Atoms for progress: Thinking about energy and innovation in the 2020s
Assuming steady vaccination progress, there’s good reason to expect the American economy to surge this year and next. Consumer eagerness and opportunity to spend combined with a tsunami of stimulus should prove a powerful combo. At least for the short term. But rosy forecasts pushing a new “Roaring Twenties” thesis are counting on a boom, not a blip. Likewise, most of these optimistic forecasts are also counting on stronger innovation-driven productivity growth to power that boom.
I’ve been writing about this notion, and now so has The Economist. The newspaper’s theory of the case: “Today a dawn of technological optimism is breaking. The speed at which covid-19 vaccines have been produced has made scientists household names. Prominent breakthroughs, a tech investment boom and the adoption of digital technologies during the pandemic are combining to raise hopes of a new era of progress.”
Of course, it would be even better if America experienced a decades-long productivity boom with fast-advancing technological progress. Instead of a Great Stagnation, a Great Acceleration. With that in mind, I’ve noticed renewed interest in explaining the early 1970s productivity downshift. Two main economic explanations share a sort of fruity theme: All the juice had been squeezed from the big invention of the past (the internal combustion engine, electrification), and the low-hanging fruit of big, game-changing innovation had already been picked.
But maybe the downshift can be explained by how the 1970s got all weird about energy, especially after the oil crisis that began in October 1973. When the “limits to growth” environmentals weren’t warning about the pollution impact of fossil fuels, they were warning that supplies were fast-headed toward exhaustion. As Hudson Institute think-tank analysts — including former nuclear war theorist Herman Kahn — wrote in 1976:
“It has become increasingly fashionable, especially among intellectuals at prestige universities and among spokesman in the most respected newspapers and journals, as well as on television, to attack economic growth, capitalism, industrialization, the consumer society, and related values. Casual references are made to our vanishing resources, the end of the “energy ride,” our increasingly “suicidal” pollution, our “self-destructive materialism,” the poverty of our emotional and anesthetic lives, the disease of consumeritis, and the need to “kick the energy habit.” The United States is usually singled out as the prime culprit in this indictment.
Now it doesn’t appear that the economic consensus blames the 1970s energy shocks for the productivity downshift (although initially, the oil crisis seemed a likely culprit). As the Congressional Budget Office says in a 2013 analysis, “…the widespread view that the [productivity] decline stemmed from the dramatic rise in energy prices after 1973 fails to account for the lack of a similarly strong slowdown in other countries or for the failure of TFP growth to recover after energy prices declined in the 1980s.”
That said, there seemed to be a shift in innovative focus from creating new sources of abundant energy to energy efficiency. In a new essay, Jason Crawford writes that “there’s no reason to believe that flatlining or declining resource usage is optimal for progress. A large part of progress is harnessing ever-more resources and putting them to productive use.” Certainly there were plenty of analysts back in the 1960s who thought America today would be dotted with nuclear fission and fusion reactors by now. Lots of geothermal energy production, too. Of course, that didn’t happen — and there’s reason to think that scarcity-oriented environmentalists deserve some blame as their techno-pessimist views were expressed in regulation and investment priorities. As a result, there remains a huge need going forward for ample, inexpensive, and carbon-free energy.
Maybe the Roaring Twenties will provide some answers. This New York Times headline from September is a promising start: “Compact Nuclear Fusion Reactor Is ‘Very Likely to Work,’ Studies Suggest.” Some Green New Dealers seem pro-energy abundance, others not so much. And while we need more research investment — while not simply throwing money around — we also shouldn’t forget the regulatory obstacles to energy innovation.
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