17 Reasons to Let the Economic Optimism Begin

The Solow paradox, as the idea underlying his quote would later be called, reflected an insight: An innovation, no matter how revolutionary, will often have little effect on the larger economy immediately after it is invented. It often takes many years before businesses figure out exactly what they have and how it can be used, and years more to work out kinks and bring costs down.

In the beginning, it may even lower productivity! In the 1980s, companies that tried out new computing technology often needed to employ new armies of programmers as well as others to maintain old, redundant systems.

But once such hurdles are cleared, the innovation can spread with dizzying speed.

It’s like the old ditty: “Shake and shake the ketchup bottle. First none will come and then a lot’ll.”

Or, in a more formal sense, the economists Erik Brynjolfsson, Daniel Rock and Chad Syverson call this the “productivity J-curve,” in which an important new general-purpose technology — they use artificial intelligence as a contemporary example — initially depresses apparent productivity, but over time unleashes much stronger growth in economic potential. It looks as if companies have been putting in a lot of work for no return, but once those returns start to flow, they come faster than once seemed imaginable.

There are several areas where innovation seems to be at just such a point, and not just artificial intelligence.

2. 2020s battery technology looks kind of like 1990s microprocessors

Remember Moore’s Law? It was the idea that the number of transistors that could be put on an integrated circuit would double every two years as manufacturing technology improved. That is the reason you may well be wearing a watch with more computer processing power than the devices that sent people into outer space in the 1960s.

Battery technology isn’t improving at quite that pace, but it’s not far behind it. The price of lithium-ion battery packs has fallen 89 percent in inflation-adjusted terms since 2010, according to BloombergNEF, and is poised for further declines. There have been similar advances in solar cells, raising the prospect of more widespread inexpensive clean energy.

Article source: https://www.nytimes.com/2021/03/13/upshot/economy-optimism-boom.html