Posts filed under “Economy”
Economic Prospects for the Long Run
Chairman Ben S. Bernanke
At Bard College at Simon’s Rock, Great Barrington, Massachusetts
May 18, 2013
Let me start by congratulating the graduates and their parents. The word “graduate” comes from the Latin word for “step.” Graduation from college is only one step on a journey, but it is an important one and well worth celebrating.I think everyone here appreciates what a special privilege each of you has enjoyed in attending a unique institution like Simon’s Rock. It is, to my knowledge, the only “early college” in the United States; many of you came here after the 10th or 11th grade in search of a different educational experience. And with only about 400 students on campus, I am sure each of you has felt yourself to be part of a close-knit community. Most important, though, you have completed a curriculum that emphasizes creativity and independent critical thinking, habits of mind that I am sure will stay with you.
What’s so important about creativity and critical thinking? There are many answers. I am an economist, so I will answer by talking first about our economic future–or your economic future, I should say, because each of you will have many years, I hope, to contribute to and benefit from an increasingly sophisticated, complex, and globalized economy. My emphasis today will be on prospects for the long run. In particular, I will be looking beyond the very real challenges of economic recovery that we face today–challenges that I have every confidence we will overcome–to speak, for a change, about economic growth as measured in decades, not months or quarters.
Many factors affect the development of the economy, notably among them a nation’s economic and political institutions, but over long periods probably the most important factor is the pace of scientific and technological progress. Between the days of the Roman Empire and when the Industrial Revolution took hold in Europe, the standard of living of the average person throughout most of the world changed little from generation to generation. For centuries, many, if not most, people produced much of what they and their families consumed and never traveled far from where they were born. By the mid-1700s, however, growing scientific and technical knowledge was beginning to find commercial uses.
Since then, according to standard accounts, the world has experienced at least three major waves of technological innovation and its application. The first wave drove the growth of the early industrial era, which lasted from the mid-1700s to the mid-1800s. This period saw the invention of steam engines, cotton-spinning machines, and railroads. These innovations, by introducing mechanization, specialization, and mass production, fundamentally changed how and where goods were produced and, in the process, greatly increased the productivity of workers and reduced the cost of basic consumer goods.
The second extended wave of invention coincided with the modern industrial era, which lasted from the mid-1800s well into the years after World War II. This era featured multiple innovations that radically changed everyday life, such as indoor plumbing, the harnessing of electricity for use in homes and factories, the internal combustion engine, antibiotics, powered flight, telephones, radio, television, and many more. The third era, whose roots go back at least to the 1940s but which began to enter the popular consciousness in the 1970s and 1980s, is defined by the information technology (IT) revolution, as well as fields like biotechnology that improvements in computing helped make possible. Of course, the IT revolution is still going on and shaping our world today.
“A great many people think they are thinking when they are merely rearranging their prejudices.” -William James Reinhart and Rogoff are being blamed for the damaging, widespread adaption of post-crisis austerity programs in Europe and in the United States. This reflects a fundamental misunderstanding of how political decision get made. Regardless of what…Read More
Here’s our update of last November’s post of the world’s fastest and slowest growing economies ranked by 2013 GDP growth. The growth estimates and nominal GDP data are from the April IMF World Economic Outlook database. We still note, the law of small numbers in the growth economies. Excluding China from the Top 40, for…Read More
Economic Growth Stays Soft The ongoing corruption of Murdoch-run WSJ continues apace — If you just skimmed the headlines, you might have a very different takeaway than what the articles authors intended. I doubt anyone’s response to a headline that stated “Economic Growth Stays Soft” would be “I guess the economy is expanding at…Read More