Daily Archives: March 3, 2020

The future will be shaped by what global productivity growth does next

By Warwick J. McKibbin and Adam Triggs – Productivity growth is a shadow of its former self. It’s one-tenth of what it was 40 years ago in advanced economies, and even emerging economies are struggling to replicate the growth of the past. As the fundamental driver of long-run living standards, weak productivity growth is a serious problem. Lower living standards, bigger budget deficits, fewer jobs, lower wages, and higher inequality await if things don’t improve.

What is most striking about this period of low productivity is that it coincides with enormous advances in technology. An extra 3.5 billion people have gained access to the internet. The processing power of computers has increased exponentially while their cost and size have plummeted. Smartphones have multiplied, and online businesses have flourished. Email, GPS and advanced software have become widespread. The sharing economy is unlocking the full potential of idle cars and empty rooms and houses. Information and communication technologies (ICT) and artificial intelligence (AI) have reshaped many industries. The accumulated history of human knowledge is now at our fingertips.

Robert Solow famously remarked that “you can see the computer age everywhere but in the productivity statistics.” Economists have put forward a variety of explanations for the so-called “Solow paradox,” each of which implies a radically different path for productivity growth in the future. Our chapter in the just-published book “Growth in a Time of Change” models each of these possible scenarios to explore what the world might look like depending on who turns out to be correct.

Let’s start with the optimists. Some economists, like the 2018 Nobel Laureate William Nordhaus and Iraj Saniee and his co-authors at Nokia Bell Labs, point to historical data showing long lag times between technological advances and increases in productivity. For these economists, a big surge in productivity is just around the corner.

If the optimists are correct and global productivity growth takes off rapidly, many of the world’s problems go away. Investment, wages, and employment rise sharply. GDP increases and inequality declines. While all sectors experience an investment boom, the durable goods sector experiences the largest increase. The sharp increase in investment sees an increased demand for investment goods, particularly durable manufactured goods and the energy and mining resources required to produce them. Countries that export durable manufactured goods (such as Germany) and energy and mining resources (such as Australia) benefit significantly. Secular stagnation becomes a thing of the past.

But new challenges emerge. The global economy is a closed system, so the resources to finance this boom in investment and production must come from somewhere: either from increased government savings or from reductions in current consumption. If governments don’t act, or if financial market rigidities prevent access to global capital markets, consumption can fall. The shock also triggers transitions that require the redeployment of labor and capital from declining sectors to booming ones. Rigid labor markets and oligopolistic product markets hamper this adjustment. Thus, the full benefits of the boom can be squandered, and its benefits may be short-lived and distributed more unequally between capital and labor.

Now consider the pessimists. Some economists, notably Northwestern University’s Robert Gordon, argue that the technological advances in recent decades won’t deliver the sort of productivity increases that we saw from the inventions of the last century. Facebook and Netflix are great, but they are no match for electricity and indoor plumbing. more>

Updates from Chicago Booth

The populism puzzle
What caused the uprising that has transformed global politics?
By Hal Weitzman – When UK voters elected a Conservative government in December 2019, they effectively re-endorsed their view, expressed in a referendum three years prior, that Britain should leave the European Union. The news was celebrated by, among others, US president Donald Trump, who drew a parallel with his own attempt to be reelected in 2020 by tweeting, in a paraphrase of comments by Fox News host Steve Hilton, “Here in America it will be the same victory as BREXIT, but even more so.”

The 2016 Brexit referendum, and its transatlantic counterpart—Donald Trump’s victory in that year’s US presidential race—surprised opinion pollsters, and prompted many observers to question conventional political thinking. This more-recent UK election, and a US presidential campaign that has so far been dominated by candidates on the edges of the political spectrum, demonstrates that political populism is a still-potent force. Two of the world’s most stable and well-established democracies appear to have embraced populism and shunned globalization, which has led to much soul-searching about the future of liberal democracy.

The results have also challenged economic thinking, and Chicago Booth’s Lubos Pastor and Pietro Veronesi have been among the researchers studying the implications. “As economists, we have been taught to think that globalization is good, because people get to specialize, and you have free trade, and that’s a way of making somebody better off without making anybody worse off,” says Pastor. “Yet here—with the Trump and Brexit votes—you saw half the population rebelling. You saw the median voter turning against globalization.”

The real puzzle is this: Why did the United States and the United Kingdom turn to populism at a time of economic growth? more>

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Updates from Ciena

Building the Adaptive Network – starting with silicon
The journey to the Adaptive Network for network operators is not a linear path and involves managing the deployment of a range of new technologies. Key to this journey is the deployment of a programmable infrastructure. Patricia Bower explores coherent DSP design – one of the primary tools network equipment designers have in order to enable programmability and flexibility – and its significance for network transformations.
By Patricia Bower – New bandwidth-intensive content and applications, along with a massive proliferation of connected devices, will place heavy demands on communications networks going forward. To prepare for this, providers must transform their networks though the implementation of new hardware and software solutions. The Adaptive NetworkTM is the ultimate goal and consists of three main elements – a programmable packet and optical infrastructure to connect network elements; an analytics and intelligence layer to analyze and predict network behavior; and software control and automation to simplify end-to-end management across multi-vendor, multi-domain networks.

A programmable infrastructure is based on network systems which can support multiple operating modes, allow for optimization of network paths through tunability, provide for scalability and support intelligence through real-time link monitoring. These capabilities contribute to a network that can adapt and scale according to demand.

High-speed global communications networks are based on the manipulation of photons (light), but over the last ten years semiconductor electronics has been the foundation for significant advances in the delivery of lower cost per bit and greater flexibility. Semiconductor integrated circuits (IC) have continued to increase in complexity, with each new generation of manufacturing process technology offering greater functionality, smaller area and lower power.

Fabricated primarily in silicon, IC processing technology – also referred to as CMOS – is based on large-scale integration of transistor gates as a primary building block. Each process node is notionally identified by a gate size expressed in micrometers or nanometers, although the names are typically no longer related directly. Volume manufacturing for the majority of semiconductor products is currently in “7nm” (or equivalent) from various CMOS foundries. Today’s Application Specific-ICs (ASICs) can integrate several hundred million transistors in a chip area of only few hundred mm2. more>

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Updates from Adobe

Dimpy Bhalotia’s Bold Black-and-While Street Photography Elevates Everyday Moments
By Laura Staugaitis – Having left behind a career in fashion, London-based creative Dimpy Bhalotia spends her days passionately pursuing black-and-white street photography. The Bombay-born artist had settled in London to study fashion and made her way for several years in that highly creative, highly competitive industry. “And then overnight I decided to wrap up my brand and travel,” says Bhalotia. Reflecting on stepping away from one path to explore another, she emphasizes the value in knowing when to turn back and start again.

Since that decisive moment, she has been traveling the world, focusing her camera lens on spontaneous scenes. Many of Bhalotia’s images are set outdoors and capture children in motion and birds in flight. A natural predilection for unpredictable, dramatic movement lends visual and emotional excitement to her street photography.

Bhalotia seeks to share hope with her images. The intentionality of being present in the moment is a core component of street photography that resonates strongly for her. She strives to make that state of mind contagious for her viewers, encouraging people to step back from technology to appreciate their lived experience. “Art is the best medicine to cure human problems. And I am trying my best through my photos,” she says. “Given how the world is going in a very stressful direction, I wish for my photos to give hope and inspire people to not give up.” more>

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