Summary: For the past half-century, much of the developed world has experienced a puzzling slowdown in productivity growth—the rate at which workers and businesses become more efficient over time. While digital technologies have advanced at a remarkable pace, innovation in the physical world has slowed considerably. The problem is not a lack of scientific breakthroughs or a shortage of good ideas. Rather, it is a failure to translate discoveries into products, infrastructure, and services that improve everyday life. This slowdown is largely the result of policy choices. By reforming outdated permitting systems, using innovation incentives such as R&D prizes and Advance Market Commitments, and reducing barriers created by protected local monopolies, we can accelerate the spread of new technologies and usher in a new era of prosperity.

In a previous exploration of the housing affordability crisis, I observed a sobering reality: artificial scarcity is often a policy choice. We have placed arbitrary limits—mostly through local governments—on our ability to build homes, driving up costs and restricting opportunity. But this pattern of self-imposed constraint does not stop at the edges of our neighborhoods. It extends into the institutions and policies that shape economic growth. It is one of the primary reasons why, despite living in an age of extraordinary digital innovation, we remain stuck in a decades-long productivity slump.

Economists often measure technological progress using a concept called Total Factor Productivity (TFP). In simple terms, TFP measures how efficiently an economy turns labor, land, and capital into goods and services. When TFP rises, society discovers better ways to produce more with the same resources.

From the 1920s through the early 1970s, TFP in the United States and much of the developed world grew at more than 2 percent per year. This was the era that gave us commercial aviation, widespread electrification, antibiotics, and the Apollo program. The physical world was transformed in a single generation.

Since the early 1970s, however, productivity growth has slowed dramatically to less than 1 percent in most years. As investor Peter Thiel famously quipped, “We wanted flying cars; instead, we got 140 characters.” Digital technologies have advanced rapidly, while progress in energy, transportation, infrastructure, and advanced manufacturing has been far slower. We can send vast amounts of information across the globe in milliseconds, yet we often struggle to build major infrastructure projects on time or on budget.

A 2020 paper by Nicholas Bloom and co-authors argues that good ideas are getting harder to find – that is, more investment in research and development has become necessary for each new patentable idea. However, more recent research by Teresa Fort and co-authors (currently in working paper form) suggests that this is not the case. The Bloom et al. result may, in fact, be an artifact of focusing on manufacturing firms, which were dominant from about 1970 to 1990. Fort and her co-authors show that patenting and innovation have shifted in recent decades, becoming dominated by firms in information, management, and professional services.

Because manufacturing is a physical process, it is much more likely to be subject to, for example, environmental regulations, whereas an IT firm operates in a much less regulated sector. So, our relative stagnation may not be the result of a scientific drought after all. Universities and research laboratories continue to produce remarkable discoveries. We are not failing at invention; we are failing at diffusion, the process of turning new discoveries into widely used products and services.

The Diffusion Deficit and the Permitting Veto

Innovation does not benefit society until it escapes the laboratory and enters the marketplace. The journey from a peer-reviewed paper to a consumer-ready product is long, expensive, and uncertain. Over time, policymakers have added layer upon layer of regulatory complexity to that journey.

Physical innovation requires physical construction. New technologies need testing facilities, advanced laboratories, semiconductor fabrication plants, energy infrastructure, and transportation networks. Yet building almost anything of significance in the modern West often requires navigating years of environmental reviews, public-comment periods, and multi-agency approvals.

Laws such as the National Environmental Policy Act (NEPA) and state-level counterparts such as the California Environmental Quality Act (CEQA) were originally intended to prevent environmental harm. Over time, however, they have increasingly become tools for the delay of progress. Because these laws frequently allow opponents to challenge projects on procedural grounds, they have contributed to what political scientist Francis Fukuyama calls a “vetocracy”—a system in which many actors can block decisions but few can make them. Average NEPA environmental impact statements now take almost four years to complete, with many extending far beyond a decade. Thankfully, the median is a bit shorter, but still about 2.5 years.

Consider the recent push to reshore semiconductor manufacturing. While the government has allocated billions of dollars in subsidies to build these vital factories, the physical construction is bottlenecked by years of permitting and environmental reviews. A state-of-the-art fabrication plant (commonly called a “fab”) that takes 18 months to build in Taiwan or South Korea can take three to five years just to obtain a permit in the United States.

The result is predictable: projects take longer, cost more, and become less attractive to investors. Even when governments provide subsidies for strategic industries such as semiconductor manufacturing, years of permitting can slow implementation. Time is money, and prolonged regulatory uncertainty discourages investment in capital-intensive industries.

The solution is straightforward, even if politically difficult. Critical infrastructure, advanced manufacturing facilities, and research laboratories should face streamlined approval processes. If projects satisfy clearly defined environmental and safety standards, they should be approved in months rather than years.

Pull Mechanisms: R&D Prizes and Commercialization

Reducing regulatory barriers is only part of the solution. We must also rethink how innovation is encouraged and financed.

In addition to corporate financing, most governments try to support innovation through “push” funding. Researchers receive grants to conduct experiments, purchase equipment, and explore new ideas. This model, some economists argue, can be effective for basic science, especially when commercial applications may be years away.

Commercialization presents a different challenge. Many promising technologies fall into what innovators call the “Valley of Death” – the difficult period between a successful laboratory demonstration and a commercially viable product. At this stage, development costs rise sharply while uncertainty remains high.

That is where “pull” mechanisms become valuable. Instead of paying for research inputs, policymakers reward successful outputs. An Advance Market Commitment (AMC), for example, guarantees that a buyer will purchase a product if it is successfully developed. Rather than funding every possible approach, the sponsor commits to paying for results.

Economist Michael Kremer helped pioneer this approach through vaccine development programs. More recently, Operation Warp Speed demonstrated its effectiveness. The government did more than fund vaccine research; it guaranteed large future purchases for successful vaccines. By reducing market risk, policymakers encouraged firms to accelerate development and manufacturing simultaneously. The result was one of the fastest vaccine-development efforts in history.

Consider other approaches. Throughout history, prizes have also stimulated innovation. The Longitude Prize helped solve a critical navigation problem for maritime trade, while the Ansari X Prize helped launch the private spaceflight industry. Pull mechanisms align private incentives with public goals by rewarding success rather than political connections or grant-writing skill.

Breaking Local Monopolies and Regulatory Capture

When people hear the word “monopoly,” they often think of large technology companies. Yet some of the most significant barriers to innovation exist at the local level.

The electric utility sector provides a clear example of how regulatory design shapes technological adoption. Because most utilities operate as regulated monopolies with government-guaranteed rates of return on capital investments, their business model relies on continuous, large-scale infrastructure growth. 

Put simply, utilities make more money the bigger power plants and power lines they build, so they usually prefer huge projects over things like rooftop solar panels that let people generate their own power without the utility having to build as much infrastructure.

Decentralized energy technologies—such as local battery storage, micro-grids, and advanced management software—directly threaten this model by optimizing the existing grid and reducing the need for new capital projects. As a result, studies from the MIT Energy Initiative and industry financial analysts indicate that utilities frequently leverage legacy regulatory processes to delay or block these decentralized innovations from integrating into the wider network.

Similar dynamics exist elsewhere. State dealership franchise laws frequently restrict direct-to-consumer automobile sales, making it more difficult for new manufacturers to enter the market. Occupational licensing requirements now affect roughly one-fifth of American workers and can create barriers to entry that limit competition and labor mobility.

Innovation depends on what economist Joseph Schumpeter called “creative destruction” – the replacement of older, less efficient business models with better ones. When established interests use regulation to shield themselves from competition, they slow technological adoption and reduce future productivity growth. Encouraging competition and reducing regulatory barriers at the state and local level would help accelerate the diffusion of new ideas throughout the economy.

Choosing Abundance

The productivity slowdown is not an immutable law of nature. It is, at least in part, the consequence of policy choices. Human ingenuity remains as powerful as ever. We have more scientists, more capital, and better tools than any previous generation. The challenge is not generating ideas; it is allowing those ideas to spread.

By streamlining permitting processes, expanding the use of R&D prizes and Advance Market Commitments, and reducing barriers created by protected local monopolies, we can accelerate innovation in the physical world.

An additional one or two percentage points of annual productivity growth may sound insignificant. Yet when compounded over decades, the effects are transformative. Higher productivity means higher incomes, better health outcomes, more abundant energy, and greater opportunities for future generations. The ideas already exist. The question is whether we will allow them to flourish.

“Ramp AI Index shows business AI adoption crossed 50% for the first time in March, reaching 50.4% of businesses. A year ago, it was 35%. Half of businesses on Ramp now pay for AI.

Anthropic continued its surge, growing from 24.4% to 30.6% of businesses — a 6.3-percentage-point gain, surpassing last month’s record monthly gain.”

From Ramp.

Summary: Iceland has long thrived through innovation and freedom. Its history is one of transforming scarcity into strength and discovery. Joining the European Union could trade entrepreneurial vitality for bureaucratic constraint and regulation. Iceland’s story proves that wealth flows not from the ground, but from the boundless resource of human imagination.

I recently had the pleasure of visiting Iceland, a country of about 390,000 people. The place feels like a mash-up of Hawaii and Alaska, with a land area roughly the size of Kentucky. Iceland has around 130 volcanoes, with about 30 considered active. Along with the volcanoes there are around 500 earthquakes per week. Many of these are microquakes (below a magnitude of 2.0) that go unnoticed, but about 44 a year register a magnitude of 4.0 or higher within 180 miles of the island.

The International Monetary Fund projects Iceland’s GDP per capita to reach $81,220 in 2025, adjusted for purchasing power parity (PPP). This compares to $89,110 for the US and $64,550 for the European Union (EU).

The purpose of my visit was to talk about why Iceland should or should not join the EU. The event was hosted by Students for Liberty Europe and RSE, the Icelandic Centre for Social and Economic Research. What does this topic have to do with our book, Superabundance?

In our book we argue that we’re experiencing a period of superabundance, where personal resource abundance is increasing faster than population growth. This period started about 200 years ago after millennia of stagnation. We attribute this in large part to people recognizing that the freedom to innovate lifts humanity out of poverty. Innovation is the discovering and sharing of valuable new knowledge in markets. Around 1820, the planet’s dormant entrepreneurs began to blossom and bear fruit. But Iceland has been innovating much longer than 200 years.

Iceland can be considered a creation of entrepreneurs. It was first settled around 874 CE by Norse explorers, primarily from Norway, led by Ingólfr Arnarson, who is traditionally recognized as the island’s first permanent settler. He established his homestead in what is now Reykjavík (“Smoky Bay”), named after the steam rising from nearby hot springs.

Throughout history, the creators have fled the takers—escaping oppression to found new realms of freedom where ideas could multiply and wealth could grow. This is the ancient rhythm of renewal that gave birth to America. The settlers of Iceland were largely Vikings, along with some Celtic slaves (it was typical of the times to enslave defeated peoples) and settlers from the British Isles. Drawn by the island’s fish and grazing land, they sought independence from Norway’s consolidating monarchy.

By 930 CE, the settlers established the Althing, one of the world’s oldest parliaments, at Þingvellir, creating a system of governance where chieftains met annually to settle disputes and make laws. This marked the start of the Icelandic Commonwealth, a decentralized society without a king.

The population grew to around 50,000 by the 11th century, sustained by farming, fishing, and trade. The Commonwealth lasted 332 years, until 1262, when internal conflicts and external pressure from Norway led Iceland to pledge allegiance to the Norwegian crown, ending its independence. This set the stage for centuries of foreign rule, first by Norway and later Denmark. Iceland finally achieved full independence 682 years later, in 1944, establishing the modern Republic of Iceland.

Wealth Is Knowledge and Growth Is Learning

Superabundance is based on the ideas of Julian Simon and George Gilder. Two of the book’s key principles are that wealth is knowledge and growth is learning. These apply directly to Iceland—a nation that turned scarcity into strength and desolation into discovery. With little arable land and few natural endowments, Icelanders learned that the ultimate resource was not in the soil or the waters but in the capacity to imagine and create.

When oil shocks hit in the 1970s, Iceland had little domestic energy. Rather than surrender to scarcity, Icelanders turned to what they had in superabundance. They drilled not for fossil fuels but for fire beneath the earth, turning volcanic fury into light and heat. Today, nearly all of Iceland’s power flows from geothermal and hydroelectric abundance—proof that energy, like wealth, begins not with matter but with knowledge.

And from this same well of ingenuity emerged a national symbol—the Blue Lagoon. The world-famous pools and spa were born from the overflow of the Svartsengi geothermal power station, where geothermal brine spilled into a lava field and transformed an industrial by-product into a national treasure. What began as an accident became an emblem of Icelandic creativity—a living harmony of mind and matter, fire and water.

The Blue Lagoon reminds us that wealth is not drawn from the ground but flows from the fountain of human imagination, where even the castoffs of creation can shimmer with new light. In Iceland, energy is not merely harnessed—it is redeemed.

In the early 20th century, Iceland was a country primarily reliant on imported coal to meet its energy needs. The first hydropower station was built in 1904, and today there are 15 stations producing 73 percent of the nation’s electricity. Geothermal represents the other 27 percent.

Abundant, affordable, and reliable energy is one of the fountainheads of modern civilization, turning ingenuity into prosperity. Yet Europe’s leaders, in their zeal to perfect nature, have turned against the very forces that sustain it. By dismantling coal, nuclear, and gas in favor of windmills and solar panels, they are not advancing progress but reversing it, replacing mastery with dependence and innovation with austerity. The continent that once ignited the Industrial Revolution now flirts with a new age of scarcity—an empire of entropy cloaked in virtue. The great tragedy is the belief that prosperity can be preserved by suppressing the freedom that created it. Prosperity follows those who dare to learn from the world, not those who try to silence it.

For Iceland to thrive, it must continue to unleash its creative energy—to innovate, to speak, and to let knowledge flow as freely as its geothermal springs. Iceland is proof that wealth is not in the ground but in the mind. When faced with the scarcity of matter, Icelanders discovered the infinite power of knowledge.

That same spirit of redemption drives Iceland’s modern economy. From deCODE genetics, which unlocked the secrets of the Icelandic genome, to Össur, whose prosthetics restore mobility with grace and precision, Iceland exports ideas more than goods. Its renewable energy now powers data centers and digital frontiers, where bits replace barrels and imagination fuels growth. And in the northern village of Ísafjörður, Kerecis has turned the skin of cod—once discarded as waste—into a life-giving biomaterial that heals human wounds across the world.

Iceland reminds us that every economy is a learning system, and every act of enterprise a revelation. Growth is not a race for resources but a search for truth—the discovery of new knowledge that multiplies as it is shared. In this sense, Iceland has learned its way into wealth, proving that in the long dialogue between man and nature, the mind is the great multiplier.

The story of Iceland is the story of civilization itself. Every act of creation is an act of learning, a small echo of the divine mind that made the world intelligible. Wealth in its truest form is not measured in metals or markets but in moments of revelation—when knowledge transforms scarcities into abundances. Iceland proved the eternal law of creativity: that human learning, illuminated by faith and freedom, can turn even the coldest rock—or the humblest fish—into a beacon of light.

Choose Wisely

So why would a nation of entrepreneurs and innovators want to be subject to a union of regulators and bureaucrats? As of 2024, the number of staff working for the European Commission is over 80,000 across all 76 EU bodies. That would be one regulator for every 4.8 Icelanders. The future of Iceland lies with leaders like Thor Jensen, Björgólfur Thor Björgólfsson, Fertram Sigurjonsson, Heiðar Guðjónsson, and Bala Kamallakharan, not armies of Brussels bureaucrats.

To secure its future, Iceland must remain a beacon of open inquiry and energy creativity. It should champion innovation over ideology—embracing every technology that multiplies human capability rather than constrains it. By coupling free markets with free minds, Iceland can continue to illuminate a path from scarcity to superabundance, showing the world that the greatest renewable resource is human creativity itself.

Choose wisely, Iceland. Your history is watching.

Find more of Gale’s work at his Substack, Gale Winds.

Summary: In just two centuries, humanity has turned light from a rare luxury into one of the most abundant resources on Earth. What once demanded hours of labor now costs a fraction of a second’s work, thanks to relentless innovation and human creativity. From candles to LEDs, the story of light reflects a larger truth: when people are free to invent and exchange ideas, they transform scarcity into abundance and darkness into illumination.

Our book Superabundance (2022) was inspired in part by the work of Nobel Prize–winning economist William Nordhaus, who conducted an extensive analysis on the “time price” of light over the span of human history. He called time prices the true prices. Light can be measured in lumens. Comfortable reading light is around 1,000 lumens. Nordhaus reported that in 1830, earning sufficient money to buy the candles necessary for one hour of light at 1,000 lumens required around three hours of labor. A candle generates around 12 lumens; therefore, one would need 83 candles to generate 1,000 lumens.

Innovation replaced candles with kerosene lamps and then with incandescent lighting and then LED lighting. Today, for 75 cents, one can buy a Cree J Series 5050C E Class LED that generates 228 lumens per watt. By increasing the wattage to 4.4 watts one can, therefore, generate 1,000 lumens of light. Electricity prices are currently around 17 cents per 1,000 watt hours, commonly known as kilowatt hours or kWh. One watt hour costs 0.017 cents; thus, the 4.4 watts to power the Cree LED for one hour would cost a mere 0.0745 cents. The average worker earns $36.53 an hour, or slightly more than a penny per second. Working for around 0.0735 seconds, therefore, the average worker earns enough money to buy 1,000 lumens for one hour.

The light that cost 10,800 seconds in 1830 costs only 0.0735 seconds today. The time price has dropped by 99.99932 percent. For the time it took to earn the money to buy 1,000 lumens for one hour in 1830, workers today earn 146,980 hours of light today. That’s a 14,697,900 percent increase. Light abundance has been increasing around 6.3 percent annually on a compound basis, doubling every 12 years.

Calculating Changes in Global Light Resources

Over the last 195 years (1830-2025), the world’s population rose from 1.2 billion to 8.2 billion—a factor of 6.83, or a 583 percent increase. To measure how humanity’s resource base has changed, we calculate the size of the global resource “pie” by multiplying personal resource abundance by population. That reveals how much “total abundance” exists across humanity at a given moment.

As we already saw, during the 195-year period, personal light abundance rose by a factor of 146,980. Assuming for argument’s sake that everyone in the world enjoys American prices of LEDs and energy, combined with the 6.83-fold increase in population, the global light abundance factor would amount to 1,004,360. In other words, the global light pie has grown by 100,435,912 percent—from an index value of 1 in 1830 to 1,004,360 today.

Light abundance would have grown at a compound annual rate of roughly 7.3 percent for almost two centuries, doubling about every 9.8 years. What was once scarce, flickering, and expensive has become nearly boundless—flowing at the speed of electrons and photons across the planet.

Resource Elasticity of Population

In economics, elasticity compares the percentage change in one variable against the percentage change in another. Between 1830 and 2025, global light resource abundance increased by 100,435,912 percent. During same period, the world’s population increased by 583 percent. Dividing 100,435,912 percent by 583 percent gives us 172,176. Every 1 percent increase in population thus corresponds to a 172,176 percent increase in global light abundance.

Let There Be More Light

We have witnessed an exponential efflorescence of light—an illumination not merely of our cities but of the human spirit itself. More people with light has meant more minds, more ideas, and more ventures into the unknown. When free to imagine and innovate, humans transform scarcity into abundance—and ignorance into insight. Over the past two centuries, we have converted the darkness of want into the radiance of wealth, beginning with light itself. From the barbarous glow of whale oil to the humble candle, and from the flicker of gas and kerosene to the steady blaze of electricity and the brilliance of silicon, each technological leap has kindled new horizons of discovery. Every advance has multiplied the possibilities for the next. The ultimate source of growth is not material—it’s the human mind set free.

The next time you turn on a light switch, please take a moment to appreciate the great work of free and creative people toiling to bring us out of the darkness. Compared to the abundant light of today’s world, our ancestors really did live in the “dark ages.”

Find more of Gale’s work at his Substack, Gale Winds.