Tyler Cowen

Went to hear Tyler Cowen, the George Mason economist, at Politics & Prose tonight. He was speaking in connection with his new book, The Great Stagnation. Not having read the book yet, I will refrain from detailed commentary. Suffice it to say that he had a few interesting things to say, and in the end I was glad I went.

The gist of his argument in the book seems to be that broad economic growth is driven by technological innovation, and that we have run out of innovation. "Broad" to him means something that the entire population benefits from, not just a narrowly-defined group. And the innovation has to be deep and fundamental to be meaningful -- something that transforms every-day lives of a vast number of people in readily recognizable ways. According to Cowen, for the past three hundred years, such innovation has been relatively easy to come by, and we started to take it for granted and assume that things will continue in the same vein for the foreseeable future. In fact, however, such life-altering innovation has now become very difficult to achieve. We have already picked off all the low-hanging fruit, and anything more will require exponentially more effort. Thus, phenomena like the leveling-off of income growth among many others.

Two points from the talk stuck with me. One is that the Internet is not all it has cracked up to be, at least when it comes to changing people's lives in fundamental ways. The intellectual elite in places like Washington, DC (i.e., all of us) don't recognize this. To us, it has fundamentally changed our lives, and we cannot imagine life and work without the Internet any more than we can imagine it without electricity or telephone service. The same is not true for the population at large, Cowen argues. For a middle-class family of four in rural Ohio pulling in $45K/year, it's a marginal improvement at best, and a bit of a luxury. I tend to agree with him on this.

The other point was a little more chilling. One of the reasons for the slow-down in innovation that Cowen has suggested is the lure of the financial sector for the best-educated. Because so many Harvard graduates (e.g.) go into finance these days, fewer talented people go into basic research, the sciences, and education. Someone in the audience, however, asked a provocative question -- how are we different in that respect from what was going on in the late 1920s, another major boom for the financial industry? Cowen's answer was that we weren't that different. In retrospect, of course, we all know where the events of 1929-1931 led to, especially in Europe. Unfortunately, I did not have an opportunity to ask him to comment on that during Q&A. I asked the question once the event proper was over, but I am not sure he got my drift. He was focused on the economic legacy of 1931 in the US, not the political legacy of 1931 in Europe. He advised me to pay off my mortgage. Thanks, Tyler.