Scott Sumner looks to Australia for insight on the long-run growth potential of the rich market democracies, and he concludes on an intriguing note:

The way our modern society is structured, businesses will keep innovating and reducing costs, and this will lead to 0.5% to 1.0% per annum rise in measured RGDP/person. But that number is no longer very important. Instead the key issue will be how well society addresses the unpredictable challenges that will come our way courtesy of scientific advances—good or bad. Will there be genetically manufactured viruses that do all sorts of damage? Or will we find a way to stop the aging process? Or invent happiness pills? Will we genetically program our babies to have high IQs? When you think about the unexpected challenges over the next few centuries, it really doesn’t matter very much whether RGDP is growing a bit more or less than 1%. Something very, very big is coming along.

The “very, very big thing” Sumner references is Eliezer Yudkowsky’s “intelligence explosion” thesis:

All compound interest returned on discoveries such as the invention of agriculture, or the invention of science, or the invention of computers, has occurred without any ability of humans to reinvest technological dividends to increase their brain sizes, speed up their neurons, or improve the low-level algorithms used by their neural circuitry. Since an AI can reinvest the fruits of its intelligence in larger brains, faster processing speeds, and improved low-level algorithms, we should expect an AI’s growth curves to be sharply above human growth curves.

A more banal possibility, however, is that we might see an increase in “empowering innovations” that would make better use of our current endowment of cognitive skills, just as the advent of the automobile allowed ordinary individuals to do extraordinary, productivity-enhancing things. The paradigmatic empowering innovation of the past decade is probably the “ephemeralization” associated with the smartphone (i.e., the transformation of various gadgets — a phone, a music player, video games, a bar code scanner, a wallet, a GPS device, etc. – into software apps that can be part of a universal gadget), which has contributed to productivity in a number of ways. Yet it has arguably been more successful at improving the quality and quantity of our leisure and our consumption, at least for now. It will be interesting to see how the ongoing evolution of mobile and wearable computing will contribute to our ability to solve problems and to collaborate with others.