"I always loved growth theory as an economic kind of science fiction, in the best sense." -Ben Golub
I discovered Chad Jones a little more than two years ago. Reading his papers for the first time was like discovering a new world; they are what ignited my passion for growth theory.
What drives economic growth? How did growth begin? What are the prospects for future growth? How does population growth and economic growth interact? Why are we becoming more safety-focused? How can policy—taxes, the allocation of talent, fertility subsidies—affect the growth rate? What are the forces shaping the very long run trajectory of our civilization? These are the sorts of questions growth theory can shed light on.
Most of all, Chad’s papers showed me what beautiful economic theory looks like. Simple models that capture a few essential forces, guided by broad empirical trends. These can often reveal insights that totally non-obvious ex ante—but are strikingly intuitive and powerful once found. As Phil Trammell puts it:
[This is] what I most like about reading and doing economic theory. Sometimes it is not just a pile of squiggles and black-box conclusions, but a machine for finding less formal insights that, though obvious once found, would otherwise have long gone unseen.
I was recently compiling a syllabus of growth papers relevant for longtermists. The first draft felt almost like a “Chad Jones reading list.” Chad Jones has simply written an exceptional amount of the most interesting growth papers.
I wanted to share some of my favorites, in the hope that others, too, can delight in them. They are also a great introduction to growth theory in general—nowadays a neglected and highly underrated field.
Two overview papers
1) "Growth and Ideas," Jones 2005.
An introduction to the basics of endogenous growth theory and the core ideas of Chad's early work. It dives right into the the nonrivalry of ideas, the powerful insight for which Paul Romer won a Nobel Prize.
The other thing that blew my mind at the time was the section "scale effects": the relationship between population size and economic growth (more people -> more ideas). Chad had the "ideas are getting harder to find" insight in the 1990s (Jones 1995a; 1995b). He worked out the central theoretical implication: the rate of long-run economic growth depends on the rate of long-run population growth.
Ideas are different from nearly all other economic goods in that they are nonrivalrous. This nonrivalry implies that production possibilities are likely to be characterized by increasing returns to scale, an insight that has profound implications for economic growth. The purpose of this chapter is to explore these implications.
2) "The Past and Future of Economic Growth: A Semi-Endogenous Perspective," Jones 2021.
A more recent review of Chad's work, pointing towards many interesting research directions. Maybe the best place to start.
The nonrivalry of ideas gives rise to increasing returns, a fact celebrated in Paul Romer’s recent Nobel Prize. An implication is that the long-run rate of economic growth is the product of the degree of increasing returns and the growth rate of research effort; this is the essence of semi-endogenous growth theory. This paper interprets past and future growth from a semi-endogenous perspective. For 50+ years, U.S. growth has substantially exceeded its long-run rate because of rising educational attainment, declining misallocation, and rising (global) research intensity, implying that frontier growth could slow markedly in the future. Other forces push in the opposite direction. First is the prospect of “finding new Einteins”: how many talented researchers have we missed historically because of the underdevelopment of China and India and because of barriers that discouraged women inventors? Second is the longer-term prospect that artificial intelligence could augment or even replace people as researchers. Throughout, the paper highlights many opportunities for further research.
One key part:
Some of my personal favorites
The precipitious fall in fertility rates means not just short-term economic pain. In the long-run, it could also mean the end of economic growth itself! At least that is the prediction of our best growth models. If population stops growing—as is our current trajectory—we are on course for not just a growth slowdown, but zero-growth Dark Ages. I don't think this is widely appreciated yet. But it is one of the very most important threats to humanity's future.
Jones also models a fascinating "lock-in" mechanism. If the population shrinks too much, growth becomes "too hard" and not worth it anymore (to a discounted, average utilitarian social planner). So if we tarry in implementing pronatal policy, we might become stuck in a stagnation equilibrium.
In many models, economic growth is driven by people discovering new ideas. These models typically assume either a constant or growing population. However, in high income countries today, fertility is already below its replacement rate: women are having fewer than two children on average. It is a distinct possibility — highlighted in the recent book, Empty Planet — that global population will decline rather than stabilize in the long run. In standard models, this turns out to have profound implications: rather than continued exponential growth, living standards stagnate for a population that vanishes.
A Twitter thread with some highlights:
See also a writeup in The Economist.
4) "Life and Growth," Jones 2016.
As people grow richer, avoiding mortality risks becomes more important to them; safety is a luxury good. This follows elegantly from standard economic preferences: "the marginal utility associated with more consumption on a given day runs into sharp diminishing returns, and ensuring additional days of life on which to consume is a natural, welfare-enhancing response." See also Hall and Jones 2007.
The result is that "economic growth leads to a disproportionate concern for safety." Jones mostly applies this to the context of health spending. As we grow richer, we spend more on health, and in turn consumption growth slows. But I think the underlying mechanism might explain broader societal phenomena, like our decadence. (I have been exploring this in recent work, not yet online.)
This paper was the very first growth theory paper I read. I thought it was so cool that it became the basis for my work on existential risk and growth.
Some technologies save lives — new vaccines, new surgical techniques, safer highways. Others threaten lives — pollution, nuclear accidents, global warming, the rapid global transmission of disease, and bioengineered viruses. How is growth theory altered when technologies involve life and death instead of just higher consumption? This paper shows that taking life into account has first-order consequences. Under standard preferences, the value of life may rise faster than consumption, leading society to value safety over consumption growth. As a result, the optimal rate of consumption growth may be substantially lower than what is feasible, in some cases falling all the way to zero.
(Sidenote: the first draft of this paper was posted online in 2008—while the final paper was published in the JPE in 2016. And you see this sort of thing often. The timelines of economics publishing are insane!)
5) "Artificial Intelligence and Economic Growth," Aghion, Jones, and Jones (2019)
A great paper on the growth implications of AI. I like it because it highlights two plausible scenarios for what AI could look like, both worth taking seriously. 1) We keep automating 99% of remaining tasks. But the 1% we can't automate yet is always the constraint. Growth continues steadily. 2) We can fully automate R&D and get explosive growth. (This is the growth theory version of "self-improving AI" or an "intelligence explosion.")
See also Phil Trammell's literature review on all the permutations of AI in growth models.
This paper examines the potential impact of artificial intelligence (A.I.) on economic growth. We model A.I. as the latest form of automation, a broader process dating back more than 200 years. Electricity, internal combustion engines, and semiconductors facilitated automation in the last century, but A.I. now seems poised to automate many tasks once thought to be out of reach, from driving cars to making medical recommendations and beyond. How will this affect economic growth and the division of income between labor and capital? What about the potential emergence of "singularities" and "superintelligence," concepts that animate many discussions in the machine intelligence community? How will the linkages between A.I. and growth be mediated by firm-level considerations, including organization and market structure? The goal throughout is to refine a set of critical questions about A.I. and economic growth and to contribute to shaping an agenda for the field. One theme that emerges is based on Baumol's "cost disease" insight: growth may be constrained not by what we are good at but rather by what is essential and yet hard to improve.
Here's a video that presents this paper in the first half and "Unintended Consequences of a Declining Population" paper in the second half.
Others I really liked
- "The Facts of Economic Growth," Jones 2016. A textbook chapter with the fundamental empirics of the last century of economic growth. For example, isn't it just incredibly striking how steady growth has been for 150 years?
- "The Allocation of Talent and U.S. Economic Growth," Hsieh, Hurst, Jones, and Klenow 2019. Reduced discrimination, by improving the allocation of talent, has plausibly been the cause of 20-40% of growth in the last 50 years!
- "Nonrivalry and the Economics of Data," Jones and Tonetti 2020. Like ideas, data is nonrival. So there are plausibly large economic gains from widely sharing data. (Privacy is overrated?)
- "Taxing Top Incomes in a World of Ideas," Jones 2020. High top tax rates can disincentive the creation of new ideas, slowing economic growth and making everyone worse off in the long run. Underrated nowadays.
- "Are Ideas Getting Harder to Find?" Bloom, Jones, Van Reenen, and Webb 2020. A classic. Note though that Jones already had the main insight in the 1990s, and this paper just adds even more evidence. Still, it has lots of neat micro data.
- "Beyond GDP? Welfare across Countries and Time," Jones and Klenow 2016. Another classic. Tldr; GDP correlates well with a broader welfare measure that includes the value of leisure, mortality, and inequality. See also Brouilette, Jones, and Klenow 2021, "Race and Economic Well-Being in the United States."
And there is much more interesting reading on Chad Jones's website!
While you're here, two great books on economic growth I can recommend:
- The Rise and Fall of American Growth, by Robert Gordon. This is what got me interested in growth in the first place. I found the qualitative descriptions of the change in the standard of living since the 1870s particularly valuable. It made the data on the growth slowdown since the 1970s and the "Great Stagnation" much more intuitively compelling to me.
- Capitalism in America: An Economic History of the United States, by Alan Greenspan (former Fed chair) and Adrian Wooldridge. An underrated book, telling the thrilling story of creative destruction in America and how it propelled 20th century growth. In general, the 20th century American growth experience is still underrated as a growth miracle (rather than the original industrial revolution).
And for more of a history on the development of new growth theory in the 80s and 90s, see David Warsh's Knowledge and the Wealth of Nations: A Story of Economic Discovery.
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