The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee (W.W. Norton)

The digital revolution has transformed our way of life, but according to official statistics, economic growth in the United States has lagged behind earlier periods and the vast majority of Americans are seeing no gains in their standard of living. The problem is not that new technologies are so expensive that they are available only to large organizations and the rich. On the contrary, they have become so cheap that they are pervasive and now enable ordinary people and the smallest of enterprises to do things that were once the stuff of science fiction. As a result, a yawning disparity has opened up between the subjective experience of innovation and the objective measures of its economic impact. Subjectively, the technological revolution of our time seems far bigger and more consequential than the economic data indicate.

This disparity between the sense of change and the measured impact of change also shows up in sharply differing long-term economic forecasts. Some economists, extrapolating from recent data and skeptical about the payoff of new technologies, believe that we need to dial down our expectations of economic growth. Other analysts, skeptical about the data and convinced of the promise of innovation, believe that the big economic gains from the digital revolution are still to come.

The controversy over inequality triggered by Thomas Piketty’s Capital in the Twenty-First Century is directly related to this disagreement about growth. When the rate of growth is lower than the rate of return (after taxes and consumption), Piketty argues, capital inexorably gains an increased share of national income—and that is where he says we are headed. In his view, the high growth and relatively low inequality in the technologically advanced economies during the three decades after World War II were a historical anomaly. Since the 1970s, the advanced economies, instead of growing 3 or 4 percent a year, have reverted to an earlier and more sluggish pattern that, in Piketty’s view, is a more realistic basis for forecasts. The “return to a historic regime of low growth” implies “the return of capital.” As he puts it, somewhat overstating his own position, “In stagnant societies, wealth accumulated in the past naturally takes on considerable importance.”

In fact, rather than stagnation, Piketty assumes that output per capita in the advanced societies will grow at 1.2 percent a year, which is still far greater than in the centuries preceding the industrial revolution. A more dismal forecast comes from Robert Gordon, an influential economist at Northwestern University, who in two papers published by the National Bureau of Economic Research projects a long-term growth rate for the United States of less than 1 percent. Gordon suggests that it is not just the exceptionally high growth in the mid-twentieth century that may prove anomalous: “the rapid progress made over the past 250 years could well turn out to be a unique episode in human history.”

Gordon’s pessimism is extreme. Now in his seventies, he has been disparaging the economic gains from new technology for years, and he sees no evidence to change his views. In one of the more remarkable claims ever made in the social sciences, he declares that “future advances in medicine related to the genome have already proved to be disappointing.” The future has already been a disappointment: in a nutshell that sums up a strain of disillusionment in contemporary thought with what many regard as the unfulfilled promise of technology to make us all more prosperous. But that promise still has its believers, and they have a case.