Innovation & Its Malcontent

(1) Professor Gordon and Reverend Malthus. (2) The worst forecast on record. (3) No more productivity-enhancing innovations? (4) Dismal scientists vs. street-smart contrarians. (5) Does the Energy Revolution matter? (6) US net petroleum imports cut in half since 1985! (7) Head in the Cloud. (8) The 10K-B.A. (9) Holding pattern: Stocks set to land or refueling for another climb? (10) Fiscal speed bumps. (11) M&A is in fashion. (12) Talking Fed heads. Innovation I. Robert Gordon is channeling Thomas Malthus, both renowned economists and social scientists. Gordon is currently a professor at Northwestern University. Malthus was the original “dismal scientist,” who lamented in his An Essay on the Principle of Population, published in six editions from 1798-1826, that famines and diseases were nature’s way of keeping population growth from outpacing the food supply: “That the increase of population is necessarily limited by the means of subsistence, That population does invariably increase when the means of subsistence increase, and, That the superior power of population is repressed, and the actual population kept equal to the means of subsistence, by misery and vice.” It was probably the most spectacularly wrong economic forecast of all times, and a classic for contrarian thinkers. Grain production soared during the 1800s thanks to new technologies, more acreage, and rising yields. During the first half of the century, chemical fertilizers revived the fertility of European soil, and the milling process was automated using steam engines. During the second half of the century, vast new farmlands were opened in the US under the Homestead Act of 1862, and agriculture’s productivity soared with the proliferation of mechanical sowers, reapers, and threshers. Professor Gordon isn’t worrying about unsustainable population growth and food shortages. Rather, he believes that the age of productivity-enhancing innovation is over. He has written a couple of thoughtprovoking articles on this subject recently in advance of a book he is publishing soon: (1) In a 12/21/12 WSJ article titled, “Why Innovation Won’t Save Us,” he grimly predicted: “Nothing has been more central to America's self-confidence than the faith that robust economic growth will continue forever. Between 1891 and 2007, the nation achieved a robust 2% annual growth rate of output per person. Unfortunately, the evidence suggests to me that future economic growth will achieve at best half that historic rate. The old rate allowed the American standard of living to double every 35 years; for most people in the future that doubling may take a century or more.” (2) Last year, in a widely discussed September study, Gordon claimed that the three industrial revolutions since 1750 might have fueled a "one-time-only" increase in standards of living and productivity over the past 250 years. It really is a very interesting paper, positing that smartphones and