Robert Gordon's new tome on the long-run trend in American living standards combines a richly detailed description of the revolutionary changes in living standards from 1870 to today with an analysis of the sources of high mid-twentieth century productivity growth rates and, most controversially, a gloomy prognosis for the future. In his view, the United States may continue to be the technological leader but it will do so in a world in which innovation is so narrowly focused as to have limited impact on average wellbeing. According to Gordon, revolutionary change ceased in the year of his birth, 1940. Eight chapters trace how American life changed in the following dimensions: food, housing, communication and entertainment, transportation, clothing, working conditions, and access to credit. The statistical and narrative detail in these chapters is breathtaking, as he vividly portrays the contrast between an 1870s existence and a 1940s lifestyle. This section could stand alone as essential reading for any course in American economic history.

His treatment of the mismeasurement of GDP per capita and prices is exemplary and a key feature of the work, reflecting a productive academic lifetime engaged with these topics. The central argument is that the usual measure of living standards, real GDP per person, understates the true gains made in the early period, since gains such as dramatically longer life expectancy are not incorporated properly. Furthermore, mismeasurement was a bigger problem historically, partly because technological change was more revolutionary and partly because price index theory was more primitive. Modern indexes deal with new goods in a more accurate way while incorporating them into the basket more quickly (the most extreme example he gives of the failings of early indexes is of the automobile, which was not included in the basket of goods until 1940).

The conventional wisdom is that the Industrial Revolution pushed countries at the technological frontier to a new equilibrium with historically high, stable rates of growth, which are expected to continue forever. Gordon offers a different hypothesis: that 1870–1970 was a special period with an unusually high rate of productivity growth, and that now we must accept a new, much lower, equilibrium for the foreseeable future. The closing chapters of the book do not portray this as a dismal prediction, but rather an inevitability with which we must come to terms.

Within the field of economic history, it is not hugely controversial to say that the Industrial Revolution period is an anomaly and accident of history, the timing and location of which was not always determined to be England and 1760. Other economic historians have made such a claim. It is also not controversial to say that, within that era of sustained growth, the mid-twentieth century stands out as having dramatically faster growth rates, or to describe the transformation of American homes and working lives from 1870–1940 as revolutionary. But at the same time, there is no general consensus as to why productivity has slowed since 1970. What is controversial is the argument that the United States will never experience this type of growth and revolutionary transformation again. He does not dispute that there will be innovation in the future within the United States, and even allows for the rate of discoveries to be as fast as has been seen historically. He simply believes these innovations will not have such meaningful effects on living standards.

In the concluding chapter, Gordon lays out six “headwinds” that will hinder future growth. The most notable are inequality and dealing with demographic changes, including aging baby boomers and looser labor market attachment by certain groups.

A primary characterization of Gordon's thesis is that technological change has in fact not been revolutionary since 1940. Part II of the book lays out the innovations that typified the post-WWII Golden Age, mirroring Part I's description of the earlier era, but emphasizing that these changes are merely evolutionary. This seems too bold a claim. For American women, technologies like the contraceptive pill were transformative, and for people of color institutional and political changes in the form of the advancements in civil rights had huge impacts on day-to-day life.

Based on his analysis, Gordon believes that he can predict the future growth rates of the U.S. economy. Chapter 17 draws bold conclusions based on trends derived from the recessionary period, 2005–2015, arguing that the limp growth rates witnessed over that decade have become the new norm. Economists are typically unreliable when it comes to predictions, and Gordon's are typically questionable. Foremost, focusing on a short time horizon that contains the largest post-war recession is problematic. Moreover, he is trying to predict productivity growth for a country at the technological frontier, which Kevin H. O'Rourke has described as “unpredictable full stop.” For instance, we may not have seen the full extent of the ICT revolution as yet, as even in Gordon's own time frame it takes 50–100 years for all of the complementary inventions to become commercially viable. He highlights recent medical innovations that have not improved outcomes beyond older technologies, but may be that a transformative innovation is just around the corner—the areas of reproductive technology and innovations targeted at reducing morbidity in later life, for example, seem like productive potential areas. The book also spends only a few pages towards the end of the book discussing the rise of the service sector and complementary fall of manufacturing, which are important factors in light of the inherent lower productivity of services.

Gordon is not the first to express concern about the trajectory of U.S. growth. Richard R. Nelson and Gavin Wright's (Reference Nelson and Wright1992) article has a very similar title and theme to Gordon's book. The timing of its publication is interesting because we know (from Gordon) that, despite the authors' concern that American technological leadership was diminishing, the decade 1994–2004 experienced TFP growth rates almost double that of 1970–1994. Nelson and Wright did not predict the dot-com boom, and we do not blame them for this. It is an inherently difficult exercise to predict innovation. Furthermore, Gordon devotes few of the 652 pages of the main text to discussions of how innovation actually occurs, which one might think would be informative in understanding the current state of technological change, though he does seem to think that a better education system and more government investment in research would be useful.

More generally, it is difficult to bet against innovation continuing into the future. With the expansion of international cooperative organizations like the WTO, and the rise of new developing country superpowers including China and India, the world of the future will be characterized by an unprecedented number of well-educated, well-nourished people with access to credit markets, each of whom presumably has an equal chance of possessing good ideas and the entrepreneurial skills to bring those ideas to global markets. With this in mind, it is difficult to accept that significant global innovation, capable of a large impact on living standards, will grind to a halt, even if domestic innovators fail.

Gordon has written a colorful book, bringing to life the wonderful realizations of technologies from the light bulb to electric factories to modern jet planes in transforming the lives of individuals. He has told some tales of the future that give us pause, and call into question the blind faith of “techno-optimists.” We will have to wait to see how the evidence plays out, but the final chapters of the book rightly encourage policymakers and industry leaders to think hard about what is needed for America to grow in the twenty-first century. Investment in human capital, basic knowledge formation, and promotion of R&D expenditure are areas that need attention now to ensure Gordon's predictions do not become reality.