Stagnation? Google and the In Box say otherwise
This morning, NPR interviewed Tyler Cowen, author of the provocative new book The Great Stagnation. (Read an excerpt here.)
Cowen argues that by the 1970s, Americans had gobbled up all the nation’s “easy” prosperity. We’ve benefited from low-cost gains in education, natural resources extraction, energy and so on.
He thinks that era is over, that future gains will be harder to come by and less rapid; and he’s convinced that the current economic recession is evidence of that fact.
I think Cowen is wrong for a couple of big reasons, most of which center around the incredibly rapid development of medical and information technologies.
I’ll focus mostly on the latter.
In 1965 — just as the stagnation Cowen describes was supposedly settling in — the American Gordon Moore stumbled across a concept and an axiom that has come to define modern life.
Moore, one of the co-founders of Intel, noted that the basic computing power that could be engineered into an integrated circuit was doubling roughly every two years.
That astonishing logarithmic trend has continued throughout the post-War era, and it has revolutionized every aspect of our existences, from the doo-hickies that heal us, to the Twitter feeds that trigger and shape revolutions.
More than almost any other grand societal trend, the exponential growth in computing power an innovation has reinvented, well, us.
It gave rise to the new global economy, which cracked open markets, cultures, and political systems.
I’m able to work — and earn my livelihood — from my dining room table right now, thanks largely to Moore’s Law.
Yes, these trends have brought some serious challenges to American society. But they’ve also introduced unheard-of levels of efficiency, progress, convenience, and prosperity.
In the period from 1980 through 2007, GDP in the US grew from roughly $22,600 to $37,700 per person. That kind of 50% gain is certainly not stagnation.
(A thornier question, in my opinion, is the way our gains in prosperity are distributed.)
In the interview with NPR, Cowen acknowledged that the rise of the internet was a major breakthrough, but he argued that the on-line revolution hadn’t significantly benefited our economy.
But Google and Facebook are only small components of the IT world we now inhabit.
Without the data management systems that we now take for granted, modern agriculture (which has pushed down food prices) and modern retail (which has generated a buying-power surge for lower income Americans) would have been impossible.
It would also be nearly impossible to manage real-time trade with China and India.
Indeed, it’s hard to imagine a component of our economic lives that hasn’t been reshaped by technological advancements developed (in large measure) during the era Cowen defines as stagnant.
When I was born (in 1965) information was incredibly constricted, monopolized, difficult and expensive to access and process. Now it is ubiquitous, cheap and moves literally at the speed of light.
It’s also worth noting that in the half-century his book describes — the period after we had supposedly gobbled up our low-hanging fruit — we Americans expanded our average life expectancies by seven years.
That’s a fairly stunning 10% increase, one that has revolutionized in tangible ways our working lives, and our expectations for retirement.
During the period Cowen describes, we also raised education standards and opened new opportunities for tens of millions of women and minorities.
We’ve unleashed the creative and wealth generating potential of roughly half the population, to the degree that women now outnumber men in many of our universities.
Returns on these new investments and social innovations are sure to continue bearing economic fruit as we move forward.
None of which is to suggest that we don’t have a lot of questions that need answering.
Our trade policies, our approach to education, our ideas about how America’s remarkable prosperity should be distributed — those are all worthy of debate.
But assuming that we’re adrift in a period of stagnation is the wrong place to start that conversation.
Technology has improved our productivity no doubt. I recall reading Popular Science and Popular Mechanics magazine articles in the late ’50s and early ’60s about the coming technological revolution and how workers would be freed from drudge work. The glowing prediction was for a lot of leisure time. What they didn’t say was that it would be called ‘unemployment’.
Your observation that the thorny problem is distribution of the benefits for the technological revolution is dead on. We have carried over the old economic model into the brave new world and the result is heading rapidly toward a plutocracy. Until we can find a way to more fairly share the benefits of the new technology it may be as much a curse as a boon.
I think the guys point though is that we can no longer assume large GDP growth in the US. Not that we will not have growth or do well, just that we have to stop seeing ourselves as the up an coming economy that creates large amounts of growth.
Lets face it the Internet is still largely entertainment, gadgets are still gadgets. The fact is the car I drive is the same basic internal combustion technology as the one driven by my grandfather, the plumbing in my home is the same the electrical grid is the same, computers still run on fire generated at coal burning plants. The large things in society have not changed that much compared to a guy in 1880 who rode horse and went to the bathroom outside and worked on a farm. Life in 1880 is MUCH different from 1940, 1940 is not that much different than 2010 in how we lead our day to day lives in comparison.
Mervel –
One of the things that Cowen talked about this morning was standing in his kitchen and thinking, ‘You know, this isn’t all that different from the 1950s,’ or a point to that effect.
But of course, that’s hugely weirdly wildly wrong. In the 1950s, a woman would have been anchored in that kitchen.
Ask your grandmom if life hasn’t changed that much from 1940 through 2010.
As late as the 1970s, Americans would have been spending 15% of their disposable income on the food in that kitchen.
That’s now dropped to just 9.8% — a huge decrease — and half of our food budget now goes to restaurants.
Those are big changes. Maybe not AS big as the transition from 1880 to 1940, but also not suggestive of stagnation…
–Brian, NCPR
I listened to that interview too. Part of his point was that median incomes have actually declined (in the US) over the past 30 years. Part of the problem is that the technological gains have permitted us to make use of very cheap labor in very distant parts of the world. Thats great for them, but only great for those of us who can afford to buy the stuff they make. And the more expensive labor here in the US – the kinds of jobs you would want your kids to get – is pretty scarce. Those high-tech companies dont use many engineers compared to the manufacturing companies like the auto industry.
The other thing is that some of the great innovations of the past 20 years have been dead-ends. All those great financial products that we came up with – for example.
Allow me to be the curmudgeon here.
Cowen is right. Not much of importance has changed since the 1950’s except for the Internet.
Mostly what we have seen is tweaking of what was. Cars still have wheels and airplanes still have wings.
Medical technology? Oh, yeah that’s great if you can afford it. It’s also great if you don’t mind living long and looking like something that should be in the grave, and have everyone hating you because you cost too much and no longer are a productive member of society – except for keeping the doctors, hospitals and drug companies in business.
Information technology? Well, he did mention the Internet but sometimes you can’t find the information you want because all of the information gets in the way. It’s like trudging through 4 feet of snow without snowshoes. The situation reminds me a bit of Raiders of the Lost Ark movie where it ends up in a huge warehouse never to be seen again.
We built a lot of good roads and now we don’t have the money to maintain them. We made it to the Moon and seem to have stopped there.
We really haven’t won a war since 1945.
The average individual has more junk (toys for adults) than their parents ever had and are in debt because of it – and I doubt they are happy for it.
Efficiency? Sure but efficiency in the work place means business needs fewer workers to get the job done. Great for business but not always so great for people looking for work.
More women in the workplace and college? That is a mixed blessing. Nothing against women in the workplace or college but to what extent is this due to the need for a two paycheck family when one paycheck used to be enough to get by and even save some money. And what good is a college education if you can’t find work or need to take a job that doesn’t require a college education? And by the way, why are there so many jobs that require a college degree when the job can easily be learned on the job if you know how to read, write, add, subtract, multiply and divide?
Which brings us to the current state of education. It costs more and delivers less.
And by the way again. Women were not anchored in the kitchens of the 1950’s. If a man or woman knows how to cook, it doesn’t take all that long to make a meal from scratch. Most of the time spent is the result of the food doing its own thing in the oven or on the stove.
Indoor plumbing is nice but we’ve had that for awhile. It was also good that the automobile came along and replaced the horse because just imagine what it would be like if we had to compete with horses for food and a clean place to walk.
Brian,
I’m with Bullard and Pete. You’re right about the economic power unleashed by desegregation and women’s rights, but the rapid advances in technology have taken away as much as they’ve given us, because automation killed jobs in the great middle. And the fact that you’re working from your kitchen table probably means you’re working more hours, likely for a lower real wage than your earlier generational counterpart made in 1965. And there are really no guarantees any more, not even a good education.
This Krugman column is informative: http://www.nytimes.com/2011/03/07/opinion/07krugman.html?smid=tw-NytimesKrugman&seid=auto
Brian;
Yeah social changes have been more dramatic in some ways then technology.
As a side note and slightly relevant, I knew my Great-Grandfather who lived to be one hundred and one. He was born in 1879 and lived in Dakota Territory, he still vividly remembered Wounded Knee as he lived in that part of Western South Dakota and was 11 when the massacre happened. The changes that he saw between 1879 and 1980 were astounding socially and technologically. I am not sure the same can be said between 1940 and 2010?
I think part of it may be the disappointment many of us feels who saw men walking on the moon in 1969, who saw the introduction of the SR-71 the fastest atmospheric airplane even today at Mach 3 + which was introduced sometime in the late 1950’s. Today we do not have the rocket capability to go to the moon; we can’t do what we did in 1969. So we wonder, what happened? I mean the internet is fine and fun, and it is fun to download music, but come on!
I have to agree with the other guys Brian M., what we’ve gained came with a huge price. Yeah, we can all communicate and find in seconds what used to take days or weeks of searching, writing letters requesting information, sending that order off to Sears or Montgomery Wards. We take over nighting a Fed Ex package as normal. We have relatively cheap foods and cars that are far safer. But- those cars are not as efficient on gas as cars from the early 80s and you can’t “fix” them, you are forced to replace parts. And that cheap food? We have disease we’ve never dealt with before, we have 3 mega farms where we used to have 30 small family farms. And, most distressing of all, we have an Autism rate that’s climb would be considered epidemic if it were an infection or virus. Autism didn;t just fall out of the sky, it’s most likely in something or a combination of some things we eat or are exposed to, something all this progress gave us. Same with many types of cancer. Yes, we don’t fear polio or measles like we did once, but now we fear cancers and infections we never saw 75 years ago. And what about the waste of fuel Fed Exing that package takes? Does convenience out weigh those costs?
As for the future, I don’t know. My gut tells me Cowen is probably right at least in a sense. Brian M is right to an extent too, technology will provide some answers and growth. But will it solve the problems a lack of cheap fuel and readily available raw materials give us? I dunno. We can hope I guess. I think there’s a portion of this issue that is ignored and that’s gov’ts role in helping or hindering growth. My views on this are fairly well known here. I leave it to others to consider it at least the possibility that taxes, special interests, subsidies and limits can affect growth.
Apparently Mr. Cowen doesn’t own a microwave oven.
Maybe the internet is an entertainment for some, but it is an essential tool for my work. GPS? ditto. My students coordinate their field work with cell phones – no need for walkietalkies. My Prius does not run on a 1950’s internal combustion engine.
The apparent stagnation has little to do with a plateau in technology. I suspect it is due to driving the fruits of that technology gains toward military dominance. Military expenditures have risen until now we spend more than the rest of the globe combines. Yes, including China and Russia. Military dominance comes at a price.
Tom,
Microwave ovens are powered by burning a big fire at a coal plant, the same way that electricity was generated 60 years ago the same goes for your prius which essentially is powered by fire.
The other things are nice and are part of our consumption economy. But let’s face it compared to the invention of airplanes, cars and space ships they don’t really hold up very well as the same type of radical change. Indeed Apple manufactures its products in China (just ask John McCain).
However I agree with you that our military is sucking a bunch of resources both creative and fiscal.
The Prius is great, but it doesn’t get what the 1980 Ford Fiesta got to the gallon. And it’s a lot worse in the snow.
I think it is great too I think all those things are great. But think about it, a car that runs on a battery, is that groundbreaking? Is having something that runs on a battery groundbreaking in the same way as an airplane was when it was invented down there in North Carolina (or France )?
Now cold fusion, inter stellar space travel, living on the moon, this is what I think we need to move forward in the same way; that level of advances.
The last space shuttle was taking up a storage bin for the space station to continue to circle the globe in orbit, the Soviets circled the globe 60 years ago.
“I think Cowen is wrong for a couple of big reasons, most of which center around the incredibly rapid development of medical and information technologies.”
Interesting you mention medical technology. In the early to mid twentieth centuries we saw development of numerous vaccines, including measles, mumps, polio, etc. What cures have come down the pipeline lately? Sure they can keep you alive as a vegetable for years, but who wants to live like that?
oa, thanks for the Paul Krugman link.
Mervel, I too have been disappointed with NASA for years. I guess it no longer has the right stuff.
Electric cars? Ever notice how no one ever tells you how much your electric bill will go up and what the actual cost is per mile?
“future gains will be harder to come by and less rapid”
While technology is rapidly increasing, and will continue to do so in part thanks to Moore’s Law (which is not really a law…) – that does not mean that economic prosperity due to it will be easy or rapid for Americans.
It is important not to confuse the two.
Part of the problem is that technological improvements are not producing the types of “low hanging fruits” Cowen talks about. And that is in part due to the fact that we now have a global economy – an opportunity for the US is now also a low fruit for India, or China, etc.
Boy, this is a tough crowd.
Some technological dreams have not held up: we don’t have flying cars or limitless, safe, cheap fusion energy. Cancer hasn’t been ‘cured’. It has proven to be simply too expensive and dangerous to keep people in space.
Yes, planes still have wings, cars still have internal combustion engines – just like they did a century ago. And wheels haven’t fundamentally changed in 10,000 years – they are still round.
And yet, we have sequenced the entire human genome, and many other species too. This was literally unimaginable in the mid 1980s. Using the same PCR and sequencing technology, USDA can pinpoint the field that is the source of pathogenic E. coli in produce. The discoveries in the last two decades in biotechnology are revolutionary – every bit as much as the invention of the automobile.
And the combined innovation of cheap, powerful computers and the internet are providing access to information that was also unimaginable two decades ago. Soon we will, quite literally, be able to access from our local library or home practically every (non copywrited) book ever published since the beginning of printing. Scientific publishers and granting agencies are starting to require all data from published or funded research be digitally archived in a way that any user can access it – this will greatly increase the efficiency and productivity of research. This is already true in the genetics community.
We have stagnated in human space flight, but not in unmanned space flight. What we have learned from unmanned space flight is amazing – remember the Mars rover? Or the Hubble telescope?
The point is, we are in the middle of an innovation revolution. Because we are in the middle of it, we don’t see the change. But it is here.
The singularity is upon us!
Or at least the rich people. The rest of us will have to make do with their scraps. At least they’re re-releasing the Fiesta!
http://www.bing.com/autos/specs/search?q=2011+Ford+Fiesta+specs&FORM=DTPAUA&qpvt=Ford+Fiesta
his (Cowen) argument was that we have harvested the low hanging fruit. This seems to be true in many fields. Health care for example. The big advances were vaccines, antibiotics, and plumbing. The diseases remaining are much tougher. Im not sure I agree with Bret that we have lots of new diseases, but the ones that we have left are the ones that cant be cured easily. Bret mentions cancer and autism, but there are plenty of others – HIV and all the genetic diseases, not to mention a whole host of mental illnesses.
Think I’ll go back to phahn50 on this new computer
I think tom makes good points.
But I remember the Mars Rover and the Hubble they were great, how have those translated into economic GDP growth in the US beyond the direct expenditures and jobs to put those platforms out there?
Honestly I think part of the problem is that there is a difference between scientists talking to one another in journals and real technological innovation that sparks broad economic growth. Faster smaller computing is still computing the platforms are just better.
It really was low hanging fruit in the past as this guy points out, for example when we learned to fly we pretty quickly visualized hey we can use this to get from point a to point b. If we map the humane Genome, well I don’t know I am sure there are medical breakthroughs possible but they are not as easily obtained and how do they translate into increased economic growth. The discoveries in biotechnology are interesting, however they have not led to GDP growth or increased the life expectancy in the United States.
I don’t mean to be a downer I think we are having major innovation in these areas, but I don’t see it having the same wide impacts as 90 years ago.
My hat is off to Tom L for pointing out some of the impressive advances that have been made. But as others have pointed out, how does that translate into increased growth for the common man? We just had an article here that told the tale of a man and his GPS. The fool drove his car (a Prius??) down a SNOWMOBILE trail! By that I’d way technology has wiped out common sense.
If I may abandon my normal cynicism and skepticism for a moment, IMO the growth we seek will come from an reinvigorated private sector on smaller scales than we’re sued to thinking of, if it happens at all. Time will tell, but the days of “The One Big Project” are pretty much on this planet.
Bret – The way it seems to work best is that the government funds small science projects that collectively lead somewhere that is exploited by industry. Then we get the ipads. But without the government support for the science, it wouldnt happen.
“The discoveries in biotechnology are interesting, however they have not led to GDP growth or increased the life expectancy in the United States. ”
Maybe you ought to ask Monsanto if biotechnology has helped their business. Also, you can find all sorts of successes in biotechnology that have increased the life expectancy in the USA and elsewhere. Anybody here listen to how scientists are growing ureters and bladders to repair urinary systems? Heard it on NPR this morning.
We are in the middle of a technological revolution in obtaining oil from sunlight and carbon dioxide, mainly due to biotechnology.
Wages continue to be paid at 1973 levels and in fact have decreased in the last ten years.
That’s economic stagnation, no matter what kind of spin you put on it.
Science. I love science but……
Ever notice how when you watch a SciFi movie you are presented with a future you would rather not have?
Do the SciFi characters seem happy with their lot? Have they learned how to make love, not war? Does the planet look like it’s in good shape?
The question is not can we do this, make this or cure that. The question is to what end?
And yes, jobs, jobs that pay a living wage.
This is a bit off subject but….
More and more I hear politicians and others asking for more volunteers for this and that. I have nothing against volunteers or volunteering but I do ask why the big push for it? Locally, volunteers are extremely important for fire and ambulance departments but we should always realize that if a job is worth doing, it is worth paying someone to do the job.
One other thing, again with a connection to science. It’s called cost.
I really wish when it comes to scientific and technological breakthroughs in medicine, the price was always clearly specified.
We have this very expensive health care system because “when it comes to your health, money is no object” except for the doctors, hospitals and drug companies. This attitude has gotten us to where we are.
We have been blinded to the cost by health insurance. We only see the cost when the health insurance doesn’t cover it or we don’t have health insurance to begin with.
I think we need to know what the cost is and not just the portion we need to pay when the insurance doesn’t cover it or ceases to exist. Would we then become our own private death panel? How much would you pay to cling one more day to a degraded life of pain and suffering?
“The question is not can we do this, make this or cure that. The question is to what end?”
Well, in the case of artifically grown ureters and bladders, it’s so you can urinate normally rather than through a catheter. Pretty good “end” in my opinion.
Unfortunately, in the case of Monsanto, it’s so they can patent roundup resistant seeds and make huge profits cornering the market. Less easy to defend being the socialist that I am.
PNElba,
But at what cost?
Here’s a thought: Pro_Death
No, this is not about the Death Penalty but is a play on words.
Abortion is closer to what I am thinking about.
We have our Pro-Life people and we have our Pro-Choice people. Whose side you might be on is not of my interest. Nor am I thinking about assisted suicide, although that is closer to what I would like to write about here.
I suppose under normal circumstances on a day to day basis we all like to live and wish to continue to do so. But have you ever thought about how death is an important component of life, how for there to be life there must also be death?
A simple example of what I mean is food. You need to eat in order to live. Everything you eat is something that once lived. This includes plants as well as animals.
If no one died, how long would it be before the planet was overcrowded to the point where there was no room for plants and other animals to feed us? How long would it be before the planet was so trashed that we decided life wasn’t worth living?
Life is valuable only because of death. Death clears out the old to make way for the new.
Without death, we would need to stop procreating. Without death, everything would become older and older and older.
Yes, do live. But do understand death is not the enemy of life. It is but life’s partner in the creation of new life.
Holy sheep dip Batman!!!, PNelba and I actually agree on something- Monsanto. Not necessarily because of the profit, but because they are using politicians and friendly courts to move toward basically outlawing non-Monsanto ( or whomever) seed. This is HUGE, it’s a problem and one of the areas that I feel regulation belongs. I’m all for good sees, adapted seed, seed that will do well in less than ideal conditions. I’m also for heirloom varieties that were bred to achieve some of those same goals over generations, not by manipulating their gene code.
Phan- to an extent I agree, but whenever we depend on gov’t it comes with it’s own costs. Sometimes it’s worth it, most times it’s not.
“On a day to day basis we all like to live and wish to continue to do so.”
Speak for yourself.
oa,
I always do. Not a day goes by when I don’t think how it could be the last day of my life.
I live up here because I like the seasons, all of them and how one dies and gives birth to the next.
By the way, I am over 65, work every day and go out into the woods alone or with friends whenever I can.
“Maybe you ought to ask Monsanto if biotechnology has helped their business. Also, you can find all sorts of successes in biotechnology that have increased the life expectancy in the USA and elsewhere. Anybody here listen to how scientists are growing ureters and bladders to repair urinary systems? Heard it on NPR this morning.”
What is good for Monsanto (an evil company if I ever had to label one), is not necessarily good for the US or our GDP growth or our life span.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2102rank.html
We rate right up there with Portugal for life span.
When we allow the Pentagon, and it’s Russian and Chinese counterparts to run things, we allow far to much of our wealth and power to be squandered. I wonder what the global cost of the cold war was. For forty years, we plowed the entire wealth of the superpowers into weapons systems that were never used. We could have built sidewalks to the moon!
Now we fight the endless war against terrorism. Endless because as long as there is tremendous economic hardship, as long as there is hunger, as long as there is super-unemployment, and as long as the super rich get to call the shots…there will be an endless stream of…angry young men..to carry on.