Re: Why growth may stay slow

Dan Clemmensen (
Wed, 18 Mar 1998 19:17:53 -0500

Robin Hanson wrote:

> If better technology caused faster economic growth, optimism about new
> technologies suggests accelerating economic growth rates, perhaps even
> becoming so fast as to constitute a "singularity."
> The following analysis suggests, however, that if growth rates are limited
> by the average return on investment (ROI), growth rates may be relatively
> insensitive to technology, and hence long remain near historical levels.
> The basic argument is this: Interest rates are determined by the supply
> and demand for investment resources. The supply curve seems to be
> basically flat at historical rates of 1-3%, and for good evolutionary
> reasons. The demand curve rises with technology, but since there are
> effectively no property rights in investment projects, all the demand
> curve above the level where supply and demand meet is burned up in a race
> to be first. So ROI should remain near historical rates until some new
> technology is so good that, even with most world income being saved
> and invested in related projects, the expected ROI for even the least
> attractive projects becomes much higher than historical interest rates.
> A more detailed argument is at:
> Robin Hanson
> RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
> 140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-8614

Robin, I'm not sure I follow your argument. The "explosive growth" argument
is that certain technological improvements will increase the productivity of
technologists. even if the real investment rate in innovation is flat, the
rate of technological improvement will increase because of the productivity
improvement. If technology increases the productivity of technological
innovators relative to other workers (unsupported assumption), then the ROI
for technical innovation will rise relative to other investments. This effect
would push innovation even faster, even with a flat perentage investment.