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AI Summary. Real long-term inflation-adjusted yields reached 4.5% during the late-1990s productivity boom, compared to 2.4%–3.0% today, implying significant upward pressure on rates if AI drives a comparable acceleration in productivity growth.
Matt Klein The OvershootAI Summary. Recent productivity growth is driven by higher input utilisation — workers and capital being used more intensively — rather than genuine efficiency gains; once utilisation is stripped out, underlying productivity growth is near zero.
Shane Boyle, John Fernald and Huiyu Li Center For Economic and Policy ResearchCore argument: Fernald’s utilisation measure infers economy-wide input intensity from observed hours-per-worker movements, scaled by estimated pass-through to labour productivity and aggregated across industries via Domar weights—capturing the unobserved margins of worker effort and capital run-time.
Input utilisation is not observed directly for the entire economy; it must be inferred. Consider a firm that wants to meet strong demand but has a given capital stock, workforce, and technology. It can ask its existing workers to work longer (which we observe). It can also run its capital longer. Each margin is costly, for example, overtime pay, so firms typically use all of them at once. The observed margin serves as a proxy for the unobserved ones. The method infers changes in industry utilisation from observed movements in hours per worker, scaled by an estimated pass-through of those movements into labour productivity. Industry estimates are aggregated using Domar weights, which reflect each industry’s importance. The stacked bars in Figure 2 show measured TFP growth split into [Fernald's] measure of utilisation growth in light grey and utilisation-adjusted TFP growth in dark grey. In 2023, utilisation growth was a drag on measured TFP growth, and utilisation-adjusted TFP growth soared. Since the beginning of 2024, however, utilisation accounts for essentially all TFP growth. For now, the measured productivity gains appear to derive from “working harder” rather than “smarter.”AI Summary. U.S. households with retirement savings and home equity have been insulated from inflation, as $15tn in annual spending by 45 million such households—driven by wealth gains rather than income—has sustained GDP growth well above rates seen in comparable economies.
Jason Thomas CarlyleCore argument: Balances in U.S. defined-contribution retirement plans have risen $6.7 trillion (+12.7% annually compounded) since early 2019, insulating roughly 73 million households from inflation and supporting elevated consumer spending out of accumulated wealth.
Roughly 73 million US households have retirement accounts (primarily defined-contribution plans like 401ks) that consist primarily of claims on businesses whose revenue growth and market values provide another hedge against inflation. Balances in defined contribution plans have increased by $6.7 trillion (+12.7%, annually compounded) since the start of 2019. US personal savings rates have fallen sharply over the past year (from 5.5% in April 2025 to 3% in May 2026) but that seems entirely rational. If your retirement balance is far above where you expected it to be, why not spend a bit more of your current income than previously intended? If we net across these overlapping cohorts and exclude recent first-time home purchases, we’re left with 45 million households that combine to account for nearly $15 trillion in annual outlays. That’s an extraordinary sum, equal to nearly 3x the size of the entire German economy and 70% of the GDP of China. And this third of the population has not only been insulated from the inflation shock but also exhibits the propensity to spend out of wealth and income to an extent that’s sustained a far higher rate of GDP growth than observed in economies with comparable living standards.AI Summary. Quality-adjusted price indexes built from historical retail catalog data show real goods consumption grew 3.8x faster than conventional measures indicate, implying pre-1940 growth outpaced the postwar boom at 5.4% vs. 4.2% annually.
Verónica Bäcker-Peral and Benjamin Wittenbrink Massachusetts Institute of TechnologyCore argument: A quality-adjusted price index built from 5.1 million Sears catalog listings shows real U.S. goods consumption grew 39x over 1900–1990—nearly four times the 10.3x implied by conventional deflators—driven by systematic understatement of quality improvements.
Measuring real GDP growth requires distinguishing changes in prices from changes in product quality... systematic quality adjustment. price indexes are unavailable for much of the twentieth century. We construct a new quality-adjusted price index using 5.1 million product listings from Sears catalogs, 1900–1990. The resulting cost-of-living index implies substantially lower goods inflation than conventional deflators between 1900 and 1990, real goods consumption grew by a factor of 39 using our index,compared with a factor of 10.3 using standard goods deflators. Figure 5 shows our estimates of the cost-of-living index for consumer goods in the solid red line. The dashed black line shows average cumulated price changes for the same sample of consumer goods. The gap.is largest before World War II, reversing the conventional view that goods consumption growth was slower before 1945 than in the post-war decades.As Gordon puts it, 'the history of price changes from 1914 to 1947 [is] the black hole where little is known.' This paper sheds light on that black hole. We estimate average annual real goods consumption growth of 5.4% for 1900-1939 and 4.2% for 1946-1980... the era of fastest growth was in the prewar, not postwar, contrary to conventional estimates.AI Summary. Sub-Saharan African cereal output has grown nearly 5x since the 1960s, but almost entirely through expanding farmland rather than improving yields, and as arable land per person falls to the global average, agricultural productivity has stagnated — with most countries less efficient in 2023 than a decade earlier.
Economist Staff The EconomistCore argument: Sub-Saharan African cereal production grew 5x since the 1960s, but stagnant yields 2020–2024 reveal productivity gains have plateaued, limiting further.
In aggregate [sub-Saharan Africa's] farmers are growing more cereals, such as maize (corn) and rice, than ever: nearly five times as much as in the 1960s. But most of those gains came from cultivating more land, which cannot go on for ever. The amount of arable land per person has been falling for decades, and now sits at roughly the global average. That might not matter if farmers were also growing more crops per hectare. But recently gentle growth in agricultural productivity has given way to stagnation, perhaps even decline. Consider figures drawn from national statistics in Africa by the Food and Agriculture Organisation. Cereal yields did not grow between 2020 and 2024, the latest data point. Nor did total factor productivity (TFP), a measure of how efficiently inputs of all kinds (such as labour and machinery) are turned into produce. Most African countries had lower agricultural TFP in 2023 than a decade before.AI Summary. Declining labor force participation concentrates economic output among fewer workers, raising the return on automation and making productivity growth the primary driver of expansion. Any productivity shortfall carries greater consequences because a shrinking worker base cannot compensate through increased participation.
Paul Kedrosky Applied ComplexityCore argument: Declining labor force participation concentrates income and tax generation among fewer workers, driving fiscal fragility and heightened vulnerability to productivity.
As fewer adults work or seek work, a larger fraction of voters experience the economy mostly as consumers, retirees, or rentiers, not as workers. That changes political incentives around wages, immigration, AI, taxation, and redistribution. The economy becomes increasingly dependent on a shrinking core. A shrinking group of workers generates the income, taxes, and innovation that support a growing number of non-workers. The economy becomes more fragile because labor shocks are concentrated among fewer participants. Capital must increasingly substitute for labor. Labor scarcity raises the return on automation, AI, robotics, and software. The AI bet becomes as much about compensating for workers' absence as simple replacement. Growth increasingly depends on productivity, on not participation. Any [productivity] miss will be much more consequential than in the past, given that labor no longer picks up the slack.