Book Launch -- <i>The Past and Future of America's Economy: Long Waves of Innovation that Power Cycles of Growth</i>

The Past and Future of America's Economy:
Long Waves of Innovation that Power Cycles of Growth
April 7, 2005

Robert Atkinson, Vice President,
Progressive Policy Institute and Director of PPI's Technology and New Economy Project

David Wessel, Deputy Bureau Chief of the Washington Bureau of The Wall Street Journal

As part of its ongoing series on The Future of the American Economy, STAGE (Science, Technology, America, and the Global Economy) sponsored a discussion with Robert D. Atkinson, Vice President of the Progressive Policy Institute and Director of PPI's Technology and New Economy Project. David Wessel, Deputy Bureau Chief of the Washington Bureau of The Wall Street Journal, provided commentary.

In speaking about America's economic future, Atkinson drew on his recently published book, The Past and Future of America's Economy: Long Waves of Innovation that Power Cycles of Growth. He identified four cycles of growth. Occurring about every fifty years, these transformations have led to years of productivity growth punctuated by and periods of slow growth or economic turmoil as the economy shifted from one long-wave to the next.

Atkinson points to the development of cheap steel, precision machine tools, and electricity as fueling the rise of factory-based manufacturing in the 1890s. What Atkinson labels the "national corporate, mass production economy" of the 1940s and 1950s was driven by industries "such as electronics, chemicals and mass consumer goods." The latest new economy emerged in the early 1990s and has been "powered by the information technology revolution, including the Internet, software, the microprocessor, and telecommunications."

In terms of schools of thought, Atkinson identifies himself with the Schumpeterian (after the great Austrian and US economist Joseph Schumpeter) school and its emphasis on innovation as the key driver of productivity growth and economic progress. While the economics profession has emphasized the importance of human capital, technology and innovation, they have proved hard to incorporate into the mathematical models currently in wide use.

Atkinson does not see either the supply side school with its emphasis on cuts in marginal tax rates or the traditional Keynesian school with its focus on fiscal or monetary stimulus as holding much promise for the future. Instead, Atkinson argues for what he calls growth economics, including policies that accelerate the use of new technologies and policies that foster future innovation. He favors the creation of a National Innovation Corporation (NIC) that "would manage a range of innovation investment initiatives." Among others steps, Atkinson favors an "Advanced Cyberinfrastructure Program," added funding for the infrastructure that supports academic research, and support for collaborative R&D partnerships.

In his comments, David Wessel praised Atkinson's book and agreed on the importance of innovation to long-term productivity growth. Wessel thought that the general American public had absorbed more of the new economy than Atkinson had suggested. For instance, they now assume that information will be available on-line. He was also more supportive of Keynesian economics as a well to deal with temporary downturns that were largely unrelated to the long cycles that were the focus of Atkinson's book. It was, for instance, an appropriate way to respond to the bursting of the financial bubble in the early years of the 21st century.

Wessel also raised the question of why it had taken so long for the information revolution to affect overall productivity growth. He noted that in 1982, Time made the PC the person of the year. Atkinson argued that it took time for the technology to mature. Wessel put more emphasis on an idea derived from Paul David's essay on the slow spread of the electric motor in an earlier era – it simply took time for people and businesses to digest how to use the new technology.

Wessel expressed some concern about the distribution implications of the new technology. He cited a recent book co-authored by MIT's Frank Levy that emphasizes that if a job can be written down it can be automated or outsourced. "What," asked Wessel, "makes you so sure that our kids will have good jobs?" Will, he asked, the United States end up with a two-tier, barbell like economy?

In his response, Atkinson shared Wessel's concern about a two-tier economy. He agreed training would help but might not be sufficient. It may, he suggested, be necessary to think of a more progressive tax system.