Ideas Aren't Getting Harder to Find-Asterisk

"Fifty years ago, productivity growth in advanced economies began to slow down. Productivity growth - the component of GDP growth that is not due to increases in labor and capital - is the primary driver of rising incomes. When it slows, so does economic growth as a whole. This makes it an urgent trend to understand. Unfortunately, the most popular explanation for why it's happening might be wrong."

"The most widely endorsed reason productivity growth has faltered is that we are running out of good ideas. As this narrative has it, the many scientific and technology advances responsible for driving economic growth in the past were low-hanging fruit. Now the tree is more barren. Novel advances, we should expect, are harder to come by, and historical growth may thus be difficult to sustain. In the extreme, this may lead to the end of progress altogether."

Fifty years ago productivity growth in advanced economies began to slow. Productivity growth, defined as the component of GDP growth not due to labor and capital, is the primary driver of rising incomes. When productivity growth weakens, aggregate economic growth and income gains decelerate. A prominent explanation attributes the slowdown to diminishing returns to discovery: past scientific and technological advances were low-hanging fruit, making new ideas harder to find. Evidence from Bloom et al. (2020) finds stable productivity measures across fields but a large increase in researcher numbers, implying lower output per researcher. Emerging research suggests innovators continue producing valuable ideas, while markets are less effective at converting breakthroughs into productivity gains.

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