A/Prof Jeffrey Funk

Division of Engineering and Technology Management

National University of Singapore

39% admin, 31% salaries, 14% too many tests. Rreasonsfor highercost of US health careSolows quip isnt true. Computers arent evrywher. What if they wereATMs led to morebranches xoz number of employees and thus costs fellPercentage of employees in firms younger than five yearsfell from 19 to 10 percent.betwwen 1982 and 2011Sherwin rosen first explained inequality. Market wants best singer and electronic media amplifies this. Market also want best lawyer but no amplification

Separate freezers came in 1939. Supermarkets in 1930s enabled one payment. In 1980s came barcodesFast foodDishwashers clothes dryers air conConsumer reports concluded little improvement in pice adjusted quality since 1960 for some appliances and since 1970s for othersConstruction costs have risenTen time increase in price of auto betwween 1950 and 2012. 4 time increse in cpi because some quality improvement. All govtmandated changes wer assumed to be improved quality50 percent more drugs were approved between 1940 an 1960 than infollowing 51 yearsSlight increase in cancer survival in last 40 yearsOne interpretation is ovr specialization in doctors hospitals researchersToo much regulationToo much emphasis on science? Identifying mechanisms is more important than devloping curesMore expensive equipment. Medical arms raceUS health care spending is 55 pe rce nt than canada but lifespan is 2.5 years shorter

Lots ofcredit in 1870 for farmers who paid after harvest. But dept storesreduced prices and margins and thus only acceoted cash. COD was eliminated. By 1900hadbegun offering credit to wealthy customers. Auto loans started in 1920.Atuto and life insurace were widelyavailable by 1940. Installment plan, social security became common by 1940

Telegraph enabled single track lines.Also important fornew and dept store inventoryAnnual rate of improvement in life expectancy was twice as fast in first halfthan second of 20th centuryAntibiotics in 1930s and 40sNo horses pasteur indoor plumbing screen doorsLife expectancy from 60increased fastr in 2nd half of 20th centuryIncreases in longevitybefore 1940 came littlefrom doctors and hospitalsReductionds in infectious diseases were achieved by 1955Cleaner water and vaccines are reason in houses and facties, meat processing. Clean milkHospitals became cleaner and safer with antiseptics and pain killers in early 20thBut mos drugs developed after 1940starting with sulfa and penicillinSafe jobs cars railroads machineryWorkers comp

What Does Robert Gordon Argue? Economic growth and thus improvements in standard living

have slowed for the U.S. in the last 70 years

growth between 1870 and 1940

was faster than between 1940 and 2010

He demonstrates this unexpected conclusion by analyzing many studies of

inflation adjusted productivity growth by sector

changes in product and service features, food, homes, and lifestyle, that are not captured in productivity data

changes in longevity and other health data

This analysis suggests technology change was slower between 1940 and 2010 than it was between 1870 and 1940

How Could this Be?

Isn’t there more innovation than ever before?

Aren’t we living in an age of unprecedented technological change?

More is spent on R&D

Supposedly there are more entrepreneurs

More people graduate from universities

Universities place more emphasis on innovation

All of this suggests that Robert Gordon is wrong……

Let’s look at some of his evidence

Simply Put An American of 1870 would not recognize life in 1940

Indoor plumbing

Canned and jarred food, refrigerators

Cable cars, subways, autos, trucks, and aircraft

Electricity, home appliances, and lighting

Newspapers, telephones, records and radio

Urban department stores, skyscrapers

But an American of 1940 would recognize life today Small changes in the above items

Only a few big changes: large screen color televisions, computers, mobile phones, Internet

Similar arguments can probably be made for Europeans, Japanese, Australians, and others

Let’s Compare Price-Adjusted Improvements Category Between 1870 and 1940 Between 1940 and 2010

Power Electricity Small changes

Lighting Incandescent bulbs Small changes

Manufacturing Electric motors and machines Computer-controlled factories

Appliances Washer, dryer, oven, refrigerator Microwave, dryer, dishwasher

Homes and Buildings Indoor plumbing, Elec, Elevators Air con, construction costs rose

Food Cans, mason jars, fridge, cleaner Frozen foods, freezers

Clothing Dept stores, mail-order catalogs Small changes

Intra-City Transport Cable cars, subway, cars Small changes

Inter-City Transport Diesel, electric trains, aircraft Improvements to aircraft

Information Tech. Punch card machines Computers

Communication Newspapers and telephone Mobile phones and Internet

Entertainment Records, radio Large screen color television, cable, Internet

Health Large increase in longevity Smaller increase in longevity

Few Categories Experienced Larger ChangesBetween 1940 and 2010 than 1870 and 1910

Smaller changes

Power, lighting, manufacturing, appliances, homes, food, clothing, intra- and inter-city transport, health

Larger changes

Information technology: Computers improved productivity of most economic sectors

Communications: mobile phones and Internet probably brought more benefits than did telephone and newspapers

Entertainment: large screen color televisions, cable, and Internet probably brought more benefits than did records and radio

Aren’t Better Communications, IT, and Entertainment the Only Things we Need?

These areas had equal if not greater improvements between 1940 and 2010 than between 1870 and 1940

But…….. Do we really need better mobile phones and Internet?

Do we really need faster and cheaper computers?

Do we really need larger screen color televisions, more cable channels, and more Internet sites?

Unless they enable improvements in other aspects of our lives, perhaps not…… How might they improve other aspects of our lives?

Can they reduce cost of electricity, quality of food and water, basic comfort of homes, and effectiveness of transport?

We return to this later

Three Big Questions

How could this have happened?

How could there be a slowdown when there has been more of the following: R&D, entrepreneurship, university graduates and emphasis on innovation in universities?

What types of technological accomplishments would change results?

Each sector is examined

Is the slowdown important?

Can happiness be achieved in other ways?

What about people with low income?

How Could this Have Happened? What caused the slowdown?

Too much of something or not enough? Defense spending? Regulation?

Government subsidies of R&D?

Income or other taxes? Inequality?

Government subsidies of universities?

Or maybe the number of opportunities have really declined? Tyler Cowen, The Great Stagnation, 2011

My research: most technological change is limited to electronics (Exponential Change: What Drives it? California Management Review, Spring 2013; http://www.slideshare.net/Funk98/when-do-new-technologies-become-economically-feasible; Rapid Improvements without Commercial Production, Research Policy, 2015 )

Left and Right will battle over this issue for decades

But academics should begin to question all their assumptions

What About Universities? Universities are expected to develop the science and

technology for next generation products and services

But these products and services don’t seem to be appearing

In spite of large increases in R&D funding for universities over the last 70 years and their massive increases in tuition in the last 20 years

Why aren’t these products and services appearing?

Is it a commercialization problem or a lack of new science and technology problem? latter suggests that new opportunities aren’t emerging

If the latter, what are universities doing wrong? What should they do differently?

Gordon Avoids these Issues

Gordon’s main argument is that growth has slowed

And that it will continue to slow because of many “headwinds” High inequality

Weak education, particularly for low income people

Aging population

Global warming

Higher barriers to entry

Gordon doesn’t argue these headwinds caused the slowdown He argues they will worsen the slowdown

Someone needs to think about the reasons for the slowdown

Three Big Questions

How could this have happened?

How could there be a slowdown with higher R&D, more entrepreneurship, more college graduates and more emphasis on innovation in universities?

What types of accomplishments would change results?

Each sector is examined

Is the slowdown important?

Can happiness be achieved in other ways?

What about people with low income?

What Improvements would Change Results?Category Between 1870 & 1940 What would change results?

Power Electricity Much cheaper and cleaner

Lighting Incandescent bulbs Lower cost and more efficient

Manufacturing Electric motors and machines Lower cost manufacturing and materials

Appliances Washer, dryer, oven, fridge Much cheaper and less bulky

Homes & Bldgs Indoor plumbing, Elec, Elev. Lower cost water, more livable space

Food Cans, jars, fridge, hygiene Lower cost healthy food

Clothing Urban department stores, etc. Lower cost, self-cleaning, require less space

Intra-City Trans. Cable cars, subway, cars Lower cost transport with lower energy usage and emissions

Inter-City Trans. Electric trains Lower cost transport, space travel

Info Technology Punch cards ACHIEVED

Communication Newspapers and telephone ACHIEVED

Entertainment Records, radio ACHIEVED

Health care Big increase in longevity Increased longevity, better health at old age

Many of the Needed Improvements are in Capital Productivity not Labor Productivity

Modern economies have tremendous wealth Land, homes, buildings, transportation equipment and

infrastructure, factories, home appliances, and computers

Improvements in their utilization are needed, as utilizations are often very low

Some of this wealth reflects scarcities Land is the scarcest resource in urban areas, but also water

Not enough livable space inside and outside homes

Too much land is used for “things,” not real living Roads and parking for vehicles

Infrastructure for water, sewage, electricity transmission

Furniture, beds, appliances and clothes in homes

More Details: What Types of Accomplishments would Change Results?

Category Between 1870 & 1940 Examples that might change results

Power Electricity Much cheaper and cleaner electricity; Fusion?

Lighting Incandescent bulbs Smart LEDs

Manufacturing Electric motors and machines Nano-technology, 3D printers

Appliances Washer, dryer, oven, fridge Reconfigurable appliances that need less space

Homes & Bldgs Indoor plumbing, Elec, Elev. More livable space, recycled water

Food Canned food, mason jars, fridge

Lower prices of healthy food

Clothing Urban department stores, etc. Reconfigurable and self-cleaning clothing

Intra-City Trans. Cable cars, subway, cars Lower cost and emissions, higher efficiency, driverless vehicles

Inter-City Trans. Electric trains Lower cost transport, space travel?

Info Technology Punch cards ACHIEVED

Communication Newspapers and telephone ACHIEVED

Entertainment Records, radio ACHIEVED

Health care Big increase in longevity Quality increases in longevity

Power Electricity was introduced in 1880 and

had reached most American homes by 1940

After small reduction in electricity prices in 1940s and 1950s Costs stopped falling in 1960s as

innovation slowed and optimal levels of scale were reached

Environmental controls have subsequently raised costs (and improved environment) And will likely further increase costs

What types of improvements would equal the diffusion of electricity between 1880 and 1940?

How might Cost of Electricity be Significantly Reduced?

What types of improvements would equal diffusion of electricity between 1880 and 1940?

Diffusion of solar, wind, and other clean energy? Cleaner environment, but higher costs

Solar and wind only diffuse with government subsidies

Wireless electricity? This would clean up our living rooms, but it probably won’t

reduce the cost of electricity

How about something more radical? Fusion?

Space-based solar electricity?

Even if they succeed, they might not offer much lower costs

Lighting

Incandescent lighting was introduced in 1880 and its costs had dropped substantially by 1940

Substantially changed homes, offices, and factories

Since 1940

Fluorescent lighting was introduced and improved

LEDs began to diffuse in about 2005

In all very few improvements

What types of improvements would equal the diffusion of incandescent lighting between 1880 and 1940?

What Might Enable Big Improvements in Lighting?

What types of improvements would equal diffusion of incandescent lighting between 1880 and 1940?

Further improvements in efficiency and cost of LEDs?

Which would propel their diffusion

Smart lighting that combines sensors with LEDs

Motion sensors so that lights are only utilized when needed

Other sensors for directional lighting, thus reducing need for entire rooms to be lighted

Together these improvements could reduce cost of lighting and probably its energy usage

Manufacturing

From 1880 to 1940 Diffusion of electricity enabled machines to be

powered by motors; and not by belts and pulleys powered by steam engines

This enabled better organization of machines and people

Interchangeable parts and economies of scale were also introduced, helped by significant improvements in machine tools

From 1940, Computer-controlled manufacturing and

logistics

Computers have enabled lower cost and higher precision manufacturing, along with global supply chains

Will Big Improvements be Achieved? What types of changes would equal diffusion of

electricity and motors between 1870 and 1940? Further improvements in computer controls, including

Internet of Things?

Further improvements in thin film processing for semiconductors, MEMS, bio-electronics, solar cells, displays, and other products?

Nano-technology? Ultra-thin materials such as graphene, carbon nano-tubes, and

others?

Enabling lighter and stronger structures for buildings, transport equipment and other systems?

Some are optimistic, others are not

3D Printers?

Home Appliances Appliances introduced in early 20th century as

electricity diffused and manufacturing improved

But only microwave oven and food mixers introduced after 1940. Consumer Reports concluded “few price adjusted improvements” since 1960s

What types of improvements would equal diffusion of appliances between 1900 and 1940?

Voice controlled appliances, i.e., smart home devices?

Much cheaper appliances that use smart phones for controls instead of embedded electronics?

New appliances like food printers?

Perhaps We Don’t Need More Appliances Appliances take up lots of space

and space is scarcest resource in urban homes

Perhaps configurable or transformable appliances, like the Swiss Army Knife, are what we are need? Think of Transformers movie

Appliances that can do many functions

transform themselves into many different appliances

Electronics can achieve some of these functions, how much?

Can better motors and materials take us the rest of the way? Can the Transformers movie teach us something?

Homes In 1870 most women spent hours each day

carrying water and waste

Infrequent baths, usually in kitchen

Indoor plumbing changed this

What types of improvements would equal importance of indoor plumbing?

Recycling of water at local level (home or neighborhood)

IF it reduces cost of water

But effect will probably be opposite – higher costs

Can smart Homes reduce household work?

Bigger problems are RISING cost of construct-ion and inefficient use of space in homes

How can we create more livable space?

Not Enough Livable Space in Homes

We can have more space by continuing to build up

But this increases the time in elevators

And increases the cost of buildings, past some height

Can we increase the ratio of livable to storage space?

Increase the amount of space available for real living?

Design houses that reduce space occupied by beds, appliances, closets, other things?

Can more flexible homes, appliances, clothing achieve this?

Can we survive with less?

Can we increase the utilization of homes and other buildings?

Many are empty much of the time

Similar Trends in Offices and Buildings From 1880 to 1940, offices and

buildings became higher and cheaper partly from

electric elevators and cheaper steel; this enabled denser cities

experienced rapid diffusion of indoor plumbing, electricity, lighting, and air conditioning

From 1940, computers have revolutionized offices, but

along different dimensions, enabling dramatic improvements in office productivity

further diffusion of air conditioning

Will Big Improvements be Achieved? What types of changes would equal diffusion of

electricity, elevators, and lighting between 1870 and 1940?

LEDs, smart lighting, smart homes? Can they reduce energy usage of buildings?

Greater density of office workers through less paper?

Multi-functional offices that can be used for multiple purposes? Need increases in building utilization

Too many empty buildings; most buildings are only used less than 50 hours a week (< 1/3)

Can restaurants, bars, universities, offices, and other lightly utilized buildings be used for multiple functions?

Food Canned food and mason jars were introduced in

late 1880s and refrigerators in early 20th century

Dramatically improved health through more consumption of vegetables and fruits

Before 1880 scurvy was still problem

Cost of food also dropped as

automation implemented on farms and factories

hybrid seeds, fertilizers, pesticides, and herbicides were used

Since 1940

Greater variety of food in supermarkets (including frozen food) through better supply chains

Additional reductions in cost, but not like 1870 to 1940

What might Enable Big Improvements in Food?

What types of improvements would equal diffusion of canned food, mason jars, and refrigerators between 1880 and 1940?

Internet of Things and automation of farms? Would enable some reduction in costs, but

relatively small impact in U.S. (bigger impact in poor countries)

Vertical farming? Greenhouses with LEDs? Both might reduce cost of logistics and time to market

Food based on genetically modified organisms? Will increase output per acre and reduce need for water,

insecticides, and pesticides; but opposed by many

We need lower priced healthy food, the most basic need of humans, and the most expensive item in budgets of low income people

Clothing

Clothing became cheaper, more comfortable, and more available between 1870 and 1940, partly through urban department stores, mail-order catalogs, and better transportation

People no longer had to make their own clothes

Enabled dramatic increase in leisure time

From 1940, more stores, the Internet, and global supply chains enabled some improvements

Greater variety of clothes has become available

Enabled greater emphasis on aesthetics and fashion

Also some falling costs

Are Big Improvements in Clothing Possible?

What types of changes would equal improvements between 1870 and 1940?

Much cheaper and better clothing through nano-fabrics?

Wearable computing that enables clothing to provide other functions such as health and other monitoring?

Self-cleaning clothing to reduce cost and time of laundering?

Configurable clothing whose shape, patterns, and colors can be changed

Both might reduce amount of clothing needed

This might mean less storage space are needed, and thus an increase in livable space in homes

Intra-City Transportation From about 1900, cable cars, subway, cars

eliminated horses and their problems Allowed people to commute further, live in

suburbs

Eliminated cost of feeding animals and cleaning up their waste (big impact on health)

From 1940, some improvements in cost, but not a lot Safer cars, mostly through better roads and

highways

Electric controls for more convenient cars

Greater fuel efficiency

Cars still represent second highest expense for many people after homes High initial, maintenance and fuel costs

Adverse impact on environment

Can Costs be Significantly Lowered? What types of improvements would equal diffusion of

cable cars, subway, and cars between 1900 and 1940?

Electric vehicles, hydrogen vehicles? these bring higher costs, even if they achieve lower

emissions

EVs are only purchased with very high subsidies

Can we increase number of passengers per vehicle without increasing travel time? Greater user of public transport through better search

tools (smart phone apps)?

Multiple passenger ride sharing that uses low emission, high efficiency driverless vehicles? From better IT?

This can reduce amount of space devoted to roads and parking, thus increasing the amount of livable space

Inter-City Transportation Trains became faster, cheaper, safer, and more

comfortable between 1870 and 1940; aircraft were also available by 1940

Revolutionized inter-city transport for people and freight

Cheaper freight reduced cost of final products, including food

Electric trains replaced diesel trains

From 1940, faster and bigger aircraft but few reductions in cost per passenger mile since 1970

Cheaper leisure travel was achieved because prices rose for business travel

Seats have also become smaller

Can Big Improvements be Achieved?

What types of improvements would equal diffusion of trains and planes between 1870 and 1940?

Supersonic jets? Magnetically Levitating Trains?

Few are optimistic about this

Space travel?

Perhaps for ultra rich

Hyperloop?

Elon Musk is optimistic, and a few others

Even if these technologies succeed, much lower costs than current technologies are needed for the new ones to provide more benefits than were received between 1870 and 1940

What about video conferencing that significantly reduces business travel?

Health Annual rate of improvement in life expectancy was twice

as fast in first half than second half of 20th century

From 1880 to 1940 Longevity increased substantially, primarily through decreases

in infant mortality, accidents, and childhood diseases

Factors: cleaner water and homes, healthier food, more hygienic food processing, cleaner hospitals, trained doctors, penicillin, sulfa drugs, safer occupations

From 1940 Increases in longevity have come through helping elderly people

live longer, albeit not necessarily better

Infant mortality, accidents, and childhood diseases still exists among low-income people in U.S.

Many new drugs and equipment have been developed

Can Longevity be Significantly Increased?

What types of changes would equal improvements in longevity achieved between 1870 and 1940?

New drugs powered by human genome, DNA sequencing, and organ-on-a-chip?

Bio-electronics, wearable computing, fitness trackers? Artificial limbs and organs?

Monitor health for early detection of disease and cancer?

Smart pills, nano-particles, and other techniques for targeted killing of cancer cells?

Can these improvements increase both longevity and quality of life?

offset health problems coming from less exercise and too much eating?

Three Big Questions

How could this have happened?

How could there be a slowdown with higher R&D, more entrepreneurship, more college graduates and more emphasis on innovation in universities?

What types of accomplishments would change results?

Each sector is examined

Is the slowdown important?

Can happiness be achieved in other ways?

What about people with low income?

Maybe a Slowdown Isn’t Important?

Do we really need more?

Can we do with less?

Important things such as homes, food, indoor plumbing, and electricity have been achieved for most Americans

Maybe we don’t need much more? Instead we need

Cleaner air, water and environment

More parks

Slower lifestyle

So a slowdown isn’t important

What About Low Income People?

They face many problems not faced by others

Not enough healthy food

Rising water costs, and sometimes unclean water

Deficient housing

Rising electricity costs

Rising costs of health care and education

In other words, the slowdown matters to some

We need faster growth in order to help low income people

Basic Services aren’t Available to Many Not enough healthy food

requires new forms of food production

Rising water costs, and sometimes unclean water requires new systems of water delivery

Deficient housing requires new forms of housing

Rising electricity costs requires better forms of electricity generation and distribution

Rising costs of health care and education Requires better forms of health care and education

These things aren’t happening to the extent they are needed

Alternatively, a technological revolution in other places can provide higher incomes that enable access to the above necessities

In Summary

The slowdown matters to a lot of people

It’s not just about more gadgets like smart phones, its about livable space, healthy food, clean water,

affordable health care and education, and inexpensive electricity

How can we achieve these things?

Robert Gordon is right, it will not be easy

We need to stop assuming that we are experiencing unprecedented technological change…. the changes are only unprecedented in a few specific

areas like Internet and smart phones

By rejecting this assumption, we can question existing designs and propose better ones