Why has the U.S. been plagued with a series of jobless recoveries, an extended period of middle class stagnation, and an equally extended rise in income inequality? Tyler Cowen floats a new unifying theory through a medium that's part of his message: a novella-sized theory outline first published as an e-book. The title provides an admirably concise precis: The Great Stagnation - How America Ate All the Low-Hanging fruit of Modern History,Got Sick, and Will (Eventually) Feel Better. The book is as accessible in price ($3.99) as it is in concision, clarity, and freedom from technical economic analysis (or jargon).
Cowen proposes that the United States has already picked all the "low-hanging fruit" of a now-past era of transformative technological development. He claims that we are now living off the wealth (and growth) generated by the life-changing technologies of the late nineteenth to mid-twentieth century: automobiles, mass communication, air travel, fossil fuel exploitation --and that we're currently on a technological plateau, where growth is inevitably slower. At the same time, we're living with government institutions that can't be easily funded at the slower real growth levels that have prevailed in recent decades. So we're fighting with understandable bitterness over whether to maintain past levels of redistribution of a not-quickly-enough-growing pie -- or whether, ultimately, to shrink our expectations of what government can do for us, at least until we get off the plateau and into a new era of transformative technology. Meanwhile, he is rueful about the efficiency of government where it matters most -- in education and healthcare delivery -- though perfunctorily upbeat about recent attempts to find efficient ways to improve education.
These theses are obviously meant to be provocative, all the more so as delivered in a short e-book that's almost an abstract of a potential tome that would fill in the conspicuously lacking evidence. In responding, I beg some latitude on two fronts. First, Cowen is an extraordinarily well-read polymath and an able economist, and it's fair to take it on faith that his evidence-light outline represents distillation of a huge amount of data and analysis. I'm responding just as a casual and moderately informed reader. Second, I'm going to indulge myself and compound the error by posting my spontaneous reactions without checking on what's probably already a copious response literature. I could call this an experiment, but it's really an indulgence: I'm eager to read and engage other responses. But I want to get my thoughts out first, and blog space is cheap...
1) I'd question whether we're living in an era in which transformative technological innovation is in short supply. Cowen does allow "the Internet" as the great exception, but points out that the leading-edge tech companies employ relatively few people, and that Internet innovation has been notoriously difficult to monetize. He is strangely silent, though, about the impact of interactive technology and computer technology more generally on production and commerce of all kinds -- just-in-time factory production, product customization, bar coding, all the incredible efficiencies of large-scale retail operations that wring out large profits on tiny margins -- and on interactive technology's role in globalizing production. He also doesn't consider transformative technologies hiding in plain sight: personal computers themselves (never mind the Internet) and cell phones. It's true, as Cowen says, that the basic physical components of middle class life in America don't look that much different than they did in the 1960s. But they are much different. And the differences have generated a lot of wealth, even if the U.S. middle class hasn't garnered as large a share as it did in he previous generation.
Work in Progress
18 minutes ago