The Myths of "Peak Growth," "Low-Hanging Fruit," and Other Determinist Economic Fallacies

The Myths of "Peak Growth," "Low-Hanging Fruit," and Other Determinist Economic Fallacies
Photo by Hakan Nural / Unsplash

Discussions surrounding economics are always rooted ultimately in morality and other philosophical ideas. Many have written on the ethics of capitalism, and the arguments for individual rights underlying it. Yaron Brook, Ayn Rand, and other Objectivists have written extensively on these subjects, and I highly commend their works to you.

But one area of discussion that is very prevalent in discussions of economics today is the idea that the slower economic growth we've experienced since the 1970s – and particularly since 2008 – is just the result of historical processes, and we have reached "peak growth," with even leading financial institutions like J.P. Morgan forecasting that we are in for decades of slower growth. One harmful explanation is that "all the low-hanging fruit" has already been "picked." This term of "low-hanging fruit" is a very destructive one. It is usually used by collectivist economists and others to refer to post-industrialization technologies such as antibiotics, automobiles, electronic communications, the Internet, etc. The idea is that there was a certain amount of innovation that was possible, and once achieved, there is an inevitable plateau which we have reached which prevents us from discovering the next revolutionary technology. Thus, these adherents claim, it is unrealistic to expect advanced / wealthy economies like the United States and Western Europe to expect economic growth rates of 3%, (often the norm in advanced economies before the 2008 financial crisis), let alone 4% or 5%.

There are empirical studies which offer a rebuttal to these arguments, such as a study by economists John Dawson and John Seater, which posits that new federal regulations imposed by the US government between 1949 and 2011 lowered real GDP growth by approximately 2% per year on average. (Note that the US in 1949 still had a vast regulatory state, this was after the proliferation of the New Deal. But between 1949 and 2005, the number of pages of federal regulations increased almost seven-fold from 19,335 pages in 1949 to 134,261 pages by 2005). When considering compound interest, this difference of 2% GDP growth would correspond to a difference between $15.1 trillion (the actual figure in 2011) and $53.9 trillion, had federal regulations been frozen at their 1949 levels. That is a fourfold increase. Perhaps more strikingly, "As a result [of the increase in federal regulations since 1949], the average American household receives about $277,000 less annually than it would have gotten in the absence of six decades of accumulated regulations—a median household income of $330,000 instead of the $53,000 we get now."

Imagine that. The median family making $330,000 a year – which would be even higher in 2022, because these were numbers from a decade ago. Consider the Jetsons world we were denied by these bureaucrats, regulators. They stole that from you.

This is just one example of a sound empirical study refuting the "inevitably slowing growth" argument. There was a proliferation of new regulations between 1949 and 2008, and then new regulations rapidly proliferated as a result of the 2008 Financial Crisis, perhaps most notably with the passage of the so-called Affordable Care Act ("Obamacare") and the Dodd-Frank financial regulations. There was (relative to recent years) massive growth in the 1990s, in part because the tech sector was allowed to flourish and innovate. True, the Internet was a rare breakthrough in technological innovation. But let's consider in abstract terms what the economic determinists are proposing.

They assert that there is a finite amount of innovation. It is difficult to consider possible new inventions from an ex ante perspective. I doubt the greatest geniuses of the 19th century could have conceived of the breakthroughs in genetic research that scientists have achieved in the past few decades. I doubt that even the greatest genius from the 14th century could have conceived of antibiotics or treatments for cancer. But we can consider the research and other work being done in labs across America today. It's difficult to imagine how many new pharmaceutical drugs have been killed because the innovators couldn't afford to put it through the clinical trial process, which can cost billions of dollars.

It's also difficult to imagine what would have been possible without the federal government strangling nuclear power in its infancy during the late 1970s and 1980s, mainly due to a high increase in cost in the United States after the Three-Mile Island incident in 1979. (For more on this history, see Alex Epstein's podcast and other work in this area). The leftist publication Vox even published an article detailing how the soaring costs of nuclear energy in the US weren't inevitable, and didn't occur in other countries like South Korea and France (note however that their diagnoses and conclusions about why this cost spike occurred are mixed). This is one area where we could have seen the proliferation of cheap, clean, and reliable energy, which affects the costs of nearly everything else.

What about derivative technologies, like nuclear-powered cargo ships, which like their aircraft carrier and submarine cousins, would only need to be refueled once every few decades? Forbes writes: "For the shipping industry, the increased number of runs per year, and the increased profits, appear to more than offset the increased operational costs of nuclear, according to an analysis by researchers at Penn State." We already have a model for how to store the waste from those; the military has been using it for decades. Nuclear-powered trains? This is just one area which could lead to countless additional spin-off applications.

Another area of future technological breakthroughs is genetic engineering and the use of different technologies (whether nanobots, genetic therapy, or something else) to treat cancer and turn it into a chronic disease that can be managed. Not to mention the potential of life-extension technologies which could make it possible for humans to live comfortably into their 150s and beyond while feeling healthy and maintaining active lifestyles. There's also potentials in areas like quantum computing, stem cell therapy, space travel, asteroid mining, alternatives to lithium-ion batteries, and nuclear fusion, just to name a few.

There are also countless innovative methods of financing these inventions, if the financial sector weren't so dominated by government bandits like the SEC. The government has imprisoned heroes like Michael Milken, who pioneered new methods of financing expensive projects to create groundbreaking new telecommunications technologies like his work on raising $2.5 billion MCI's construction fiber-optic cable infrastructure, the first national single-mode fiber-optic network. And another $1.2 billion allowed McCaw to build the first national wireless telephone system.

If one or any combination of them was achieved, we would see vast increases in people's wealth, opportunity, quality of life, and disposable income. There are countless more, which we can't even begin to imagine now without seeing the next big breakthrough and what it can achieve for human flourishing. And these are just the "low-hanging fruit" in groundbreaking new technology that sits waiting to be plucked, if the government were to stop throttling them in their infancy.