Michael On Everything Else

The Great Stagnation by Tyler Cowen

Mr. Cowen is one of my new favorite bloggers. His blog is MarginalRevolution.com and one of the great things about his writing is it’s hard to pin down his ideology, i.e., he’s relatively non-partisan.

I just finished his book The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, a penguin eSpecial from Dutton. It’s a good read with a lot of insight and take-aways. Below are a few of my clippings and notes:

Some of the symptoms (each line is a separate, unique quote):

we face a long-run fiscal crisis, driven by the increasing cost of entitlements, our heavy reliance on debt, and our willingness to let matters slide rather than face up to paying the bills.

Political discourse and behavior have become increasingly polarized, and what I like to call the “honest middle” cannot be heard above the din.

All of these problems have a single, littlenoticed root cause: We have been living off low-hanging fruit for at least three hundred years. We have built social and economic institutions on the expectation of a lot of low-hanging fruit, but that fruit is mostly gone.

The United States became the wealthiest country in the world relatively quickly, and probably it held this designation well before the close of the eighteenth century. So much fertile land coupled with a relatively high degree of social freedom explains much of this transformation.

About one-third of the college students today will drop out…

Educating many of these students is possible, it is desirable, and we should do more of it, but it is not like grabbing low-hanging fruit. It’s a long, tough slog with difficult obstacles along the way and highly uncertain returns.

Over time, an increasing percentage of what we spend on government is spent on optional rather than core services because the core services tend to have been around longer. Another way of putting it is to say that the marginal value of added government, even if positive, falls as government grows larger. This statement is not antigovernment; it’s just common sense.

Even if you think everything our government does is awesome, successive increments of government are still on average less valuable than the core functions.

We’re facing a fundamental skills mismatch, and the U.S. labor market is increasingly divided into a group that can keep up with technical work and a group that can’t.

Some of the fixes:

Educating many of these students is possible, it is desirable, and we should do more of it, but it is not like grabbing low-hanging fruit. It’s a long, tough slog with difficult obstacles along the way and highly uncertain returns.

The more that women and African Americans move into higher-productivity jobs, the more the economy benefits.

but,

When it comes to boosting the rate of economic growth by discarding discrimination, many of the most important advances lie behind us.

Have you ever wondered why so many developing economies—the successful ones, I mean—rise to prosperity through exports and tradable goods? There are a few reasons for this, but one is that the external world market provides a real measure of value.

If you are exporting successfully, it’s not based on privilege, connections, corruption, or fakery. Someone who has no stake in your country and no concern for your welfare is spending his or her own money to buy your product.

The successful East Asian economies, including Japan, Korea, Taiwan, and Singapore, understand this point well.

China moved from a totalitarian mess to the world’s second-largest economy, based on partially free (if corrupt) markets.

If fewer Americans make cheap plastic toys, maybe more Americans can search for technological breakthroughs or in some broader way contribute to that enterprise.

The internet makes scientific learning and communication a lot easier, and it increases the productivity of scientists in out-of-the-way places. It makes science more a meritocracy and limits the privileged positions of insiders.

I have a lot more clippings—there was so much I wanted to retain. I enjoyed the book and plan to re-read it soon.


@book{cowen2011,
   Author = {Tyler Cowen},
   Title = {The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will( Eventually) Feel Better},
   Publisher = {Dutton},
   Year = {2011},
   ISBN = {0525952713}
 }