WASHINGTON Federal Reserve Chairman Ben Bernanke took a break from current economic woes and uncertainties Saturday, looked into the future and found reason for optimism.
Bernanke, in remarks prepared for delivery to graduates of Bard College at Simon's Rock Great Barrington, Massachusetts, took issue with economists and pundits who downplay the economy's long-run potential and foresaw great prospects for innovation and improved standards of living.
His only comment about the current situation was to say that the recovery faces "very real challenges," but that he has "every confidence we will overcome" them.
After a historical review of the first and second waves of the industrial revolution, he examined the more recent era of technological innovation, particularly information technology.
Some have argued that today's technological revolution, which has given people new ways of communicating, won't be nearly as transformative of people's lives as those first waves, which gave the world steam engines, air travel and so forth.
But Bernanke told students "there are some good arguments on the other side of this debate."
"First, innovation, almost by definition, involves ideas that no one has yet had, which means that forecasts of future technological change can be, and often are, wildly wrong," he said. "A safe prediction, I think, is that human innovation and creativity will continue."
"Second, not only are scientific and technical innovation themselves inherently hard to predict, so are the long-run practical consequences of innovation for our economy and our daily lives," he said. "Indeed, some would say that we are still in the early days of the IT revolution."
"Moreover, even as the basic technologies improve, the commercial applications of these technologies have arguably thus far only scratched the surface," he said, citing as an example "the potential for IT and biotechnology to improve health care."
"Finally, pessimists may be paying too little attention to the strength of the underlying economic and social forces that generate innovation in the modern world," Bernanke went on. "We live on a planet that is becoming richer and more populous, and in which not only the most advanced economies but also large emerging market nations like China and India increasingly see their economic futures as tied to technological innovation."
"And, importantly, as trade and globalization increase the size of the potential market for new products, the possible economic rewards for being first with an innovative product or process are growing rapidly," he said.
"In short, both humanity's capacity to innovate and the incentives to innovate are greater today than at any other time in history," the Fed chief asserted.
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