Eli Dourado, a senior research fellow at Utah State University, joins Brian Anderson to debunk myths about the great stagnation, discuss new technologies that are on the precipice of unleashing growth, and detail the regulatory strictures and complacency that stand in their way.
Audio Transcript
Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on today's show is Eli Dourado. He's a senior research fellow at Utah State University Center for Growth and Opportunity. Before joining Utah State, Eli worked with advanced supersonic flight at Boom. He directed technology policy at George Mason University's Mercatus Center, and he earned a Ph.D. In Economics from George Mason studying under Tyler Cowen. In a feature for City Journals' spring issue called the New Productivity Revolution, he discusses a number of new technologies that will have tremendous benefits for human flourishing, if we can get out of our own way. Eli, thanks very much for joining us.
Eli Dourado: Well, thank you for having me, Brian. It's great to be on with you.
Brian Anderson: As you note in this essay which is in our spring issue, economic productivity has stalled in recent years and a number of explanations for this secular stagnation as it's called have been put forward. The most famous one probably is the one advanced by economist, Robert Gordon, who argues that we've basically picked all the low-hanging fruit. We've invented all of the major technologies, and so that what we're seeing these days is just diminishing returns from the digital revolution.
And marginal improvements to digital technology aren't comparable to something like the internal combustion engine. So you disagree with this argument, respectfully in the essay, and identified a number of key technologies that you believe are on the cusp of being the next big, huge, great transformative inventions. So maybe we could just start there to detail what these big looming inventions are.
Eli Dourado: Sure, yeah. Happy to do that. As you know, I outlined three areas that I think are really promising. And the first one is in biotech and especially around the idea of mastering protein biology. So understanding how proteins work and there's been a number of developments that are all coming together at the same time to rapidly increase our capabilities and being able to manipulate and ultimately even design proteins. And so one that everyone of course is familiar with is the mRNA vaccines that have just come out that enable us to produce within human cells any arbitrary protein that we want. We've taken over the machinery of the ribosome and we can basically tell a human cell to pump out any protein that we want.
And in this case, we used it to pump out the Coronavirus spike protein, which is defined in the Corona virus genome. And by just sort of like copy-pasting the code maybe making some slight tweaks and then the hard part is administering it to the body. But that breakthrough has happened, and we can make trillions of spike proteins and our immune system can learn to attack them and beat them up as a... Use them as a punching bag to train for the real thing when the real infection happens. And then our immune system is-
Brian Anderson: These will be applications beyond the Coronavirus, right?
Eli Dourado: Yes. Yeah, so any protein you want to train your immune system to flag or target you could do this way. And I think what's really interesting is particularly the cancer applications. Because what we could do, and what these companies are, or the roadmap is in fact to do is to be able to sequence a healthy cell in your body and sequence a cancerous cell and identify targets, identify the proteins that manifest that are different in the cancer cells and then train your immune system to attack the cancer. And so people... Some of the trials have been astounding. There's been a lot of failures as well but it seems that this technology is for real and it looks like it's going to happen.
So that's the part of the protein, I think there's other things going on around design, around being able to predict protein folding, and so on. Proteins are so fundamental to all of biology, that being able to understand how they work and being able to ultimately design new proteins that evolution neglected, that didn't provide us with because there's no reason from an evolutionary fitness perspective to give it to us. But if we want to live longer and so on, we could have all these cleanup processes going on in our bodies, enabled by some artificially designed proteins that scientists are already starting to take care within the labs.
Brian Anderson: So beyond the biological innovation in this area which obviously is going to have enormous commercial potential, you talked about two other particular areas, right? So geothermal energy is a second. What's going on there?
Eli Dourado: Yeah, it's such a fascinating field. So the thing to realize about geothermal energy is it could, in principle, provide all of the energy that we need. The amount of heat energy in the Earth is way more than the oil and gas reserves that exist. And it's replenished constantly at a rate that's about twice human primary energy use. So there isn't enough in principle to power our civilization until the oceans boil, right, so there's plenty.
And so what's needed is ways of exploring for and extracting heat energy that isn't immediately evident at the surface. So traditional geothermal energy has been done like near volcanoes and fumaroles, and geysers where it's obvious there's some heat, you benefit from certain rock formations, and so on. And being able to go deeper to do it in more places and eventually everywhere, and to engineer the subsurface. So that the kinds of...
You're expanding the number of locations where it's viable to the point where, you know, really just anywhere on the planet, you could drop a well and produce clean electricity. You know again, this is very different from wind and solar that are intermittent, and that only operate in certain geographies and certain times a day and unpredictable ways that sometimes... Geothermal is 24/7 base-load energy. And it's able to... It could potentially be very, very cheap. The startups coming out of the oil and gas sector and entering the geothermal space are talking about something like, "You know with today's technology, 4 cents a kilowatt-hour. With future technology, maybe two or three cents."
And when you amortize the cost of drilling and you've got the hole that lasts hundreds of years, the cost gets down to maybe like one cent per kilowatt-hour. So it's really... You're going to be able to have very high-quality energy at a very low price, everywhere on the planet without carbon emissions, without other emissions, with a low footprint on the surface. It's just really the ideal form of energy and without the regulatory hassles that come with nuclear energy. So it's kind of like nuclear without the hassle.
Brian Anderson: So this is generally safe, this kind of drilling?
Eli Dourado: Oh, yeah. It's extremely safe. There's different models of it but in the ultimate instantiation of it, you're just going very, very deep and in a vertical well, very, very deep, and then either sort of connecting it, the vertical shafts horizontally with a network of horizontally drilled pipe, or you could create a fracture network underground to create the surface area for the water or the working fluid to receive the heat that is available down there.
Brian Anderson: It's interesting because we're not hearing as much about geothermal power compared to say, solar and wind as a kind of renewable energy source. So that is a very striking argument you're making in this essay. What about the third area of innovation, you described as space exploration? We hear about Elon Musk a lot of course, and SpaceX. So what's going on there, and why is this something we should get excited about?
Eli Dourado: So Elon Musk, as we all know is obsessed with going to Mars, and I think a lot of people still don't really believe he's going to do it. And the rocket program that is under development right now in Boca Chica, Texas is really... That's what it's targeting and it's doing so in a way that is going to radically open up access to orbit and to the wider solar system. So the Starship vehicle that is being tested now is designed to get launch costs down to almost nothing. On Falcon 9, the current workhorse vehicle that I think last quarter launched to two-thirds or more of the mass to orbit. It's about $2,600 a kilogram to get to low Earth orbit.
And with Starship, I mean, there's a figure going around from Elon that they could get it down to $1.5 million to launch for 150 tons which is $10 a kilogram. So it's more than 200 times cheaper than what Falcon 9 is today. And now, they may not hit that figure, at least not initially and so on, but order of magnitude changes and the cost of access to space are going to be a game-changer. You're going to start to see more activity in orbit, including more complex activity that are more use of things like consumer-grade hardware because you don't have to spend the billions of dollars on your satellites, to replace it doesn't really cost that much.
So there's all kinds of second-order effects. And so payloads are going to... The total master space is going to go up. The quality of the master space is going to go up. And then the other thing about Starship is it's being designed to refuel on orbit. It's dramatically opening up access to low Earth orbit. But the sort of like the proportional reduction in costs beyond low Earth's orbit is even greater. So normally when you send a payload to beyond low Earth's orbit on a rocket, you're able to do that by trading the payload capacity for fuel. You have less payload of mass and more fuel mass. And by refueling on orbit you can send the full payload capacity of the Starship to that final destination, whether that's Mars or somewhere else in the solar system. And so it's going to just basically, radically open access to the wider solar system.
Brian Anderson: Your essay really adopts the kind of argument that Tyler Cowen has made that our culture has in many ways become too risk-averse. And the policy environment surrounding some of these innovations could impede their development. You know, those who are comfortable with current things would prefer to guard their current arrangements. You know, society on the view of this argument becomes unwilling to do what's necessary to push the horizon of improvements forward. So as you write in your piece, stagnation is a choice. I wonder if you could say a little bit more about that, and what the kind of regulatory environment could look like that would accelerate some of these developments whether it's in biotech or energy or space exploration.
Eli Dourado: Sure. Yeah. And I think, maybe it's worth bringing back the connection to... There's basically two theories about why we stagnated. And I think one is Robert Gordon, it's something implicit in the technology that we've sort of ran out of room. There's no low-hanging fruit anymore. And then the other argument is as you say, it's from Tyler Cowen, it's that you become complacent. And I think that the fact that we have, that there is all this technological space to grow in that my essay has talked about. I think that discounts the Robert Gordon piece of it. But then to look at sort of bolstering the argument for complacency is the examples of things like, you know, housing policy, where it's like, we know how to have more and better housing at lower cost, and that's to build with higher density. And we don't, we're not doing it.
The pandemic is a perfect example of a time where for a short period we were not complacent, and we actually tried to move very quickly to commercialize these mRNA vaccines. And when we did it, it worked well. And so it's interesting that during this time of where we've chosen briefly to be non-complacent, we have very fast innovation. So what if we could do that all the time?
For biotech, it would mean something like the FDA being more concerned about too slow drug approval times, right. People dying from drugs not being approved. As well as people dying from drugs that have been approved wrongly. So those deaths should be equivalent in their calculus but they don't seem to be. I think just looking at the science in biotech around aging and saying like, "There's something really promising here. What would it take to accelerate that?" And to do... If we were as concerned about that as we were about the coronavirus, we could avoid many millions of premature deaths by extending life span and health span through that research.
You know, one of the reasons I've said that I'm interested in geothermal is because I think nuclear is over-regulated, right? Nuclear power in the US is six times more expensive than South Korea. Even geothermal, like I've identified this bottleneck in terms of doing a well on federal lands which takes about a couple of years to approve and for the same well for oil and gas would get approved almost automatically. You mentioned that I worked in Supersonics before, that's an area where clearly there's a regulatory element to our stagnation.
We had the Concord flu in 1969 and we don't have it today and we can't buy a ticket on a Supersonic aircraft today and that's entirely a regulatory decision. So there is a lot of I think evidence for the fact that we could move faster and we've chosen not to. I think the other half of the case for saying why is it's not the low-hanging fruit explanation for a slow total factor productivity growth, it's the complacency explanation for slow growth.
Brian Anderson: And I guess, if we expand that question to the kind of political attitudes toward innovation, there are groups on both the right and the left who are suspicious of innovation. We've seen on the right... The right's been generally more supportive, I think of free markets and obviously, and innovation over the years but we do have a current within conservatism of the kind of Neo-Traditional as conservatism. And you know that that's become increasingly prominent in recent years. And their argument is that the modern economy is leaving certain groups behind. It's eroding civic and religious bonds, and that we need more government planning just by the right planners to help ameliorate that situation.
And then you have on the left, groups like the degrowth movement, which we're looking to localism as a kind of response to the future of ecological disaster. What do you say to these different groups to make the case for innovation? You've been a very passionate advocate for this in your work. What do you say to the right and the left on the score?
Eli Dourado: I would say that a lot of their issues really are not about material economic growth. They are about status and about making sure that certain values are respected, right? Maybe on the right, people are concerned that traditional values and that rural America and that working-class folks are respected and valued by our society in a way that they feel like sometimes they're not. And on the left, a lot of times it's like these environmental values or these equality values, they feel like they aren't being adequately respected.
And so, I really see a lot of the need for material growth that is kind of orthogonal to those questions about how do we raise the status of all people at the same time. Right? And so certainly, it affects the material growth to be constantly fighting about those things and not being concerned about material economic growth. But it's a separate question, and if we just could actually put the culture war on pause for a while, and come together and think about how can we make our living standards higher across the board. Like that would be the way to move forward and to have a better society.
Brian Anderson: Thanks very, very much, Eli, to a fascinating essay, wonderful discussion. Don't forget to check out Eli Dourado's work. It's on the City Journal website, www.city-journal.org. We'll link to his author page in the description so you can find his essay there. You can also find City Journal on Twitter @cityjournal and on Instagram @cityjournal_mi. And if you like what you've heard on today's podcast, please give us a ratings on iTunes. So thanks again very much Eli, and really appreciate you coming on the show too.
Eli Dourado: Thanks, Brian. It's been a real pleasure to work with you on this piece.
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