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on June 20, 2015
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 complex concepts in easy-to-understand forms. I have minimal economics training but this book helped me better understand why our (American and the world's) economic situation is the way it is and how to be better prepared for the future. Obviously this book doesn't get into the complexities of many contemporary economic issues (it's less than 100 pages), but it conveyed its big, bold concept (that the economic slowdown of the last decade is an inevitable process) in a clear and persuasive manner. I really liked the metaphor of low-hanging fruit (which is used repeatedly throughout the book), as it helped me conceptualize the rather abstract concept of national/global economics in a tangible, visceral manner.

I would highly recommend reading this, either in kindle or hardcover form.
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on December 17, 2013
I always enjoy pieces that have that "the emporor has no clothes" flavor and this one certainly does. Right now I am concerned that America has too many defenders operating from ideologies that have little to do with the original ideas that led to the formulation of the Constitution, not really Americans in the truest sense. Cowens piece brackets the reality of the pile of riches early Americans stumbled onto when the country was young and point out that we have now reached a place in our history where the ideas of our foundrs will be put to the truest test.

If you have ever run a business you know it is easy to think you are smart when a rising tide is floating all boats. You find out not only how much acument you have but what your true values are when the going gets tough. We are there, our adolescence is complete, it is time to grow up as a nation and see whether we are really worthy of the vision we have inherited. Cowens short essay and likely the book that follows points out that we are in dire need of the development of the collaborative skill that our forefathers displayed when they created the foundation for the country. In that regard we are sort of like the children of riich parents who have never had to really earn a living, we are now early in our real education as citizens.

I'd also recommend George Packer's the unwinding of America as a way os eing what the larger patterns discussed by Cowen look like at the level of the individual in the country today.
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on November 1, 2012
Cowen makes a number of points in a surprisingly short essay. (Shorter is better, I'm paying for points made, not pages used to make them.)

First is that economic progress depends on (among other factors) technological innovation. So far so good; this is nearly a truism. Cowen goes on to say that technological innovation is lumpy (yes) and that the period 1980-2010 is actually a period of low, rather than high, innovation. That last point got my attention. I agree. However, the argument needs more evidence here -- how do you measure worldwide technological innovation over, say, a decade, and then compare that with other decades? On the surface, one can say: electric light + automobile + telegraph + radio (inventions from 1880 - 1920) beat all the inventions from 1970 - 2010 (Internet, and, well, what else?)

Cowen also says: it's difficult to measure increases in human satisfaction ("welfare" is the economic term but some readers may take that to mean something else, so I'll say "human satisfaction" instead). Government outputs that increase human satisfaction are difficult to measure, so economists fall back to measuring the cost of the inputs instead. That leads to self-justified government programs: a 20-person department must be better than a 10-person department because it costs twice as much.

The Internet, the great invention of the past 30 years, poses a similar problem. The internet has taken out so many costs that it's hard to measure human satisfaction from nearly cost-free goods! For example, I bought a copy of "Up from Slavery" for $0.00 from amazon.com. I enjoyed reading it and it inspired me. But how can an economist measure how much better off I am? The Internet has created a mountain of unquantifiable consumer surplus.

If stagnation comes from low innovation, then how does one increase innovation? Cowen offers one proposal: offer more respect to scientists and engineers. Give less of your adoration to entertainers of various types and more of it to people actually improving the world. By itself, this isn't very actionable. However, Cowen points out that some cultures respect engineers more than other cultures, and he predicts that societies with such cultures are going to do better in the future.
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on April 21, 2017
This book summarizes the current thought of many economists about what is happening to the American, and for that matter, all of Western Civilization's economy. It is worthwhile to include in your reading the much more extensive discussion of this issue, as contained in Robert Gordon's, "The Rise and Fall of American Productivity." Cowen projects, but offers no evidence, that America will recover from this stagnation. Gordon suggests that it might be otherwise. At least, it may be decades before we will return to the growth surge that we and all of Western Civilization experienced in the thirty years after WWII. A similar argument is made by Thomas Picketty in this book, "Capital in the Twenty-first Century." This is a sobering thought for all political partisans that claim that they can resurrect GDPs of 4-5% per annum.
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on August 10, 2017
This short book (or long article) written in 2010 has held up extremely well and packs the most punch for its length of just about any other business or economics writing I can think of. Cowen tackles complex questions about economic growth, income and innovation in a clear, persuasive style using simple examples and images.

Some highlights were Cowen's discussion of why GDP growth is so hard to track and is often misleading, the explanation of why we spend too much on education and healthcare without sufficient results, and how stagnant economic growth is one of the main factors contributing to political dysfunction.

I also found the discussions of the internet and the financial crisis to be original and insightful. Cowen thinks the internet has the potential to make our lives much richer and more fun but without contributing much to jobs or income. He explains the financial crisis not so much as a real estate bubble as an epidemic of overly optimistic expectations of economic growth which pervaded all assets.

I suppose some would argue that the picture actually looks somewhat better in 2017 than Cowen predicts, now that unemployment is down, the market is at all-time high and numerous other indicators are looking up. We have avoided the much-predicted double dip crash or recession. I think looking at the whole picture, though, things like the opioid crisis and bitterness of the 2016 election and still unimpressive GDP and income suggest that the narrative is still very much intact.

I am looking forward to reading Cowen's follow-up books, Average is Over and the Complacent Class.
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Cowen's discussion of the technological plateau and move away from innovation in the productive economy is insightful at first. He is right that the 30 year cycle we saw with major innovations in most fields seemed to stop in the 1960s, and these cycles have shifted. He does mention as a off-hand aside that this was partly because of stolen land, and he does seem to talk about educational plateaus. He mentions India and China, and then things start to slide. For example, he seems to think marketizing schools would make them more proficient. I realize this is gospel in most George Mason economics circles, but there is actually no evidence for and plenty of evidence against it. See the competition in the for-profit (not merely private) sector of higher ed in the states--it is basically consists of things that are barely above diploma mills. Cowen might reply that this is due to the distorting factor of loans: then he should actually study China, Korea, and Latin America. There is a glut of for-profit private education there as well, and it exists without the government loan system in the US, so the market failures cannot be explained by rent-seeking behavior alone.

His answers are standard center-right economist answers even if he is much better at spotting the problems. He does not deny the centralization of wealth, nor is dishonest about tax breaks. It is sad that conservatism in the United States has come to those two talking points alone because otherwise it would be clear where Cowen's ideological presumptions lie. For example, he briefly says that the Reagan (or Volker) revolution set the US right, but he has already proved economic stagnation continued unabated since the 1960s forward. Both statements can't be truth. He is right about Keynesian retribution schemes being very limited in time frame (something that even Keynes's himself pointed out), and generally are only affective after massive destruction of capital (after World War 2), but doesn't seem to have an answer for why the austerity in Europe has not cleared out the "rot" and let to renewal in GDP in the EU outside of Germany and Nordic countries (who he makes a swipe at).

He is right that America is beyond the lowing hanging fruit, but does not seem to see that India and China's rapid industrialization is also in a similar pattern of development. It is easy to grow massively when you are establishing yourself and opening up new markets: declines in the rates of profits per unit don't kind in as quickly in those states and the need for extreme intellectual property to try to artificially force prices up through removal of competition isn't a problem at that stage either. This, however, is rooted in historical economics which is something the synchronic thinkers in the neo-classical school of economic do not admit. Cowen is not different here.

So while Cowen's diagnosis is in some ways dead-on: his prescription is more cliche from the Tom Friedman-style center-right school, and his optimism at the end may be a false note.
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on May 30, 2011
This is a very thought provoking essay. It is concise and well written. Its brevity is refreshing given how many books these days stretch 50 pages of information across 500 pages (e.g., T. Friedman.) The central thesis of the piece is simply that technological progress has slowed down so economic growth will slow as well. That thesis is rock solid but whether technological progress has slowed to the extent argued here is debatable. That question requires the expertise of an engineer or scientist but they don't seem to write books like this.

I would have rated this higher but there are a couple of big gaffs that I couldn't let go. First, Cowen argues that big government requires modern technology and that government by "ox-cart" can't work on a large scale. Given the fact that the Roman Empire lasted as long as it did and that it was as extensive, centralized and powerful as it was this supposed dependence of big government on technology is obviously false. Second, Cowen compares modern Singapore with Periclean Athens which is just absurd. The classical Athenian democracy (even in Pericles time) was remarkable for its dysfunction. The Athenians made so many bad decisions that they drove their brightest citizens to become very anti-democratic (e.g., Plato among many others.) How this remarkably dysfunctional democracy that repeatedly made disastrous decisions has anything to do with modern day Singapore is just beyond me. These two faults don't distract from Cowen's main point at all but that really makes them worse: Why are they in the essay at all? It demonstrates some sloppiness on Cowen's part and a complete ignorance of classical history (a period that should be of some interest to scholars of technology's effect on economic growth.)
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on April 21, 2011
I thought the first 2/3 of Cowen's short book was pretty good -- describing low-hanging fruit that the US has already plucked (and that our competitors are plucking now), and explaining "Why Did We Have Such a Big Financial Crisis?" ("We thought we were richer than we were.")

His last 1/3 -- "Can We Fix Things?" -- seems overly optimistic to me.

1) "The first favorable trend is the interest in science and engineering in India and China which will lead to more innovation here." I think this trend is much less beneficial for the US than it is for India & China.

2) "The second ... is that the Internet may do more for revenue generation in the future than it has done to date." Yes, but revenue at low margins. The Internet brings costs down but prices even more. Its greatest benefit will be offshore.

3) "Third, we now see a critical mass in the American electorate favoring ... greater quality and accountability to K-12 education." Agreed, but it will take 1-2 decades to match our competitors, even if we maintain focus.

4) "What else to do? Raise the social status of scientists." How? In the U.S. most media, politicians, CEOs and citizens themselves are unsupportive or even hostile. Unlikely here but happening offshore; this gap will widen.

5) "What else? We should have a greater awareness that there is a political malaise and we should not add to it." We should, but most media and politicians benefit from increased conflict, since most viewers/voters give more attention and ratings to conflict, not to tedious, detailed, boring, half-satisfying compromise. A change here requires a change in human nature and self-interest (very unlikely), or a change in political structure (also unlikely, though California's Top Two Primaries Act may help). Many competitors overseas have more effective political systems.

Conclusion: "In the meantime, we need to be prepared for a recession that could last longer than we are used to." I think he is admitting that his envisioned fixes, even if they do happen, will not help us for years.
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on November 11, 2012
My review is probably a little biased since I arrived at a similar conclusion about the state of economic development in the world a few years ago. Of course my conclusion was based on zero data, just a gut feeling, so seeing someone arguing for the same thesis, with data, may be influencing my review.

The thesis is basically that we are in a period of economic stagnation because there are no current sources of large economic and productivity boosts. Because of this, we should be prepared as a society for lower levels of economic growth than there has been in the past. The attractive part of the thesis for me is that the explanation for stagnation is not a right/left political issue, but is much more structural and fundamental. Attractive in the sense that we can stop blaming each other's political preferences for our economic woes.

But in another sense, it's much scarier than a political problem. If it were a political problem, one side winning would produce the desired outcome of economic growth. You can't really fight or plan for technological innovation, it happens on its own schedule. You can't spend your way into technological innovation or organize for technological innovation. In that sense it's much more pessimistic as there isn't something that can be done to fix the problem.
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on December 30, 2013
For full disclosure, I listened to a series of podcast episodes where I heard both the argument and the counter to the Great Stagnation prior to reading the ebook so I had some preconceived notions as to the value of the argument. However, I will say that there were some very interesting measures and theories which made the read valuable. In the end, I don't really buy into the notion that innovation has stalled, but that there are new measures for the value of innovation which are not accounted for in GDP.

I think Cowen does a great job of moving through the argument quickly and without oversimplification. I think his notion of government production being inflated in GDP was significant thus increasing the perceived growth in GDP was noteworthy. Over all, while I don't share his somewhat clouded perception of the current and future economy, his positions are though-provoking and the paper is timely. I recommend this digital book for anyone as the author is not overly technical and it makes for an easy read.
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