I sure hope the 2020s is a “Roaring Twenties” with a productivity and economic boom that extends well beyond the expected post-pandemic rebound. As I have written, “2020 was definitely not a ‘we have Twitter but no flying cars’ sort of year.” More on this notion in a recent essay by Eli Dourado that creates a sort of sector-by-sector roadmap — in biotech, transportation, energy, space, and IT — for determining if we are getting, in his view, a Roaring or Boring 20s. Dourado:

Collectively, these technologies add up to a lot of possibility. If we cure a bunch of diseases, slow down aspects of aging, realize cheap and emissions-free baseload energy, and deploy new modes of transportation and better construction technologies, we will almost certainly exceed 2 percent [total factor productivity] growth. But we might not do these things. It all depends on execution. The underlying science is there. The engineers are willing. Even the funding is available in most cases. But, as a society, how much urgency do we feel? Our culture does not prioritize progress—it fights, destructively, for status. And our politics reflects our culture.

Now it might seem like a productivity boom is already here. As Moody’s Analytics economist Mark Zandi recently noted, productivity has increased by over 4 percent in the past year vs. just 1 percent growth in the expansion prior to the pandemic. Driving that surge has been the destruction of smaller, less productive businesses in industries such as retailing, leisure and hospitality, and recreational activities. Zandi: “Tens of thousands of mom and pop retailers have failed and mid-sized publicly traded retailers have filed for bankruptcy, while the retailing behemoths gobbled up market share.” Zandi also notes that businesses across a variety of sectors have “taken advantage of the pandemic to more fully deploy technologies and process changes that they were investing in but reluctant to take full advantage of during the good times.”

So the Zoom Effect. But how long-lasting is it? Maybe it lasts for some time. Goldman Sachs:

The pandemic may also catalyze permanent changes in business input usage—for example, via reduced travel and entertainment spending. This would boost aggregate productivity if the associated output is repurposed as final demand, such as by selling hotel rooms to tourists instead of business people or converting office floors to condominiums. Similarly, Work-from-Home has arguably mobilized part of the household capital stock (home offices and computers) for business purposes, much like what Uber and Airbnb did for cars and second homes.

So when you put it all together — composition effects (job losses in low productivity sectors), the exit of low productivity businesses, efficiencies from more business activity online vs. brick-and-mortar, and the office space/travel issue — you get a pretty significant productivity boost:

Again, Goldman:

Our baseline estimates in the final column imply a boost to productivity levels of 3.8% by 2022—or +1.3pp to annual average productivity growth over three years (2020-2022). Taken together, we continue to expect productivity growth to accelerate relative to the 1.3% average in the three years leading up to the crisis. And reflecting this expected increase in aggregate supply, our analysis suggests a longer runway for the expansion and the possibility of stronger-than-expected growth in 2021-22.

So both kinds of productivity gains are at play here, one that makes business more efficient and one that creates new tasks, industries, products, and services. Both Zoom and, say, a vibrant space economy.

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