Tyler Cowen's Marginal Revolution is among the most-visited economics blogs, and his new e-book, The Great Stagnation, has been getting a lot of attention for its somewhat surprising and pessimistic conclusion that American economic advancement really began to slow in the early 1970s - and that we're in for a period of stagnant growth.
In this mini-Q&A (less than 300 words), Cowen responds to 2 questions from Ryan Streeter: what's the main takeaway policymakers should get from the book, and is there anything they can do?
RS: For the policymakers who have not read The Great Stagnation, what is the one big takeaway from the book they should know about?
Cowen: Right now American society is not nearly as innovative as we think. The rate of technological progress has been slowing down for decades, and we’re spending more in sectors, like health care and education, where more money does not automatically bring better results. In macroeconomic terms, the internet, for all its conveniences, has yet to pay off. We are mismeasuring value, or in other words, we are poorer than we think and the financial crisis of 2007-2009 was the first wake-up call in a series of more to come.
RS: You've said in the book that we are probably in for a long stretch of relative stagnation before the U.S. economy enjoys the kind of surge we experienced until the early 1970s. But is there anything policymakers can do to get us moving in the right direction?
Cowen: The coming fiscal crunch will be worse than most people think. Addressing Medicare and health care costs is absolutely essential and we must do it now. It is hard to control these costs by turning on a dime.
Policymakers should be aggressively pro-science in their attitudes and behavior. Science doesn’t play an important enough role in American public discourse, even though it is a major determinant of our living standards. Science had higher status in American society in the early 1960s than today, yet few people see this as a major problem.
Liability law, NIMBY, and overregulation slow down the rate of technological progress. We need reform in all those areas.
If you would like to hear more from Tyler on The Great Stagnation, watch this video interview that our friend Nick Schulz over at The American recently did with him.
"...its somewhat surprising and pessimistic conclusion that American economic advancement really began to slow in the early 1970s..."
To anyone that isn't steeped in neoliberal mythology, this is not surprising, and it is not news.
It's funny that the solution is investing in science. Government spending and science - they're the Republicans two favourite things, no?
Posted by: Ash Faulkner | February 28, 2011 at 06:23 AM