By Arnold Kling
by far the most rapid MFP growth in U. S. history occurred in 1928-50, a phenomenon that I have previously dubbed the “one big wave.”
MFP = multifactor productivity. Note that the Great Depression takes up much of this period. One view of the Great Depression is that it was a massive reallocation of labor and capital–a recalculation, if you will. By 1950, we have adapted much more to trucks and automobiles, so that we no longer need factories in big cities or farms surrounding them. The economic structure of 1950 looked completely different from that in 1928.
Similarly, I think that the economic structure in 2025 will look completely different from that in 2006. I cannot predict exactly what it will look like, and much may depend on how heavy-handed our government is over the next ten years. My guess is that, if left to itself, the economy would allocate more resources toward education, health care, and entertainment, but with considerable new technology applied to all three.