Always Look on the Bright Side

The American economic recovery carries on apace, with a net rise in employment of almost half a million over the past three months. The Office for National Statistics has decided that the UK never had a double dip recession, and the texture of the economic news has turned positive.

But economics is not called the dismal science for nothing. What of the longer-term? Here, there is no shortage of doom and gloom. Stephen King, chief economist at HSBC, has just published an interesting and well-written book ‘When the Money Runs Out’. Pessimism infects the high command of the American academic economics establishment.

The source of these melancholy views is an influential paper by Robert Gordon published by the National Bureau of Economic Research in August 2012. The title poses a stark question: ‘Is US Economic Growth Over?’ Gordon’s answer is basically ‘yes’. There are a few nuances to this in his paper, but he takes a bleak view of the prospects for the American economy during the rest of the 21st century.

For Gordon, the basic problem is that all the major technological innovations are behind us.  The period 1750-1850 saw the steam engine and the railways. In the closing decades of the 19th century, the foundations of our modern way of life were laid down with the internal combustion engine and electricity. He argues that in 1960 we entered the information age, and although this has brought benefits, the boost to growth which it provided is now fading.

A key question is whether this is true. Predicting how new technologies will be used is fraught with difficulty, and their full potential can take many decades to realise. The statement made by Thomas Watson, chairman of IBM, in 1943 is notorious: ‘I think there is a world market for five computers’.

Even after the event, their impact can be difficult to identify. There is still a powerful school of thought amongst economic historians that the railway made little difference to the growth of the American economy in the 19th century, a proposition which strikes the layperson as absurd but which is nevertheless believed.

But it is not just in the information technology and communications sector where dramatic advances are already taking place. Major breakthroughs in energy use and extractions have been made, with 300 mpg cars, shale gas, and the huge potential of both renewable energy and energy storage. Biotechnology is even more exciting. Humans may soon have the ability to live healthy lives to the age of 200 and beyond.  Sociobiology may give us deep new insights into how to deal with major social issues such as drug addiction and crime.

Capitalism has been incredibly inventive during the 250 years of its history, and there is no reason to believe that this will not continue. The crucial requirement is not technological but political. The basic institutional structures of the rule of law and private property must be maintained, so that innovators can reap the fruits of their labours.

Paul Ormerod

As published in City AM on Wednesday 3rd July 2013

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Alex O’Byrne, Associate at Volterra, is an experienced economic consultant specialising in economic, health and social impact, economic strategy, project appraisal and socio-economic planning matters.

Alex has led the socio-economic and health assessments of some of the most high profile developments across the UK, including Battersea Power Station, Olympia London, London Resort, MSG Sphere and Westfield. He has significant experience inputting to EIAs and s106 discussions as well as drafting economic statements, employment and skills strategies and affordable workspace strategies.

Alex is also experienced at economic appraisal for infrastructure. He was project manager of the economic appraisal for the City Centre to Mangere Light Rail in Auckland. He also led the economic and financial appraisals of the third tranche of the Transport Access Program for Transport for New South Wales, in which Alex developed and employed innovative methodological approaches to better capture benefits for individuals with reduced mobility.

He is interested in the limitations of current appraisal methodologies and ways of improving economic and health analysis to ensure it is accessible to as many people as possible. To this end, Alex recognises the importance of transparent and simple to understand analysis and ensuring all work is supported by a robust narrative.

Alex holds a BSc (Hons) in Economics from the University of Manchester and he was a member of the first cohort of the Mayor’s Infrastructure Young Professionals Panel.


Senior Partner

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Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.