Economic output is determined by productivity per worker-hour and the total number of hours worked. Normally, then, increases in productivity have led to increases in output. But we were, as a society, well above subsistence levels in 1988. In principle, the past twenty years worth of increases in productivity could have resulted in flat output but decreased hours worked. That could be in the form of a lot of unemployment, with the unemployed provided some fairly generous welfare payments or else everyone just having longer vacations or retiring earlier or any combination of such measures.
Obviously, that’s not what happened. But isn’t it something that could happen in the future? Isn’t it even likely to happen, as average wealth levels increase and therefore the marginal utility of additional wealth declines? That’s not to say that people will sit around doing nothing all day, but maybe we’ll see tons and tons of hobby pursuits — people retiring at 50 and putting in five hours a day on their unpaid blog.
And speaking of unpaid blogging, tell Brad DeLong I expect answers to these questions.