of US health care
Solows quip isnt true. Computers arent evrywher.
What if they were
ATMs led to morebranches xoz number of employees
and thus costs fell
Percentage of employees in firms younger than five
yearsfell from 19 to 10 percent.betwwen 1982 and 2011
Sherwin rosen first explained inequality. Market wants
best singer and electronic media amplifies this. Market
also want best lawyer but no amplification

3.  Separate freezers came in 1939. Supermarkets in 1930s enabled one payment. In 1980s
came barcodes
Fast food
Dishwashers clothes dryers air con
Consumer reports concluded little improvement in pice adjusted quality since 1960 for
some appliances and since 1970s for others
Construction costs have risen
Ten time increase in price of auto betwween 1950 and 2012. 4 time increse in cpi because
some quality improvement. All govtmandated changes wer assumed to be improved
quality
50 percent more drugs were approved between 1940 an 1960 than infollowing 51 years
Slight increase in cancer survival in last 40 years
One interpretation is ovr specialization in doctors hospitals researchers
Too much regulation
Too much emphasis on science? Identifying mechanisms is more important than
devloping cures
More expensive equipment. Medical arms race
US health care spending is 55 pe rce nt than canada but lifespan is 2.5 years shorter

4.  Lots ofcredit in 1870 for farmers who paid after
harvest. But dept storesreduced prices and margins
and thus only acceoted cash. COD was eliminated. By
1900hadbegun offering credit to wealthy customers.
Auto loans started in 1920.
Atuto and life insurace were widelyavailable by 1940.
Installment plan, social security became common by
1940

5.  Telegraph enabled single track lines.
Also important fornew and dept store inventory
Annual rate of improvement in life expectancy was twice as fast in first
halfthan second of 20th century
Antibiotics in 1930s and 40s
No horses pasteur indoor plumbing screen doors
Life expectancy from 60increased fastr in 2nd half of 20th century
Increases in longevitybefore 1940 came littlefrom doctors and hospitals
Reductionds in infectious diseases were achieved by 1955
Cleaner water and vaccines are reason in houses and facties, meat
processing. Clean milk
Hospitals became cleaner and safer with antiseptics and pain killers in
early 20th
But mos drugs developed after 1940starting with sulfa and penicillin
Safe jobs cars railroads machinery
Workers comp

6. What Does Robert Gordon Argue?
 Economic growth and thus improvements in standard living
have slowed for the U.S. in the last 70 years
 growth between 1870 and 1940
 was faster than between 1940 and 2010
 He demonstrates this unexpected conclusion by analyzing
many studies of
 inflation adjusted productivity growth by sector
 changes in product and service features, food, homes, and lifestyle,
that are not captured in productivity data
 changes in longevity and other health data
 This analysis suggests technology change was slower
between 1940 and 2010 than it was between 1870 and 1940

7. How Could this Be?
 Isn’t there more innovation than ever before?
 Aren’t we living in an age of unprecedented
technological change?
 More is spent on R&D
 Supposedly there are more entrepreneurs
 More people graduate from universities
 Universities place more emphasis on innovation
 All of this suggests that Robert Gordon is
wrong……
 Let’s look at some of his evidence

8. Simply Put
 An American of 1870 would not recognize life in 1940
 Indoor plumbing
 Canned and jarred food, refrigerators
 Cable cars, subways, autos, trucks, and aircraft
 Electricity, home appliances, and lighting
 Newspapers, telephones, records and radio
 Urban department stores, skyscrapers
 But an American of 1940 would recognize life today
 Small changes in the above items
 Only a few big changes: large screen color televisions,
computers, mobile phones, Internet
 Similar arguments can probably be made for Europeans,
Japanese, Australians, and others

9. Let’s Compare Price-Adjusted Improvements
Category Between 1870 and 1940 Between 1940 and 2010
Power Electricity Small changes
Lighting Incandescent bulbs Small changes
Manufacturing Electric motors and machines Computer-controlled factories
Appliances Washer, dryer, oven, refrigerator Microwave, dryer, dishwasher
Homes and Buildings Indoor plumbing, Elec, Elevators Air con, construction costs rose
Food Cans, mason jars, fridge, cleaner Frozen foods, freezers
Clothing Dept stores, mail-order catalogs Small changes
Intra-City Transport Cable cars, subway, cars Small changes
Inter-City Transport Diesel, electric trains, aircraft Improvements to aircraft
Information Tech. Punch card machines Computers
Communication Newspapers and telephone Mobile phones and Internet
Entertainment Records, radio Large screen color television,
cable, Internet
Health Large increase in longevity Smaller increase in longevity

10. Few Categories Experienced Larger Changes
Between 1940 and 2010 than 1870 and 1910
 Smaller changes
 Power, lighting, manufacturing, appliances, homes, food,
clothing, intra- and inter-city transport, health
 Larger changes
 Information technology: Computers improved productivity
of most economic sectors
 Communications: mobile phones and Internet probably
brought more benefits than did telephone and newspapers
 Entertainment: large screen color televisions, cable, and
Internet probably brought more benefits than did records
and radio

11. Aren’t Better Communications, IT, and
Entertainment the Only Things we Need?
 These areas had equal if not greater improvements
between 1940 and 2010 than between 1870 and 1940
 But……..
 Do we really need better mobile phones and Internet?
 Do we really need faster and cheaper computers?
 Do we really need larger screen color televisions, more cable
channels, and more Internet sites?
 Unless they enable improvements in other aspects of our
lives, perhaps not……
 How might they improve other aspects of our lives?
 Can they reduce cost of electricity, quality of food and water,
basic comfort of homes, and effectiveness of transport?
 We return to this later

12. Three Big Questions
 How could this have happened?
 How could there be a slowdown when there has been
more of the following: R&D, entrepreneurship,
university graduates and emphasis on innovation in
universities?
 What types of technological accomplishments
would change results?
 Each sector is examined
 Is the slowdown important?
 Can happiness be achieved in other ways?
 What about people with low income?

13. How Could this Have Happened?
 What caused the slowdown?
 Too much of something or not enough?
 Defense spending? Regulation?
 Government subsidies of R&D?
 Income or other taxes? Inequality?
 Government subsidies of universities?
 Or maybe the number of opportunities have really declined?
 Tyler Cowen, The Great Stagnation, 2011
 My research: most technological change is limited to electronics
(Exponential Change: What Drives it? California Management Review,
Spring 2013; http://www.slideshare.net/Funk98/when-do-new-
technologies-become-economically-feasible; Rapid Improvements
without Commercial Production, Research Policy, 2015 )
 Left and Right will battle over this issue for decades
 But academics should begin to question all their assumptions

14. What About Universities?
 Universities are expected to develop the science and
technology for next generation products and services
 But these products and services don’t seem to be
appearing
 In spite of large increases in R&D funding for
universities over the last 70 years and their massive
increases in tuition in the last 20 years
 Why aren’t these products and services appearing?
 Is it a commercialization problem or a lack of new
science and technology problem?
 latter suggests that new opportunities aren’t emerging
 If the latter, what are universities doing wrong? What
should they do differently?

15. Gordon Avoids these Issues
 Gordon’s main argument is that growth has slowed
 And that it will continue to slow because of many
“headwinds”
 High inequality
 Weak education, particularly for low income people
 Aging population
 Global warming
 Higher barriers to entry
 Gordon doesn’t argue these headwinds caused the
slowdown
 He argues they will worsen the slowdown
 Someone needs to think about the reasons for the
slowdown

16. Three Big Questions
 How could this have happened?
 How could there be a slowdown with higher R&D, more
entrepreneurship, more college graduates and more
emphasis on innovation in universities?
 What types of accomplishments would change
results?
 Each sector is examined
 Is the slowdown important?
 Can happiness be achieved in other ways?
 What about people with low income?

17. What Improvements would Change Results?
Category Between 1870 & 1940 What would change results?
Power Electricity Much cheaper and cleaner
Lighting Incandescent bulbs Lower cost and more efficient
Manufacturing Electric motors and machines Lower cost manufacturing and materials
Appliances Washer, dryer, oven, fridge Much cheaper and less bulky
Homes & Bldgs Indoor plumbing, Elec, Elev. Lower cost water, more livable space
Food Cans, jars, fridge, hygiene Lower cost healthy food
Clothing Urban department stores, etc. Lower cost, self-cleaning, require less space
Intra-City Trans. Cable cars, subway, cars Lower cost transport with lower energy
usage and emissions
Inter-City Trans. Electric trains Lower cost transport, space travel
Info Technology Punch cards ACHIEVED
Communication Newspapers and telephone ACHIEVED
Entertainment Records, radio ACHIEVED
Health care Big increase in longevity Increased longevity, better health at old age

18. Many of the Needed Improvements are in
Capital Productivity not Labor Productivity
 Modern economies have tremendous wealth
 Land, homes, buildings, transportation equipment and
infrastructure, factories, home appliances, and computers
 Improvements in their utilization are needed, as utilizations
are often very low
 Some of this wealth reflects scarcities
 Land is the scarcest resource in urban areas, but also water
 Not enough livable space inside and outside homes
 Too much land is used for “things,” not real living
 Roads and parking for vehicles
 Infrastructure for water, sewage, electricity transmission
 Furniture, beds, appliances and clothes in homes

19. More Details: What Types of Accomplishments
would Change Results?
Category Between 1870 & 1940 Examples that might change results
Power Electricity Much cheaper and cleaner electricity; Fusion?
Lighting Incandescent bulbs Smart LEDs
Manufacturing Electric motors and machines Nano-technology, 3D printers
Appliances Washer, dryer, oven, fridge Reconfigurable appliances that need less space
Homes & Bldgs Indoor plumbing, Elec, Elev. More livable space, recycled water
Food Canned food, mason jars,
fridge
Lower prices of healthy food
Clothing Urban department stores, etc. Reconfigurable and self-cleaning clothing
Intra-City Trans. Cable cars, subway, cars Lower cost and emissions, higher efficiency,
driverless vehicles
Inter-City Trans. Electric trains Lower cost transport, space travel?
Info Technology Punch cards ACHIEVED
Communication Newspapers and telephone ACHIEVED
Entertainment Records, radio ACHIEVED
Health care Big increase in longevity Quality increases in longevity

20. Power
 Electricity was introduced in 1880 and
had reached most American homes by
1940
 After small reduction in electricity prices
in 1940s and 1950s
 Costs stopped falling in 1960s as
innovation slowed and optimal levels of
scale were reached
 Environmental controls have
subsequently raised costs (and improved
environment)
 And will likely further increase costs
 What types of improvements would
equal the diffusion of electricity between
1880 and 1940?

21. How might Cost of Electricity be
Significantly Reduced?
 What types of improvements would equal diffusion of
electricity between 1880 and 1940?
 Diffusion of solar, wind, and other clean energy?
 Cleaner environment, but higher costs
 Solar and wind only diffuse with government subsidies
 Wireless electricity?
 This would clean up our living rooms, but it probably won’t
reduce the cost of electricity
 How about something more radical?
 Fusion?
 Space-based solar electricity?
 Even if they succeed, they might not offer much lower costs

22. Lighting
 Incandescent lighting was introduced in 1880
and its costs had dropped substantially by 1940
 Substantially changed homes, offices, and factories
 Since 1940
 Fluorescent lighting was introduced and improved
 LEDs began to diffuse in about 2005
 In all very few improvements
 What types of improvements would equal the
diffusion of incandescent lighting between 1880 and
1940?

23. What Might Enable Big
Improvements in Lighting?
 What types of improvements would equal diffusion of
incandescent lighting between 1880 and 1940?
 Further improvements in efficiency and cost of LEDs?
 Which would propel their diffusion
 Smart lighting that combines sensors with LEDs
 Motion sensors so that lights are only utilized when
needed
 Other sensors for directional lighting, thus reducing
need for entire rooms to be lighted
 Together these improvements could reduce cost of
lighting and probably its energy usage

24. Manufacturing
 From 1880 to 1940
 Diffusion of electricity enabled machines to be
powered by motors; and not by belts and
pulleys powered by steam engines
 This enabled better organization of machines
and people
 Interchangeable parts and economies of scale
were also introduced, helped by significant
improvements in machine tools
 From 1940,
 Computer-controlled manufacturing and
logistics
 Computers have enabled lower cost and higher
precision manufacturing, along with global
supply chains

25. Will Big Improvements be Achieved?
 What types of changes would equal diffusion of
electricity and motors between 1870 and 1940?
 Further improvements in computer controls, including
Internet of Things?
 Further improvements in thin film processing for
semiconductors, MEMS, bio-electronics, solar cells, displays,
and other products?
 Nano-technology?
 Ultra-thin materials such as graphene, carbon nano-tubes, and
others?
 Enabling lighter and stronger structures for buildings, transport
equipment and other systems?
 Some are optimistic, others are not
 3D Printers?

26. Home Appliances
 Appliances introduced in early 20th century as
electricity diffused and manufacturing improved
 But only microwave oven and food mixers introduced
after 1940. Consumer Reports concluded “few price
adjusted improvements” since 1960s
 What types of improvements would equal diffusion
of appliances between 1900 and 1940?
 Voice controlled appliances, i.e., smart home devices?
 Much cheaper appliances that use smart phones for
controls instead of embedded electronics?
 New appliances like food printers?

27. Perhaps We Don’t Need More Appliances
 Appliances take up lots of space
 and space is scarcest resource in urban homes
 Perhaps configurable or transformable appliances, like
the Swiss Army Knife, are what we are need?
 Think of Transformers movie
 Appliances that can
 do many functions
 transform themselves into many different appliances
 Electronics can achieve some of these functions, how
much?
 Can better motors and materials take us the rest of the
way?
 Can the Transformers movie teach us something?

28. Homes
 In 1870 most women spent hours each day
carrying water and waste
 Infrequent baths, usually in kitchen
 Indoor plumbing changed this
 What types of improvements would equal
importance of indoor plumbing?
 Recycling of water at local level (home or
neighborhood)
 IF it reduces cost of water
 But effect will probably be opposite – higher costs
 Can smart Homes reduce household work?
 Bigger problems are RISING cost of construct-
ion and inefficient use of space in homes
 How can we create more livable space?

29. Not Enough Livable Space in Homes
 We can have more space by continuing to build up
 But this increases the time in elevators
 And increases the cost of buildings, past some height
 Can we increase the ratio of livable to storage space?
 Increase the amount of space available for real living?
 Design houses that reduce space occupied by beds,
appliances, closets, other things?
 Can more flexible homes, appliances, clothing achieve this?
 Can we survive with less?
 Can we increase the utilization of homes and other
buildings?
 Many are empty much of the time

30. Similar Trends in Offices
and Buildings
 From 1880 to 1940, offices and
buildings
 became higher and cheaper partly from
electric elevators and cheaper steel; this
enabled denser cities
 experienced rapid diffusion of indoor
plumbing, electricity, lighting, and air
conditioning
 From 1940,
 computers have revolutionized offices, but
along different dimensions, enabling
dramatic improvements in office
productivity
 further diffusion of air conditioning

31. Will Big Improvements be Achieved?
 What types of changes would equal diffusion of
electricity, elevators, and lighting between 1870 and
1940?
 LEDs, smart lighting, smart homes?
 Can they reduce energy usage of buildings?
 Greater density of office workers through less paper?
 Multi-functional offices that can be used for multiple
purposes?
 Need increases in building utilization
 Too many empty buildings; most buildings are only used
less than 50 hours a week (< 1/3)
 Can restaurants, bars, universities, offices, and other
lightly utilized buildings be used for multiple functions?

32. Food
 Canned food and mason jars were introduced in
late 1880s and refrigerators in early 20th century
 Dramatically improved health through more
consumption of vegetables and fruits
 Before 1880 scurvy was still problem
 Cost of food also dropped as
 automation implemented on farms and factories
 hybrid seeds, fertilizers, pesticides, and herbicides
were used
 Since 1940
 Greater variety of food in supermarkets (including
frozen food) through better supply chains
 Additional reductions in cost, but not like 1870 to
1940

33. What might Enable Big
Improvements in Food?
 What types of improvements would equal diffusion of canned
food, mason jars, and refrigerators between 1880 and 1940?
 Internet of Things and automation of farms?
 Would enable some reduction in costs, but
 relatively small impact in U.S. (bigger impact in poor countries)
 Vertical farming? Greenhouses with LEDs?
 Both might reduce cost of logistics and time to market
 Food based on genetically modified organisms?
 Will increase output per acre and reduce need for water,
insecticides, and pesticides; but opposed by many
 We need lower priced healthy food, the most basic need of
humans, and the most expensive item in budgets of low
income people

34. Clothing
 Clothing became cheaper, more comfortable,
and more available between 1870 and 1940,
partly through urban department stores, mail-
order catalogs, and better transportation
 People no longer had to make their own clothes
 Enabled dramatic increase in leisure time
 From 1940, more stores, the Internet, and
global supply chains enabled some
improvements
 Greater variety of clothes has become available
 Enabled greater emphasis on aesthetics and
fashion
 Also some falling costs

35. Are Big Improvements in Clothing
Possible?
 What types of changes would equal improvements
between 1870 and 1940?
 Much cheaper and better clothing through nano-fabrics?
 Wearable computing that enables clothing to provide
other functions such as health and other monitoring?
 Self-cleaning clothing to reduce cost and time of
laundering?
 Configurable clothing whose shape, patterns, and colors
can be changed
 Both might reduce amount of clothing needed
 This might mean less storage space are needed, and thus an
increase in livable space in homes

36. Intra-City Transportation
 From about 1900, cable cars, subway, cars
eliminated horses and their problems
 Allowed people to commute further, live in
suburbs
 Eliminated cost of feeding animals and cleaning
up their waste (big impact on health)
 From 1940, some improvements in cost, but not
a lot
 Safer cars, mostly through better roads and
highways
 Electric controls for more convenient cars
 Greater fuel efficiency
 Cars still represent second highest expense for
many people after homes
 High initial, maintenance and fuel costs
 Adverse impact on environment

37. Can Costs be Significantly Lowered?
 What types of improvements would equal diffusion of
cable cars, subway, and cars between 1900 and 1940?
 Electric vehicles, hydrogen vehicles?
 these bring higher costs, even if they achieve lower
emissions
 EVs are only purchased with very high subsidies
 Can we increase number of passengers per vehicle
without increasing travel time?
 Greater user of public transport through better search
tools (smart phone apps)?
 Multiple passenger ride sharing that uses low emission,
high efficiency driverless vehicles? From better IT?
 This can reduce amount of space devoted to roads and
parking, thus increasing the amount of livable space

38. Inter-City Transportation
 Trains became faster, cheaper, safer, and more
comfortable between 1870 and 1940; aircraft were
also available by 1940
 Revolutionized inter-city transport for people and
freight
 Cheaper freight reduced cost of final products,
including food
 Electric trains replaced diesel trains
 From 1940, faster and bigger aircraft but few
reductions in cost per passenger mile since 1970
 Cheaper leisure travel was achieved because prices
rose for business travel
 Seats have also become smaller

39. Can Big Improvements be Achieved?
 What types of improvements would equal diffusion of trains
and planes between 1870 and 1940?
 Supersonic jets? Magnetically Levitating Trains?
 Few are optimistic about this
 Space travel?
 Perhaps for ultra rich
 Hyperloop?
 Elon Musk is optimistic, and a few others
 Even if these technologies succeed, much lower costs than
current technologies are needed for the new ones to provide
more benefits than were received between 1870 and 1940
 What about video conferencing that significantly reduces
business travel?

40. Health
 Annual rate of improvement in life expectancy was twice
as fast in first half than second half of 20th century
 From 1880 to 1940
 Longevity increased substantially, primarily through decreases
in infant mortality, accidents, and childhood diseases
 Factors: cleaner water and homes, healthier food, more hygienic
food processing, cleaner hospitals, trained doctors, penicillin,
sulfa drugs, safer occupations
 From 1940
 Increases in longevity have come through helping elderly people
live longer, albeit not necessarily better
 Infant mortality, accidents, and childhood diseases still exists
among low-income people in U.S.
 Many new drugs and equipment have been developed

41. Can Longevity be Significantly Increased?
 What types of changes would equal improvements
in longevity achieved between 1870 and 1940?
 New drugs powered by human genome, DNA
sequencing, and organ-on-a-chip?
 Bio-electronics, wearable computing, fitness trackers?
 Artificial limbs and organs?
 Monitor health for early detection of disease and cancer?
 Smart pills, nano-particles, and other techniques for
targeted killing of cancer cells?
 Can these improvements
 increase both longevity and quality of life?
 offset health problems coming from less exercise and too
much eating?

42. Three Big Questions
 How could this have happened?
 How could there be a slowdown with higher R&D, more
entrepreneurship, more college graduates and more
emphasis on innovation in universities?
 What types of accomplishments would change
results?
 Each sector is examined
 Is the slowdown important?
 Can happiness be achieved in other ways?
 What about people with low income?

43. Maybe a Slowdown Isn’t Important?
 Do we really need more?
 Can we do with less?
 Important things such as homes, food, indoor
plumbing, and electricity have been achieved for
most Americans
 Maybe we don’t need much more? Instead we need
 Cleaner air, water and environment
 More parks
 Slower lifestyle
 So a slowdown isn’t important

44. What About Low Income People?
 They face many problems not faced by others
 Not enough healthy food
 Rising water costs, and sometimes unclean water
 Deficient housing
 Rising electricity costs
 Rising costs of health care and education
 In other words, the slowdown matters to some
 We need faster growth in order to help low income
people

45. Basic Services aren’t Available to Many
 Not enough healthy food
 requires new forms of food production
 Rising water costs, and sometimes unclean water
 requires new systems of water delivery
 Deficient housing
 requires new forms of housing
 Rising electricity costs
 requires better forms of electricity generation and distribution
 Rising costs of health care and education
 Requires better forms of health care and education
 These things aren’t happening to the extent they are needed
 Alternatively, a technological revolution in other places can
provide higher incomes that enable access to the above
necessities

46. In Summary
 The slowdown matters to a lot of people
 It’s not just about more gadgets like smart phones,
 its about livable space, healthy food, clean water,
affordable health care and education, and inexpensive
electricity
 How can we achieve these things?
 Robert Gordon is right, it will not be easy
 We need to stop assuming that we are experiencing
unprecedented technological change….
 the changes are only unprecedented in a few specific
areas like Internet and smart phones
 By rejecting this assumption, we can question existing
designs and propose better ones