The Great Stagnation in Brief

From The Economist blog;

Mr Cowen's book can be very briefly (too briefly) summarised as follows. The rich world faces two problems. The first is that a decline in innovation has reduced the growth rate of output and median incomes, making it hard for rich countries to meat obligations accepted when expectations were higher. The second is that a lot of recent innovation is occuring in places like the internet, where new products are cheap or free and create very few jobs.

This is Tyler Cowen himself summarising the major theme of the book;

Beyond the income slowdown, there is a further worry: an increasing share of the economy consists of education and health care. That trend is not necessarily bad, but in these two areas, results are often hard to measure. If health care costs rise 6 percent in a year, for example, that counts as higher G.D.P., but how much is our health actually improving? It’s an open question. America spends more on health care than other countries, but those expenditures don’t seem to produce uniformly superior results. And while there have certainly been gains in medical treatment, we may be overvaluing them. In education, we are spending more each year, but test scores have stagnated for decades, graduation rates are down and America’s worst schools are disasters.

There is an even broader problem. When it comes to measuring national income, we’re generally valuing expenditures at cost, rather than tracking productivity in terms of results. In other words, our statistics may be deceiving us — by accepting, say, our health care and educational expenditures at face value. This theme has been emphasized by the PayPal co-founder Peter Thiel in his public talks and by the economist Michael Mandel in his writings...

Science should be encouraged with subsidies for basic research, as well as private charity, educational reform, a business culture geared toward commercializing inventions, and greater public appreciation for the scientific endeavor. A lighter legal and regulatory hand could ease the path of future innovations.

The Great Stagnation on Kindle

Yes, I agree with Kevin Drum;

The problem with this is that the Kindle sucks at rendering tables and charts. The screen cap on the right, for example, shows a chart from Tyler's book. As Kindle charts go, it's actually not too bad. But what's on the X-axis? It appears to start with 1455, and obviously the numbers go up. I get the idea. But the actual details are completely lost. Later in the book there's another table so badly rendered that I can't make it out at all.

In the case of "The Great Stagnation," this isn't too big a deal. I know what the chart above is getting at, and the table at the end is one I've seen before. But other nonfiction books don't fare so well. Gregory Clark's Farewell to Alms, for example, relies heavily on lots and lots of fairly complex charts and tables, and they're rendered so badly (unreadable graphs, table columns that don't line up, etc.) and placed so haphazardly that they made the book almost impossible to absorb properly. To this day, I'm not sure if my disagreements with his thesis are real, or mere artifacts of the fact that the e-version of the book was really hard to follow. In any case, that was the book that made me give up on the Kindle entirely for nonfiction. Until now.

Though the Kindle sucks in many ways, it is still a great way to get books for someone in a poor developing country.

Book Forum- The Great Stagnation

Tyler Cowen's The Great Stagnation;

I’m also persuaded by the median income numbers because they are supported by related measurements of other magnitudes. For example, another way to study economic growth is to look not at median income but at national income, gdp, or gross domestic product, the total production of goods and services. Charles I. Jones, an economist at Stanford University, has “disassembled” American economic growth into component parts, such as increases in capital investment, increases in work hours, increases in research and development, and other factors. Looking at 1950–1993, he found that 80 percent of the growth from that period came from the application of previously discovered ideas, combined with heavy additional investment in education and research, in a manner that cannot be easily repeated for the future. In other words, we’ve been riding off the past. Even more worryingly, he finds that now that we are done exhausting this accumulated stock of benefits, we are discovering new ideas at a speed that will drive a future growth rate of less than one-third of a percent (that’s a rough estimate, not an exact one, but it is consistent with the basic message here). It could be worse yet if the idea-generating countries continue to lose population, as we are seeing in Western Europe and Japan.

We will be discussing about the book for the next few weeks.