February 2, 2011

The Great Stagnation

Tyler Cowen 
To be honest, I don’t usually read books on economics, but Tyler Cowen is one of the few economists whose … blog posts I read (or try to read!) quite regularly, in fact, he also runs, along with Alex Tabarrok, Marginal Revolution, a famous economics blog. Yet, despite my own limitations, this post is about a book on economics I have only just started reading, as suggested by my Italian economics guru, Oscar Giannino.

The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better is a short take on the US’s recent economic trajectory and was released only in electronic format in January 2011. The book’s central issue is: Why American median wages have risen only slowly since the 1970s, and why this multi-decade stagnation is not yet over? This, according to Cowen, has

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.

In a figurative sense, he says elsewhere,

the American economy has enjoyed lots of low-hanging fruit since at least the seventeenth century, whether it be free land, lots of immigrant labor, or powerful new technologies. Yet during the last forty years, that low-hanging fruit started disappearing, and we started pretending it was still there. We have failed to recognize that we are at a technological plateau and the trees are more bare than we would like to think. That’s it. That is what has gone wrong.

The problem, of course, won’t be solved overnight, but in Cowen’s opinion there are reasons to be optimistic: Americans simply have to recognize the underlying causes of their past prosperity—low hanging fruit—and how they will come upon more of it.

This book is about America, but it is also about Europe.

For those who don’t know him, Tyler Cowen is Holbert C. Harris Professor of Economics at George Mason University and a columnist for The New York Times and Slate.

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