A Rain Dance for Productivity Growth

Matt Stephenson
Matt Stephenson
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May 28th, 2021

The First Industrial Revolution (“IR 1”) is the famous one, occurring a little before the year 1800. It connected people with railroads and steamships and yet, despite its fame, it brought almost no growth:

Look how flat the curve is before ~1850. That curve is a measure our ability to do more with less, to meet our human needs without simply forcing everyone to work harder. And
so it's interesting that IR 1 didn't really improve our lot, at least not for decades and decades after it occurred. What happened?

Let's observe that the curve actually changes with the appearance of a wave of major inventions that had quite a different character. Broadly speaking, we can say that whereas IR 1 brought us together with connecting inventions like the steam engine, the second wave had great livability innovations in areas like heating, sanitation, electric lights, elevators, motion pictures, etc.

The IR 1 world was a newly connected one, but it was also polluted and dangerous and kind of miserable. And so we didn’t actually produce much all huddled together, drinking dirty water and breathing fumes. But then, once we figured out how to make this newly connected world more livable and pleasant, things got vastly better. Only then did we get the growth explosion that the Industrial Revolution is famous for.

In this light, it might be interesting to read top economists today pondering over the stagnant growth and missing productivity of the internet era dating back to the 1970s. Perhaps we can imagine a similar economist during IR 1.0 puzzling over the missing productivity that the steam engine should have wrought.

What if today’s economists are wrong for the same reasons — what if the internet is indeed revolutionary and we just haven't gotten the 2.1 patch?

The internet brought our minds together in a great network to rival the 19th century network of railways and steamships. If this 1800s network could take you to undeniably thrilling — but also crowded and disgusting — cities, perhaps the internet too feels a bit like this now. Thrilling but awful, alluring but somehow inhumane. And so perhaps some optimism is available in the story of the 19th century, and the fact that its network showed a lot of promise but failed to deliver for a very long time until, suddenly, it did.

What if the same thing is true now?

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