COMMENT: Economists vs. scientists on growth

Similarly, global investment has collapsed since the 2008 financial crisis (though not in China), lowering potential growth. And measured productivity growth has declined everywhere, falling roughly by half in the U.S. since the tech boom of the mid-1990s. No wonder global real interest rates are so low, with high post-crisis savings chasing a smaller supply of investment opportunities.

Still, the best bet is that AI and other new technologies will eventually come to have a much larger impact on growth than they have up to now. It is well known that it can take a very long time for businesses to reimagine productive processes to exploit new technologies: railroads and electricity are two leading examples. The pickup in global growth is likely to be a catalyst for change, creating incentives for firms to invest and introduce new technologies, some of which will substitute for labour, offsetting the slowdown in the growth of the workforce.

With the after-effects of the financial crisis fading, and AI perhaps starting to gain traction, trend U.S. output growth can easily stay strong for the next several years (though, of course, a recession is also possible). The likely corresponding rise in real global interest rates will be tricky for central bankers to navigate. In the best case, they will be able to “ride the wave,” as Alan Greenspan famously did in the 1990s, though more inflation is likely this time.

The bottom line is that neither policymakers nor markets should be betting on the slow growth of the past decade carrying over to the next. But that might not be entirely welcome news. If the scientists are right, we may come to regret the growth we get.

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Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. The co-author of `This Time is Different: Eight Centuries of Financial Folly’, his new book,`The Curse of Cash’, was released in August 2016.