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The Great Stagnation: How America Ate All the Low-hanging Fruit of Modern History, Got Sick, and Will Eventually Feel Better

The Great Stagnation: How America Ate All the Low-hanging Fruit of Modern History, Got Sick, and Will Eventually Feel Better

The Great Stagnation: How America Ate All the Low-hanging Fruit of Modern History, Got Sick, and Will Eventually Feel Better

3.5/5 (14 ratings)
2 hours
Jun 30, 2011


America has been through the biggest financial crisis since the great Depression, unemployment numbers are frightening, median wages have been flat since the 1970s, and it is common to expect that things will get worse before they get better. Certainly, the multidecade stagnation is not yet over. How will we get out of this mess? One political party tries to increase government spending even when we have no good plan for paying for ballooning programs like Medicare and Social Security. The other party seems to think tax cuts will raise revenue and has a record of creating bigger fiscal disasters than the first. Where does this madness come from?

As Cowen argues, our economy has enjoyed low-hanging fruit since the seventeenth century: free land, immigrant labor, and powerful new technologies. But during the last forty years, the 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. The fruit trees are barer than we want to believe. That's it. That is what has gone wrong and that is why our politics is crazy.

Cowen reveals the underlying causes of our past prosperity and how we will generate it again. This is a passionate call for a new respect of scientific innovations that benefit not only the powerful elites, but humanity as a whole.
Jun 30, 2011

About the author

Tyler Cowen (Ph.D.) holds the Holbert C. Harris chair in economics at George Mason University. He is the author of Discover Your Inner Economist (2007), Create Your Own Economy (2009), the New York Times bestseller The Great Stagnation (2011), An Economist Get Lunch (2012), Average is Over (2013), and a number of academic books. He writes the most read economics blog worldwide, He has written regularly for The New York Times and contributes to a wide number of newspapers and periodicals.

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  • (3/5)
    This is a long essay about what Tyler Cowen considers to be the real roots of our current economic and political frustrations: a stagnation in technological advances that started around 1970. This sounds counter-intuitive, but Cowen makes a good case for his approach.

    Up until that point, America always had a great deal of what Cowen refers to as "low-hanging fruit": first, and for a very long time, land so abundant it was practically free. Europeans could come to America, stake their claim, work hard, and be substantially better off than they'd been in Europe. Next, the enormous technological advances of the 19th and first half of the 20th century--steam engines, trains, the telegraph, electricity, the telephone, the car, the airplane. Thirdly, large numbers of smart, uneducated people who could be educated and add tremendously to productivity. Technological advances and the expansion of education continued to make huge differences in the lives of nearly everyone, raising the standard of living and the available wealth dramatically in each generation.

    But by the late sixties, there were fewer opportunities to continue making those dramatic advances. Most Americans are now being educated, and the gains to be made are incremental gains amongst the most challenged learners--students with language barriers, or learning disabilities, or who are from families that are economically disadvantaged, or broken or disrupted in ways that make the parents less available or less able to give the students a stable basis. Overcoming those obstacles and educating these students is important and will benefit the economy as a whole as well as the individuals affected--but not nearly as dramatically as previous, more general advances in education. Technology also has had mostly incremental gains--better cars or better planes, medical gains now concentrated in care for the elderly and other marginal-gain areas. We'll all be glad for those advances when we are old, and they're important, but, again, not making dramatic changes in most people's everyday lives. There's no room for the dramatic advances in medicine and hygiene that took place through the first half of the 20th century.

    Moreover, the largest parts of our economy now are government expenditures, medicine, and education, and two of the three should be very dynamic parts of our modern economy. They are, unfortunately, areas where real value, quality, and productivity are hard to measure effectively, and the market forces that control food prices or electronics prices simply aren't effective because of this.

    As a result of all these trends, we have slow or stagnant growth, and a political system hampered by the frustrations of a population that is barely keeping even rather than experiencing the steadily rising standard of living of their parents and grandparents.

    The one exception to this general picture of technological stagnation is the internet. Cowen discusses with great enthusiasm the advances connected to the internet, the ways in which they have dramatically changed and enhanced the lives of much of the population. By way of the internet, for the cost of a connection and the minor cost of electricity, we have access to information, education, entertainment, and contacts and friendships all over the world. It gives us access to opportunities to be happier, smarter, more fulfilled, without expenses we can't afford in the midst of our Great Stagnation.

    And that in turn means that, while easing the pain of the economic slowdown, the internet also paradoxically makes it worse, because we're not spending the money to generate the more externally productive economic activity that's a vital part of reviving the economy.

    All this sounds pretty grim, but in fact Cowen sees real prospects for a path out of our stagnation, for the creation of new "low-hanging fruit" that will make possible a return to dynamic growth, development, and human progress. If you have political opinions at all, whatever they are, you will disagree with some of what he says, but this is an essay grounded in fact and reality. Even if you don't in the end agree with Cowen's approach to a solution, you'll find yourself challenged to think by his discussion and analysis.


    I received a free electronic galley from the publisher via NetGalley.
  • (4/5)
    A provocative thesis that the "low hanging fruit" are gone in advanced economies like the US, and growth must be slowed from now on until truly game-changing technologies are invented. Not sure I agree, but it is well worth the read and stimulating to thought.
  • (3/5)
    I really don't know that this was the deepest of essays I've read regarding America's potential for economic trouble, but the concept is interesting and the price was perfect.
  • (5/5)
    Tyler Cowen's The Great Stagnation was the conversation-leader at the beginning of the year. Everyone read it, wrote columns about it, or blogged about it. Pundits still refer to it and debate it quite often. If I were assigning a book for students or faculty or policy makers to read and discuss, this would be at the top of the list.

    Cowen's hypothesis is that much of the U.S.'s growth in the last 200 years has been by picking the "low-hanging" fruit:
    1. As U.S. expanded westward, it acquired more resources ("free land").
    2. Women and minorities gained acceptance and entered the workforce. Uneducated populace became more educated in 20th century.
    3. There were gains in technology that had positive externalities.

    #1 and #2 have basically peaked. We've also seen declines in high school graduation rates since the 1960s. So, we appear to have pretty much gotten the benefit of increased labor force participation and society-wide education. #3 just isn't happening like it did during the Industrial Revolution. Cowen argues that while the internet makes us more productive, it doesn't get us the GDP growth we expect. Facebook, Twitter, Apple, etc. are putting out great innovations, but these aren't creating many jobs or income (GDP). One could argue that iPods have destroyed as many jobs as they have created. Cowen is libertarian-slanted, so he doesn't gripe about this-- he's simply pointing out that if we're expecting a high rate of GDP growth we're setting ourselves up for huge disappointment.

    "Life is better and we have more stuff, but the pace of change has slowed down compared to what people saw two or three generations ago."

    So, Cowen notes that we're consuming less and focused more on emotional, spiritual happiness. The internet makes us very happy very cheaply, which means when we lose our jobs or lose income, we may be slightly more content and accepting of that. Median wages have stagnated.

    The funny thing is, getting away from materialism on such a large scale—whatever the virtues of that switch—really, really hurts. It is the hurt that we in America are living right now.

    Why it matters:
    If the government expects GDP to grow at a 4% rate over the next 50 years in making its calculations about how much tax revenue it will has to spend, and instead we get something like 1% growth, interest rates will go up and we'll have overbuilt various sectors. Retirees won't see their stock portfolios grow like they'd like and may have retired too early.

    Cowen makes the empirical point:

    "The larger the role of government in the economy, the more the published figures for GDP growth are overstating improvements in our living standard...For better or worse, we used a lot of this new low-hanging fruit to build big government. Big government was one of the final creations from these new technologies."

    We're all going to be disappointed. Cowen points to Japan's two "lost decades" as an example of a wealthy country managing economic stagnation without coming apart at the seams, and suggests we learn from Japan's example. Yikes!

    Cowen uses his Stagnation hypothesis to explain the recent financial crises and recession. Everyone expected much greater GDP growth than was possible, and so they overinvested. Sooner or later, this causes a crash. Even now, people are expecting more GDP growth than what is possible, and this is causing frustration with an inevitable "jobless recovery," The Great Stagnation explains why the last few economic recoveries were "jobless."

    Cowen's prescriptions:
    1. End protectionis policies and allow gains from trade to happen:

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

    2. Have a societal shift away from idolizing sports and entertainment stars and idolizing scientists instead. If it becomes "cool" to be a scientist, we'll get more of them and more technologies invented. I agree with this, and this thought has affected my behavior heavily in the last 5-6 years.

    I give this book 5 stars. Everyone read it for a reason. Kindle Singles are great things.
  • (3/5)
    A few good points were made that cut through to the heart of the matter. Didn't agree with everything mentioned and will need to think about whether America really has exhausted the low hanging fruit, or if it really even existed as purported. I could argue that the Information Age is the low hanging fruit that is beginning to be harvested -- with the Internet just being part of that. Once we have a true IoT there will be LOTS of low-hanging fruit to harvest.
  • (1/5)
    Alerted, by Matthew Yglesias, to a "bravura performance by one of the most interesting thinkers out there" on the cause of the current economic mess, I rushed, metaphorically speaking, to the Kindle store and spent 4 dollars on Tyler Cowen's How The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better. This is fairly awful book. Cowen's tone is condescending; his use of history is superficial, his notion of the cause odd, and his notions of how to get better depressing.On causation: Cowen blames overconfidence. "[R]ealtors" are not to blame because "[t]he financial crisis was not fundamentaly about the bursting othe real estate bubble" (706-17) Okay, but then, one thinks, those who used various chicanery to spin bad loans into huge profit for no socially beneficial purpose bear the bulk of the blame. Nope: "The financial crisis is not even fundamentally about mistakes in the banking sector, although such mistakes were made" (717-28). Note the passive voice. Well then who might be responsible oh most interesting of thinkers out there? "We were all, more or less, overconfident. It gets increasingly harder," he argues, "to escape the conclusion that many millions of people were complicit, whether intentionally or not." He then illuminates this, apparently inescapable, conclusion by recourse to a museum director planing building expansion(718-30 to 730-40). Innovative thinking indeed.On condescension: The title is one example. His invocation of the "fun" of the internet working to limit a sober understanding of economies' general crappiness is another (746-57 to 757-67). This bit, from his conclusion, [t]hese days, you can read the latest scientific papers, whether or not you are based at Harvard or Princeton" (797-808) ignores the fact that disseminating the latest findings in all manner of disciplines predates Jstor. Darnton's work on the Encyclopedia is one example; Francis Bacon's Novum Organon published by Society For The Diffusion Of Useful Knowledge, which yet another example of making cutting edge thought available to the masses, another. It is also an example that leads to a discussion of his use or, more precisely, abuse of history.On roads and their history: He makes much of the notion of "core" versus "optional" state functions. Using the example of investments on infrastructure, he argues that [w]e're valuing dollars spent on highway extensions as if they were worth as much as the dollars we spent on building the core roads that link major cities" (267-78 to 278-88). This characterization of the roads in American history is misleading in two ways. In the first instance, he ignores the origins of the Good Road Movement, which arose from a combination of commercial and leisure interests. Cyclists intent on increasing the pleasures of live had long advocated for improved roads while agricultural and extractive commercial interests wanted to ease the movement from productive to markets. Railroads already connected "major" cities, the Interstate system came rather later and its designers had rather more in mind than linking major cities. Does this really matter, you might ask. Well, yes. The push for good roads was as much about pleasure as commerce and trying to reading the former out of the equation transforms state infrastructure investment into an activity solely dedicated to matters economic, which conveniently ignores the fact that there is more to life than making money. The Central Theme or Metaphor: Cowen makes much of his notion of the fact that "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."(60-71)He accepts that some of this stuff was "not completely new"; however, he insists they "expanded rapidly" in the period under consideration effectively "tying together the world economy." Although there was a "somewhat longer time frame, agriculture" underwent a similar process. What was, he suggests, "fundamentally new to human history" was the "gains . . . from playing out the idea of advanced machines combined with powerful fossil fuels" (81-81).And to be clear, when he discusses low-hanging fruit he doesn't mean the fruits you ate first. He asks:"Have you ever walked into a cherry orchard? There are plenty of cherries right there for the picking. Imagine a tropical island where the citrus and banannas hang from trees. Low-hanging literal fruit-- you don't even have to cook the stuff" (60-71).It's helpful to ask if we didn't have to cook the stuff that, literally and metaphorically, hung so low. Take, as one example, access to America's wide-open lands. If you ignore the long history of the "Age of Exploration" or, if you want to consider things from the opposite perspective, the "Age of Conquest" leading up to the seizure of lands from the pre-existing inhabitants, then yes easy peasy. Did you know that over 50% of the conquistodors perished either during the trip over or on first landing?Or that the technological changes, financial support, and religious justification of the Portuguese expansion and colonization came from the state? It's true.The longer time frame for the agricultural sector? Depending on how you want to think about it, agricultural revolution's time frame is rather longer. You can do the same thing for each and every low-hanging fruit Cowen mentions. They didn't just appear all of sudden when needed for the economic exploitation of this or that resource but rather they came about through the intersection of state and society seeking to improve the condition of men even on this earth and individuals more concerned with lining their own pockets then anything else. The American Transcontinental railroad is a nearly perfect example of the inter-mixture of state, society, cupidity, and charity, in is ancient meaning. What is of fundamental importance here is that each step forward required enormous investments in money, imagination, and human effort. To call this "low-hanging fruit" is to fundamentally misrepresent the modern world's history.What I think Cowen actually means is if you ignore the actual history of the picking of the fruit, it hung very low indeed.On the state of technological breakthroughs he argues that "[t]he period from 1880 to 1945 brought numerous major technological advances into our lives"; he then lists the usual suspects and argues that "life [now] in broad material terms isn't so different from what it was in 1953" (81-91). His pessimism on the future of innovation relies, in part, on the work of Charles I. Jones, who "has 'disassembled' American economic growth into component parts" and "[l]ooking at 1950-1993. . . found that 80 percent of the growth . . . came from he application of previously discovered ideas . . . with heavy additional investment in education and research, in a manner that cannot be easily repeated for the future" (177-88). Cowen also instances the work of Jonathan Huebner, which shows that current rates of "innovation" are nearly medieval (188-93); Huebner, elsewhere, suggests that we will out do the medievals in or lack of innovation by 2024.It would be nice to know why we can't repeat investments in education and research. It would also be nice to know why figuring out how to use the technology we have right now to improve the conditions of humanity without regard to ever expanding profits is, apparently, off the table.This brings me to Cowen's cure for what ails us. He argues that one "favorable trend" is his expectation that "[o]ver time, we can expect" China and India "to assume a greater role as innovators" and that "their manufacturing and services efforts" will "free up a lot of our time and energy for innovation." He is, of course, unclear as to why the Chinese and Indians will be able to that which he has ruled out for Americans; although, to be fair, Cowen waves his hands toward markets.(787-96 to 797-808)Secondly, the "internet may do more for revenue generation in the future." (ibid.) See, the way out of the current bubble induced crises is a new bubble. He likes the various market-based solutions to the "crisis" in America's educational system, despite the all evidence that they don't work. (808-19). And, he wants to improve the "status" of science by adopting "one point that Ayn Rand . . . got right, namely that we should all revere creators and scientific innovators (830-42 to 841-52). Want a better economy? All Hail John Galt lest Galt go.Taken in the round, this is a remarkably passive response to the current malaise for such an interesting thinker; given that the take-away seems to be that we can't do much except wait for the system that failed so spectacularly to fix itself except train ourselves to revere our Galtian overlords.