Idle, belated thoughts on 'The Great Stagnation'
The Internet is great, but it’s no telegraph or automobile.
That’s one of the key takeaways from economist Tyler Cowen’s “The Great Stagnation,” which to my great embarrassment I only got around to reading today, more than two years after he first published it. I’ve read Cowen’s blog, Marginal Revolution, since before then, but never plopped down the $4 to buy the e-book — not much longer than a long-form magazine article, I read it in just over an hour.
Cowen sets out to explain the last five years, and the last 40 — the sudden recession the world has not yet fully emerged from, and decades prior to that of slow, fitful, partially illusory economic progress.
The two are largely one and the same, Cowen diagnoses — a reflection of a society that has (with one key exception) largely run out of big new ideas but doesn’t realize it. The lack of ideas has slowed the economy, the self-delusion breeds bubbles and crashes.
His chief concept is that of “low-hanging fruit” — ideas, innovations and changes that produce a lot of economic bang for relatively little effort. For example, taking a largely uneducated population and sending everyone to high school and the best to college produces huge dividends. That’s low-hanging fruit. Trying to find a way to make existing schools five percent more effective is not low-hanging — it has relatively high costs compared to the payoff. Going from no car to owning a car transforms one’s life; going from the kind of cars they made in 1950 to the kind of cars they make in 2010 doesn’t. That’s not to say those more incremental improvements aren’t worth it, but they’re not the kind of changes that produce economic booms or transforms the economy.
America and the West has largely picked the low-hanging fruit of the Industrial Revolution, Cowen says. He breaks out charts to demonstrate it, charts of stagnating family incomes, slowing productivity and falling patent counts. Until we find more low-hanging fruit, society might just have to lower its sights and accept that the good old days are over.
The elephant in the room, of course, is the Internet and computer power — the single greatest invention of the past half century. Cowen acknowledges this, and tries to argue why as impactful as the computing age has become, it hasn’t led to low-hanging fruits for society at large:
As of yet, the Internet just hasn’t made that much money. Some computer companies have made a great deal of money, of course. But “relative to how much it shapes our lives and thoughts, the revenue component of the internet is comparatively small.”
Not everyone has benefitted from the Internet in the way that plumbing or education helped everyone. Anyone can find the Internet useful for entertainment, but Cowen says its value as a productive tool flows primarily to an intellectual elite, a small subset of knowledge workers with the “cognitive abilities to exploit” it.
But perhaps the Internet just hasn’t yet fully come of age. One of the more interesting observations in the book is the comparison to the heydey of the Industrial Revolution in the 19th Century. Then, Cowen notes, many of the biggest advances in science and technology could be made by clever amateurs, self-taught dilettantes with an idea or good luck. Today, it’s trained specialists with years of advanced training who make advances in most fields. The exception is the Internet — people like Mark Zuckerberg and Steve Jobs were amateurs when they made their breakthroughs. That suggests a field that is still ripe for advancements and could lift society out of its Great Stagnation and into a new boom.
Until then, however, Cowen suggests we should recognize that “relatively slow rates of technological progress will be with us for at least a few more years, possibly much longer.” The biggest problems with moving slowly can come when you think you’re moving quickly.