lapses have been temporary, the leaps have been permanent. over the past two and a half centuries, secular innovation has dwarfed secular stagnation. in explaining rising living standards since 1750, economists have typically identified three distinct innovation phases. each was associated with a great leap forward in society ’ s production possibility frontier. 9 the first is the industrial revolution commencing in the middle of the 18th century ; the second, the era of mass industrialisation, starting in the second half of the 19th century ; and the third is the it revolution, which began life in the second half of the 20th century. what distinguished these three innovation phases is that they gave birth to a sequence of socalled general purchase technologies ( gpts ). 10 these technologies had applicability well beyond the sector for which they were originally designed, thereby transforming the efficiency of business practices generally. during the first industrial revolution, these gpts included the steam engine, cotton spinning and railways ; during the second, electricity, the internal combustion engine and internal water supply and sanitation ; and in the third, the personal computer and the internet. interest in innovation - led growth has re - intensified over recent years as growth prospects have dimmed. one strand of the secular stagnation debate asks – wither innovation? among some there is a concern the well of innovation may be running dry. 11 for others, the well of innovation generated by the digital revolution is poised to gush. 12 will secular stagnation or secular innovation dominate? some have focussed on demand - side deficiencies as a source of secular stagnation ( for example, summers ( 2014 ) ). my focus here is on structural, supply - side factors. to the extent say ’ s law operates – with supply creating its own demand, or lack of it – this distinction may not be that great over the medium - term. kahneman ( 2012 ). gordon ( 2012 ). bresnahan and trajtenberg ( 1996 ). gordon ( 2012, 2014 ), cowen ( 2011 ). brynjolfsson and mcafee ( 2014 ). bis central bankers ’ speeches the long history of growth to begin to address that question, let ’ s start by taking a longer look at the past. one reason for doing so is that the long history of growth looks rather different than the short. secularly rising living standards have become the social and economic norm. no - one can recall a time when the growth escalator has moved

##pi - cpi wedge. data availability means that us yields are only included from 1997 so the uk provides most of the historical back - run. chart 14 : forward real interest rate yield curves percent 1. 0 0. 5 0. 0 - 0. 5 - 1. 0 - 1. 5 united kingdom - 2. 0 germany / euro area - 2. 5 horizon ( years ) sources : bloomberg and bank calculations. notes : data for the united kingdom and the united states are derived from nominal bond yields deflated using inflation swaps. the germany / ea figures are based on nominal bund yield deflated using euro - area inflation swaps ( as a proxy for the euro - area risk free rate ). the measure of inflation used is rpi for the united kingdom and cpi for the united states and the euro area. data are to close of business 9 february 2015. bis central bankers ’ speeches chart 15 : population growth annual percentage change source : united nations population projections ( http : / / esa. un. org / wpp / ) for 1950 onwards ; the maddison - project ( http : / / www. ggdc. net / maddison / maddison - project / home. htm ) prior to 1950. chart 16 : business expenditure on research & development south korea japan china united states united kingdom france r & d expenditure as a % of gdp 3. 5 3. 0 germany 2. 5 2. 0 1. 5 1. 0 0. 5 source : oecd. bis central bankers ’ speeches chart 17 : public investment uk advanced economies percent of gdp 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 source : imf world economic outlook october 2014 ; ons. notes : the advanced economies line show real public investment as a share of ppp weighted gdp. the uk line shows nominal net investment as a share of nominal gdp. this series follows a similar pattern to real general government investment, but is available over a longer time horizon. the definition of what is classified as “ public ” has changed over time and at different speeds in different places, which may account for some of the differences between the uk and other advanced economies. bis central bankers ’ speeches