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According to futurists of the 50s, we’re supposed to have flying cars, supersonic jets, and work 15 hours a week by now...what happened? While predicting the future is difficult, some experts argue that since the 1970s the pace of progress unexpectedly slowed and shifted. The cause? Growing ambivalence to progress and the rise of the regulatory state. But all is not lost, we can still get the future we deserve.
Growth is Good
We must begin this discussion on the basis that economic growth and technological progress are objectively good. Progress is the reason that people live longer and far fewer children die in early childhood. It’s the reason that peace, rather than war, is now the norm. It’s the reason why more of us have clean running water, lighting at night, heating in the winter, and cooling in the summer.
The average person on planet Earth today is 1550 percent wealthier compared with the average person in the 1800s. Economic growth brings increased human capability, it frees us from the toil of spending our entire waking lives hunting and gathering food. It allows us to live, not merely survive. Technology underpins all progress, including labor productivity, which in turn, drives growth and material progression.
But economic growth and labor productivity rates appear to be stalling out in much of the developed world; a trend that most trace back to the late 1960s. Productivity growth in the US, for example, grew at a fairly steady 2+ percent per year for most of American history. Beginning in the 1970s, however, productivity growth slowed to just around 1 percent per year on average.
To get a sense of what this means, had the productivity growth rate continued at its pre-70s trend, the median American household would be about twice as wealthy as it is today, with a median income of $150k instead of $80k. This is not limited to the US; growth rates are just as bad, if not worse, in much of what we call the “developed” world.
So the question becomes, what happened? Why is growth slowing? Researchers have now begun to unravel the mystery of slowing growth rates in the “Western” world, and many are pinning the blame on a kind of self-inflicted energy crisis.
The End of Energy Abundance
To solve the mystery of slowing growth, we might look to another historical trend; energy availability. Total energy availability grew about 7 percent per year from the country’s inception until around 1970. If we plot this growth in terms of energy consumption per capita (per person), we see a fairly consistent trend of roughly two percent annual growth. This observation was popularized as the “Henry Adams Curve” by futurist J Storrs Hall.
It just so happens that the two percent growth in energy consumption roughly matches labor productivity growth for the same period. But, as one can see above, beginning around 1970 the trend flatlines. To be clear, this does not mean that total energy availability in America stalled completely. Energy consumption continued to grow, but it grew roughly in line with population growth, thus a flatline when represented in per capita terms.
Correlation does not imply causation, so we must take care not to draw too many conclusions from this limited data. But many believe flatlining energy use and slowing productivity growth to be evidence that something fundamentally changed in American society in the early 1970s. And, if we are to speculate just a bit, this change coincides with a new trend in American politics and society; an ambivalent attitude toward progress and the emergence of the regulatory state.
Just as the first humans stepped on the Moon, Americans were beginning to question the cost of progress. Polluted lakes, polluted air, and the 1973 energy crisis, put pressure on lawmakers to act. As I previously noted, shortly thereafter began an explosion in the “regulatory industrial complex.” The Code of Federal Regulations, the repository where all Federal rules are codified, grew from roughly 70,000 to 170,000 pages from 1975 to 2010. For better or for worse, the growing web of regulations undoubtedly slowed progress, both economic and technological.
While many regulations were necessary, many were not, and many more were poorly written. Among these included a total ban on supersonic flights over the US, dooming the Concorde, and the dream of supersonic travel. The ban was justified to prevent the noise of sonic booms from disturbing people on the ground.
But if the goal was to limit noise, why not regulate noise? Policymakers chose to regulate speed instead, assuming that all supersonic jets must produce a disruptive “boom.” We now know it is possible to design supersonic aircraft that make little, if any, sonic boom. But they still cannot fly due to the FAA’s 50-year-old speed limit.
But perhaps the most salient casualty of regulatory overreach was nuclear energy. Nuclear power is, as I will discuss in an upcoming essay, extremely safe, efficient, and environmentally friendly. The energy density of fission holds extreme promise in the battle against climate change and pollution. Nuclear power would have been able to keep the “Henry Adams Curve” going whilst reducing harmful pollution.
But perhaps because of its association with nuclear weapons, the public indiscriminately turned against everything nuclear. The Nuclear Regulatory Commission (NRC) was formed in 1975, and with it came the near death of nuclear energy in the United States. Heavy-handed regulations also stifled innovation in the sector, including new reactor designs that were impervious to meltdowns.
It wasn’t just nuclear energy that was stifled either. In the early 1970s, Congress also passed the National Environmental Policy Act, which was intended to force government agencies to consider the environmental impacts of Federal initiatives. On its face, this sounds like a reasonable policy. But with each lawsuit filed under NEPA, came new legal precedents, one built upon the next.
Environmental Impact Statements, which used to be a few pages long, swelled to hundreds of pages in length, not including appendices. Environmental assessments of such mundane things like a new billboard or vehicle congestion fees, now take years to prepare, if the project isn’t canceled first.
NEPA was intended to protect the environment, but it quickly became a cudgel against anything and everything new. Ironically, this includes solar power facilities, windmills, and other green energy projects. NEPA now protects the status quo, the incumbent fossil fuel industry, and actively slows the transition to cleaner sources of energy.
Of course, progress didn’t come to a halt after 1970, but it does appear to have shifted. Prior to 1970, relative energy abundance and permissionless innovation led to huge progress in the “world of atoms.” We developed new forms of transportation, new kinds of engines, we built expressways, airports…etc.
But in the new energy-restricted and heavy-regulated world of physical matter, innovation moved into the digital realm…the world of bits. We invented the microprocessor, the internet, and immensely improved computers and software. These things were relatively unregulated and don’t require much energy to use. Certainly, this development, led by Moore’s Law, has been earth-shattering by itself. But I cannot help but feel that a potential future of endless possibility has been needlessly taken from us.
A Solvable Problem
But there is still hope that we can return innovation back to the world of atoms. Indeed, with Moore's Law appearing to reach its physical limits (transistors are approaching the size of atoms) we may also have no choice. But shifting back to the world of atoms requires pragmatism, optimism, risk, and frankly, getting out of our own way.
There are some signs that the tide may be turning, at least in the United States. Congress is slowly working to unwind the regulatory roadblocks that enrich lawyers at the expense of progress. The Infrastructure Investment and Jobs Act, signed by President Biden in late 2021 contains modest permitting/regulatory reforms, as does the more recent Fiscal Responsibility Act.
These measures do not go far enough. Congress is debating a more comprehensive permitting reform package, one that hopes to limit the judicial review empowered by NEPA and streamline permitting for electrical transmission lines; both crucial measures for adding new energy capacity in the US. When we lift the weight of regulatory burdens off of energy, we may again reinvigorate innovation in the world of atoms.
In the end, however, permitting reforms alone are unlikely to bring us the future we deserve. A bright future requires a complete rethink of how our society is structured. Call it whatever you like, but it is imperative to rethink the regulatory industrial complex, restructure our tax systems to lift burdens off of production, and channel more resources into science. A bright future requires new policies and new ways of thinking; it requires building a truly Protopian society.
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Always love reading your posts. 2 points/questions:
1) You mentioned that 2% growth in energy consumption roughly matched labor productivity until 1970 and after that energy consumption grew in line with population growth, which may be interpreted as the evidence for slowing productivity growth in the US henceforth. Didn't the US economy slowly start to shift towards a less oil-dependent, more service oriented economy since that time period? If an economy shifts towards a service economy, why would productivity get affected? In the US's case, that seems to be the case.
2) On the hypothetical 15 hour workweek, I think that would probably never come true. I think as automation and AI reshape and restructure work as we know it, mankind would always re-orientate themselves towards filling up the void with more "fulfilling" work, this is definitely going to be very interesting episode to watch in the next couple of decades.
You may like this:
https://www.econlib.org/productivity-puzzles/ [I disagree on the inflation analogy.] I think, however, that Sumner implies that regulation is inevitably growth inhibiting. I claim it is only when the regulators have not passed their Econ 102 class (where optimal regulation/taxation of externalities is covered), which is indeed, pretty frequent.