Ray Kurzweil, “The Law of Accelerating Returns”

You can read the full article here.

I’d like to quote the part where Ray Kurzweil talks about the economy.

The Double Exponential Growth of the Economy During the 1990s Was Not a Bubble

Yet another manifestation of the law of accelerating returns as it rushes toward the Singularity can be found in the world of economics, a world vital to both the genesis of the law of accelerating returns, and to its implications. It is the economic imperative of a competitive marketplace that is driving technology forward and fueling the law of accelerating returns. In turn, the law of accelerating returns, particularly as it approaches the Singularity, is transforming economic relationships.

Virtually all of the economic models taught in economics classes, used by the Federal Reserve Board to set monetary policy, by Government agencies to set economic policy, and by economic forecasters of all kinds are fundamentally flawed because they are based on the intuitive linear view of history rather than the historically based exponential view. The reason that these linear models appear to work for a while is for the same reason that most people adopt the intuitive linear view in the first place: exponential trends appear to be linear when viewed (and experienced) for a brief period of time, particularly in the early stages of an exponential trend when not much is happening. But once the “knee of the curve” is achieved and the exponential growth explodes, the linear models break down. The exponential trends underlying productivity growth are just beginning this explosive phase……

…….None of this means that cycles of recession will disappear immediately. The economy still has some of the underlying dynamics that historically have caused cycles of recession, specifically excessive commitments such as capital intensive projects and the overstocking of inventories. However, the rapid dissemination of information, sophisticated forms of online procurement, and increasingly transparent markets in all industries have diminished the impact of this cycle. So “recessions” are likely to be shallow and short lived. The underlying long-term growth rate will continue at a double exponential rate.

There’s more information at the source, including some charts.