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The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will(Eventually) Feel Better
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Cowen's central idea is that the pace of innovation has slowed, and that we are now on a "technological plateau" that makes further growth challenging. If you consider technology in the broad sense (energy, transportation, home, etc), this makes sense as things have not changed a lot in recent decades. However, I think it is also true that progress has been highly concentrated in information technology and communications, and that things continue to advance rapidly in this area. Cowen notes this but seems to feel that the Internet is the only really major innovation.
Cowen argues that what we need is a new burst of innovation that will propel economic growth. Here is the problem I see with that: Cowen writes that "a lot of our major innovations are springing up in sectors where a lot of work is done by machines, not by human beings." In fact if you look at companies like Google or Facebook, or entire industries like semiconductors, computers, Internet or biotech, there are really not a lot of jobs in total and certainly not a lot for middle skill people. If there is manufacturing it is either heavily automated or offshore.
The question is: if today's innovations are already creating industries that are not labor-intensive and rely instead on technology, why would the future be different? Won't the new burst of innovation that Cowen calls for create even more technology-intensive industries...and few jobs?
I. The low-hanging fruit we ate
..A. Examples in the United States
....1. Free land (Homestead Act, etc.)
....2. Technological breakthroughs (electricity, motor vehicles, telephone, radio, television, computers etc.)
....3. Smart, uneducated kids (who were made productive through excellent public education).
....4. This is a partial list; clearly other candidates can be proposed, e.g. cheap fossil fuels.
..B. Examples in other countries ("catch-up growth")
....1. Leveraging the technological breakthroughs of the West (e.g. China, India)
....2. Smart, uneducated kids (e.g. China, India)
..C. MEDIAN income growth in the U.S. has slowed notably since 1973.
....1. Decline in household size is not the cause.
....2. Unmeasured quality improvements (think electronic gadgetry) are not a counter (because there is
...... also unmeasured quality degradation, think traffic jams and AIDS)
..D. Rate of technical innovation has declined notably since 1873 and even more since 1955
....1. Innovation is getting harder; the low fruit has been picked.
....2. Recent innovations have slight marginal benefits
..E. Recent and current innovation is more geared to PRIVATE goods than to PUBLIC goods.
....**This is the driver of the Great Stagnation.
....1. Extracting resources from the government (subsidies for solar power, farm products, other junk;
.....useless construction; useless government employees; legal services, etc.) by lobbying.
....2. Extreme protections of intellectual property (e.g.Read more ›
This nice little book is worth reading. Tyler Cohen has correctly identified several almost unique circumstances that helped America become great and powerful. Some low hanging fruit like free land, innovation, millions of immigrants seeking work (and ready to work for pennies), millions of young people wanting to get education; scientific progress and technical innovation.
The book contains very sharp observations. For instance, the author notices that innovation has moved lately in the wrong direction:
"If one sentence were to sum up the mechanism driving the Great Stagnation, it is this: Recent and current innovation is more geared to private goods that to public goods. That simple observation ties together the three major macroeconomic events of our time: growing income inequality, stagnant median income, and, as we will see in chapter five, the financial crisis.:
Not only this. Cowen points out that "Top American earners are increasingly concentrated in the financial sector of the economy."
The booklet is easy to read, the style is lively and intellectually entertaining. When I reached the end, however, I said: Oops, was that all? Too many blank spots left!
Here is a major blank spot: The dollar. Talking about low hanging fruit, the author somehow missed the dollar. By becoming the world reserve currency after WW2, the dollar gave this country an enormous financial advantage. It became not only a low hanging fruit, but a ready fruit on the table. The benefits of this fruit only increased when it was freed from gold in 1971 and when OPEC agreed to trade oil only in dollars in 1974. What is the future of the dollar? What are the perspectives to enjoy it free on the table?Read more ›
Most Recent Customer Reviews
This is more of a long essay than a book. Cowen's analysis will discomfort both the left and the right. Read morePublished 3 days ago by Jason D. Sands
Many reviewers here didn't understand the book. Some thought it was anti government, some thought it was pro government, but it is neither. Read morePublished 6 months ago by B. Gilad
I didn't read this book until 2015 and still found a great deal of valuable lessons. Tyler Cowen is one of my favorite applied economics writers because of his ability to convey... Read morePublished 7 months ago by Alex Bush
Good essay to understand that we cannot climb the mountain infinitely.Published 10 months ago by Donaldo M. Dagnone
Not a very powerful book. Cowen is an economist at George Mason. I took economics at George Mason.
Of course that was a very long time ago. Read more