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Customer Review

on January 26, 2011
"The Great Stagnation" offers a very concise and well thought-out essay on the relationship between innovation and prosperity. The first chapter, which shows how median incomes have stagnated in recent years as the economy's "low hanging fruit" has gotten scarce is especially well done. The parts on health care and education are also very good.

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?
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