Are the best days of the U.S. economy over?

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• JUDY WOODRUFF:

  One of the key themes you hear in this presidential campaign is, why isn't the economy growing faster and yielding even better wages for workers? That question isn't just a matter of debate among politicians.

  Some economists are also wondering if something fundamental has changed in the U.S. in recent decades.

  That's the subject of tonight's report by our economics correspondent, Paul Solman. It's part of his series, Making Sense, which airs Thursdays.

• PAUL SOLMAN:

  President Obama's last of State of the Union featured this proud proclamation:

• PRESIDENT BARACK OBAMA:

  Anyone claiming that America's economy is in decline is peddling fiction.

• PAUL SOLMAN:

  But really? Tell that to eminent economist Robert Gordon, a Democrat, who's peddling a distinctly nonfictional new book, "The Rise and Fall of American Growth."

  ROBERT GORDON, Author, "The Rise and Fall of American Growth": Did you know that the cable car dates back to 1870, the beginning of what I call the special century, when life was revolutionized in the United States?

• PAUL SOLMAN:

  A century that ended in 1970, 46 years ago. Gordon's thesis that slower growth is the new normal in the U.S. has sparked a major debate in economics the past few years. His book was a hot topic at this year's meeting of the American Economic Association in San Francisco.

• BOB SHILLER, Nobel Laureate:

  It's what you call a magnum opus.

• PAUL SOLMAN:

  That's Nobel laureate Bob Shiller, this year's president of the group, who organized a session on the new book and chaired it himself to spotlight Gordon and his special century thesis.

• ROBERT GORDON:

  A century that freed households from an unremitting daily grind of gainful manual labor, household drudgery, darkness, isolation and early death.

• PAUL SOLMAN:

  There seems little dispute in economics these days that 1870 to 1970 was technologically special.

• WOMAN:

  No one who hasn't cooked over a wood stove by the light of a kerosene lamp can really appreciate what it all means.

• PAUL SOLMAN:

  So it was an amazing century, right?

  ERIK BRYNJOLFSSON, Massachusetts Institute of Technology: It was an amazing century. We took so much muscle power, things that used to be done by horses or by humans, and replaced it with machines.

• PAUL SOLMAN:

  But MIT's Erik Brynjolfsson doesn't buy the argument that the U.S. economy's best days are over.

• ERIK BRYNJOLFSSON:

  We're now just in the early stages of what we sometimes call a second machine age, where we're beginning to do the same things for brainpower, things like artificial intelligence, computers and big data. And I think we're going to see a productivity wave the likes of which we have never seen before.

• ROBERT GORDON:

  It's just a hope that Erik has that these new inventions of robots and artificial intelligence are going to change the world on a par with electricity and the internal combustion engine.

  Just think of the benefits of getting rid of the urban horse. Think of all the horse droppings all over the street that we no longer have to think about and clean up.

• PAUL SOLMAN:

  To counter those who consider his cavalier dismissal of high technology so much, well, horse manure, Gordon took us on an intimate show-and-tell.

• ROBERT GORDON:

  Look at a few of the things that were invented in the special century after 1870, starting with the electric light, the greatest invention of all. And now let's look at two of the great inventions of all time. First, we have running water, which eliminated the need to carry water into the house in pails.

  And then we have the flush toilet, which eliminated the need to go outside into the bitter cold to an outhouse. And here we have a double invention, central heating and air conditioning. We have the telephone invented in 1876. We have the television set, partly invented here in San Francisco by Philosophy Farnsworth, and then look what we have hidden down here, a refrigerator, which eliminated the contamination of food.

  And here we have the Golden Gate Bridge, an example of the tremendous investment in infrastructure that made our economy grow so fast in the middle of the 20th century. This bridge was finished in 1937.

• NARRATOR:

  The Golden Gate is bridged.

• PAUL SOLMAN:

  Put them all together, says Gordon, and there's been no comparable stretch of economic growth before or since.

• ROBERT GORDON:

  Here is the basic point of my book. The early 20th century, the middle of the 20th century between 1920 and 1970, and all the years since then, and the role of innovation and technology is that black area at the bottom. And when we highlight it we see that in the middle of the 20th century, we were growing three times faster than we have been in the last 40 years.

• PAUL SOLMAN:

  And not only were the really big inventions already on the market by 1970. This footage of the 1962 Seattle World's Fair suggests the ones we consider big today were already in the works.

• NARRATOR:

  One day, you may be able to call home and automatically turn off the oven or, from a public telephone, water the lawn during that dry spell when you are many miles away on vacation. Sounds fantastic, doesn't it?

• PAUL SOLMAN:

  Critics like Brynjolfsson don't dispute the wonders of the past. They just think we haven't seen anything yet.

• ERIK BRYNJOLFSSON:

  It's been said that the greatest failing of the human mind is the inability to understand the exponential function. And that's especially true in the computer era, where computer power doubles about every 24 months or so.

• PAUL SOLMAN:

  Exponential growth like 2-4-8-16 and so on.

• ERIK BRYNJOLFSSON:

  What that does is, it leads us to overestimate what's going to happen in the short run, because at first it's happening fairly slowly, but then we underestimate what happens in the long run, when things really take off.

• PAUL SOLMAN:

  Bob Gordon scoffs.

• ROBERT GORDON:

  But computers have been riding this exponential wave for the last 50 years, and it's not shown up in productivity.

• PAUL SOLMAN:

  In measured GDP output per unit of labor, that is.

• ROBERT GORDON:

  We have gone from the mainframe to the personal computer to the smartphone, and only in the late 1990s did we see a revival of productivity growth of the kind of magnitude to match the great old days of electricity and the invention of the motorcar and the airplane.

• PAUL SOLMAN:

  Productivity, says Gordon, has slowed to a crawl for years now, what's called long-term or secular stagnation.

• ERIK BRYNJOLFSSON:

  The last time people were talking a lot about stagnation was in the 1930s. And guess what? The next couple of decades were the best decades ever for economic growth.

• PAUL SOLMAN:

  Admittedly, Americans have been techno-overoptimists before.

• ACTOR:

  The 9000 series is the most reliable computer ever made. We are all foolproof and incapable of error.

• PAUL SOLMAN:

  The year 2001 came and went without any manned space odysseys of note.

• ACTOR:

  Open the pod bay doors, Hal.

• PAUL SOLMAN:

  Much less ones with the likes of artificially intelligent Hal.

• ACTOR:

  I'm sorry, Dave. I'm afraid I can't do that.

• PAUL SOLMAN:

  But most striking to us is the near-universal agreement about the headwinds now facing U.S. economic growth: problems in education, an aging population, a huge national debt, and, most of all, growing inequality.

  Economic historian Greg Clark said he's long been a techno-optimist. But after reading Gordon's book:

  GREGORY CLARK, University of California, Davis: I am actually convinced now that the best of America is behind us in terms of economic growth.

• PAUL SOLMAN:

  Clark titled his talk "Winter Is Coming," a nod to the grim TV series about a more primitive time, HBO's "Game of Thrones."

• GREGORY CLARK:

  I titled it that way because I was struck, when I looked at the future of the U.S. economy, how much it was going to resemble the medieval economy.

• PAUL SOLMAN:

  The medieval economy?

• GREGORY CLARK:

  The medieval economy, in terms of the types of jobs that people now are doing, gardening, food preparing, serving, cleaning, bricklaying, carpentry. You could get someone from 1400, put them on the job and in two hours, they'd be perfectly functional.

• PAUL SOLMAN:

  Working, that is, but hardly getting by.

  And to Robert Gordon, the connection between stagnant wages and today's political unease is obvious.

• ROBERT GORDON:

  Because the heart of slow wage growth is slow productivity growth. And added to that is the inequality that is siphoning off the little productivity that we have got into the top 1 percent. And so the bottom 99 percent have good reason to be resentful and anxious.

• PAUL SOLMAN:

  For the PBS NewsHour, this is economics correspondent Paul Solman, reporting from San Francisco.