It seems like the United States economy is enjoying more innovation than ever before. At the same time, statistics show the economy suffering from its slowest growth in decades.
Analysts often try to resolve this by arguing either that conventional statistics aren’t properly measuring the value of innovation or else that the apparent speed-up in innovation is actually an illusion and progress is slowing down. Another possibility is that things are exactly as they seem: Rapid technological innovation is real, and so is slow economic growth. In fact, in a sense the innovation is causing the slow growth.
Call it the productivity paradox, and recognize that it explains a lot about the current state and the future direction of the American economy.
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