Technology Is Great, but Won't Fix the Job Market

Moneybox
A blog about business and economics.
Nov. 19 2013 4:30 PM

Technology's No Replacement for Stimulus  

Horace Dediu recently made a cool chart showing adoption ramps for various technologies in the United States. The curve starts when only 10 percent of households had a given technology, and ends when 90 percent of households had it.

He was making another point with it, but it's particularly fascinating to focus in on the 1930s. You see that something as great as electricity actually stalled out at around a 67 percent adoption rate. Automobile ownership stagnated for about 10 years. Telephones actually got less popular. Stoves plateaued for a few years. In retrospect, we can all see this as the impact of the Great Depression (and for the car, wartime rationing). People didn't have any money, so they didn't buy new stuff. But they didn't entirely stop buying new stuff. The popularity of radios just kept skyrocketing throughout this entire period.

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I thought of this while disagreeing with Michael Mandel this afternoon about the role of innovation in generating adequate demand and full employment:

Which is to say that back in the 1930s, I bet a lot of people thought innovation had stalled out. Radios were there to serve kind of like our smartphones—an example of how demand for a really cool innovative new product can stay robust regardless of what central banks are doing. But radios/smartphones were just one small thing. To really unleash economic growth you needed a whole bunch of new innovations! Not a bunch of nonsense like electricity and cars that were fads in the 1920s but seemed played out by 1935.

Of course that turned out to be exactly backward. For the innovations of the era to really shine, you needed a return to full employment and rising incomes. The 1920s weren't a "car bubble" that crashed in the 1930s, they were a harbinger of a trend that would continue once macroeconomic management got back on trap.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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