Tyler Cowen has given us a provocative and highly controversial assessment of the U.S. economy — and it’s an e-book.
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Finally, there are reasons to think that Cowen too quickly dismisses the potential economic impact of the computer and cell phone revolutions. These innovations have already led to impressive improvements in productivity and communication, while permitting people to work from home, in small business settings, and in highly skilled occupations. Some of these technologies are spreading around the world more rapidly than many of the innovations of the past. There are thousands and perhaps millions of people around the world who do not have access to indoor plumbing or higher education but are walking around with cell phones. It is still early days for some of these technologies, and we do not yet know where they may eventually lead. It is, moreover, a good and not a bad thing that companies like Google, Facebook, and Twitter can carry on their operations with modest investments in labor so that available manpower can be allocated to other uses. Do we really want Google or Microsoft to operate like the industrial behemoths of the past? It is in the nature of advancing economies to move away from enterprises like General Motors and toward smaller and more specialized firms that employ highly educated workers and exploit new technologies.
WHETHER COWEN is right or wrong about “the great stagnation,” he has at least placed a critical issue on the table for national discussion. The American experiment has always depended upon economic growth as the main pathway to individual satisfaction and as a solvent for political discord. After the close of the frontier in the late 1800s, we soon found new avenues of progress in the amazing technological breakthroughs that Cowen cites. What will be the sources of growth in the 21st century?
On one critical point, however, Cowen is right on the money. We are not as wealthy as we think we are. As we eat our seed corn without replenishing it, we are bound to see our living standards deteriorate and our political conflicts escalate. The Great Stagnation is an important and impressive book, and a book of the best kind — one that makes us think about current ills even when we may not agree with its diagnosis.