Ben Bernanke's misplaced faith in innovation

Ben Bernanke, chairman of the United States Federal Reserve, is an optimist about economic growth in the coming decades, rejecting "depressing" views about a slowdown and putting his faith in collaborative innovation driven by a jackpot culture for inventors.

For his mental health, let's hope he believes it. For our economic wellbeing, let's hope he doesn't act on it.

While a series of economic revolutions has driven a 30-fold increase in living standards between 1700 and 1970, economists have recently fretted that the information technology changes of recent years will yield less growth.

Bernanke, speaking last weekend to graduates at Bard College at Simon's Rock, in Massachusetts, was having nothing of it. Not only will humans continue to innovate and to find ways to wring value out of recent innovations, the rise of the internet allows for massive and rapid collaboration, he argued. And, as Mark Zuckerberg can tell you, the potential rewards for innovation exceed those in the past.

"Both humanity's capacity to innovate and the incentives to innovate are greater today than at any other time in history," Bernanke said.

While Bernanke was careful to couch his views as being about the long-run future, this kind of thinking, while perhaps appropriate to graduation day, is a tad scary when done by the man with his hands on the levers of monetary policy.

Hazy faith in a future of explosive growth from as yet undreamt-of technologies is exactly the kind of thing which in the past has led us to stock market bubbles, busts and recrimination.