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suggestive but falls short of expectations
on October 20, 2013
The old paradigm of economic growth can be summed up as the combination of population (labour) growth and labour productivity growth. Invention, innovation, organizational change, and regulation, were all embodied in the productivity component in this old model. This component was exogenous to the model, and does not provide an endogenous explanation of growth.
I was hoping that the incorporation of information theory within the growth model would start to address this shortcoming of exogenous productivity. Shannon had a metric for measuring the information content within a communication. One can think of a trend line for a statistical series as an attempt to separate the signal (information) from the noise in a statistical series. I thought Gilder might extend these ideas. The book did not take this tack.
The statement in the book, that production was really a rearrangement of more basic material elements within the world, rather the creation of something new, is suggestive. The imagery that production is the first layer in a multi-layer process, and that invention, innovation, and creative thought, are in a higher level, starts to provide an insight as to how these creative processes might work; namely focusing on the production level and consciously thinking of new ways to provide the same product, or rearrange the material elements of an existing product, to serve a new purpose. The development of this line of thinking might facilitate more innovation.
The demographic trends in developed countries will not support higher standards of living without substantive productivity gains.
Current trends in productivity growth are unlikely to offset the foreseen demographic decline in labour supply.
We need more effective methods of fostering productivity to counter the above scenario.
I was hoping that Gilder would provide some insights into such developments. He did not. Hence the shortfall in expectations.
But the book was still worth reading even if it did not deliver all I was seeking.