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Pessimism Has Its Blind Side

Do periods of economic downturn create more pessimists, or do they just get more attention during tough times? Economists and politicians love to alarm us into believing economic growth is now on a slippery slope to permanently low levels. Everything has already been invented, baby boomers are on the decline, and productivity will never experience the kind of improvements that were seen in the 1950s.

Robert J. Gordon, Professor of Social Science at Northwestern University, wrote a paper (“Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds“) for the National Bureau of Economic Research (NBER) in August 2012 in advance of his book release Beyond the Rainbow: The American Standard of Living Since the Civil War . He points out that the computer and Internet revolution has resulted in a much smaller economic impact than that of the combustion engine. He then argues that future innovations will have a diminishing effect on economic growth because of six headwinds.

Gordon makes some good arguments, and every once in a while I do have my doubts about continued economic growth in the US. Working in the semiconductor industry, I'm constantly bombarded with dissertations on the ominous challenges of increasing R&D costs, narrowing margins, and the death of the PC era. One of Gordon's “headwinds” is the assumed plateau in educational attainment in the US. He believes the increasing cost of higher education is deterring low-income groups from attending college, and the percent of the population completing higher education degrees in the U.S. has reached a saturation point.

But then I have dinner with a 25-year-old who works at an Internet company and believes they are going to revolutionize the education system. The public school system provides the necessary tools for a majority of the student population, but Internet education programs can address students outside the normal distribution. New programs are being developed for advanced learners and customized assistance for those who drop out of the traditional class room setup.

Gordon admits that there may continue to be technical innovations but points out that the Internet has done more for entertainment and communication and not enough for productivity and economic growth. I say, give it time. The computing power in a smartphone or tablet combined with sensor technology will bring about a shift just as significant as the move from a rural to an urban economy.

For a more in-depth analysis of Robert Gordon's paper and Semico's view on technology growth, please refer to the October issue of the Semico IPI Report. For questions, contact Rick Vogelei, rick@semico.com.

10 comments on “Pessimism Has Its Blind Side

  1. FLYINGSCOT
    November 7, 2012

    Interesting point about the alternative schooling system but I wonder if it will get the necessary accreditation or be recognized by the powers that be.  It is importnat to get an education but it also needs to be recognized by others as being useful.

  2. Barbara Jorgensen
    November 7, 2012

    Good point about the Internet, or connectivity, enabling education for more people. I hope, however, that doesn't become the norm but is used only as a last-ditch effort. Socializing in school is as important as the academics. Already we see the effect of people entering the workforce that have no idea how to communicate face to face.

  3. Adeniji Kayode
    November 8, 2012

    @Barbara,

    For sure, this method of learning would definately have its own adverse effect on the quality of education and the performance of the student.

  4. Adeniji Kayode
    November 8, 2012

    @Flyingscot,

    you are right, there might be little or no respect and trust for such schooling system.

    Even the society might discriminate against it too because it may not be generally accepted

  5. Ariella
    November 8, 2012

    @Barbara Most schools have to treat students in a one-size-fits-all manner. And, of course, one size may fit most but never all. Online options allow for more customization at fairly low cost because a separate teacher doesn't have to be hired for each specialized group doing, say more advanced math, science, or history than the rest of the class. 

  6. prabhakar_deosthali
    November 9, 2012

    In my opinion the school education is not just about books, reading , writing or gaining knowledge , but it is also about learning to live in a community away from your parents.

     

    It is about  how to cope with adjustments, competition, insults, and all such things that an internet based education system cannot impart.

     

     

  7. Joanne Itow
    November 9, 2012

     

    Thank you all for your comments.  I agree that the social interaction in school is a valuable experience but I also agree with Ariella that 'one-size' never fits all.  If we can provide educational options that open the door for students who need to work while going to school and/or offers a lower cost option for higher education, I'm all for it.  I just do not agree with Robert Gordon, that the U.S. has reached an educational plateau.    I still believe that innovations in  technology can and will stimulate economic growth in the U.S. 

  8. Adeniji Kayode
    November 10, 2012

    @ Joanne, I really buy the idea too afterall othing is enitirely good or bad,it just depends on how such thing is put to use.

  9. Adeniji Kayode
    November 12, 2012

    @prabhakar

     You are right on that, there are lot to be gained in going to school, lifestyle, culture and human relation can not be learned well over the internet.

  10. Adeniji Kayode
    November 12, 2012

    Will the exams written on the internet also be regarded as true test of one's ability?

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