ONE of the economic mysteries of recent years is why productivity gains have been so slow. It is a big issue for the developed world since, with workforces likely to stagnate or shrink as the baby boomers retire, productivity will have to do all the work of generating economic growth. The pessimists, led by Robert Gordon, argue that modern technology, like the iPhone, is nothing like as transformative as late 19th and 20th century innovations such as electrification or the car. The optimists say that mankind is only just beginning to exploit the potential gains of the internet and that GDP measures may not be capturing all of the recent gains.

A new paper from the Kansas City Fed highlights a very simple reason for recent sluggishness; that the…Continue reading