Is human progress slowing down?

Just when investors couldn't get any more depressed about the looming "fiscal cliff," New York Times columnist Paul Krugman decided to freak people out even more with his piece with the dramatic headline "Is growth over?".

Krugman was referring to a thesis by Northwestern University economist Robert J. Gordon arguing that the progress made in the past 250 years is so dramatic and unique that it may never be duplicated. In a paper published in August, Gordon notes that economic advancements occur in fits and starts. He mentions three distinct industrial revolutions: steam and railroads from 1750 to 1830; electricity, running water and petroleum from 1830 to 1870; and the Web and mobile phone revolution of 1960 to the present. The last of these revolutions arguably is the least dramatic in terms of technological change. 

"There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely," according to a paper Gordon published earlier this year.

In other words, nothing lasts forever.

Krugman, a Nobel laureate, said Gordon's thesis was interesting even though he doesn't agree with it. He notes that high-speed computing and voice-recognition software have much improved in recent years, and could spur rapid productivity growth and overall economic growth.

"It’s all too easy to make the case that most Americans will be left behind, because smart machines will end up devaluing the contribution of workers, including highly skilled workers whose skills suddenly become redundant," he wrote. "The point is that there’s good reason to believe that the conventional wisdom embodied in long-run budget projections -- projections that shape almost every aspect of current policy discussion -- is all wrong."

Voice-recognition software and similar technologies are vastly better than they used to be and will continue to improve. Moreover, just because the pace of human innovation has slowed recently doesn't necessarily mean that it might speed up again.

As Nate Silver noted in "The Signal and the Noise," economists are terrible about forecasting the future. While Gordon and Krugman may be correct in their historical analysis, as every investor knows, past performance is no guarantee of future returns. This is especially true when considering grand theories that attempt to predict future decades of human activity through statistical calculations in a spread sheet.

--Follow Jonathan Berr on Twitter @jdberr

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