by Tyler Cowen
on January 17, 2016 at 2:12 pm
in Books, Current Affairs, Economics, Uncategorized
The Age of Stagnation: Why Perpetual Growth is Unattainable and the Global Economy is in Peril, by Satyajit Das, and
The End of Average: How We Succeed in a World that Values Sameness, by Todd Rose.
I have a keen interest in both topics…
Satyajit answered the 2013 Edge question along those lines. It is a surprisingly tech-less view of the future.
Arrived in my pile…in 1982.
by Paul M. Sweezy
This is a reconstruction from notes of a talk given to the Harvard Economics Club on March 22, 1982, and is reprinted from the June 1982 issue of Monthly Review.
Mainstream Versus Marxian Traditions (http://monthlyreview.org/2015/09/01/secular-stagnation/)
“When Larry Summers first made his secular stagnation speech at the IMF, and the American economics tribe heralded it as if it were the greatest (and latest) thing since sliced bread, my irony gene went into overload….The argument that the West has been suffering from secular stagnation, and that only a series of financial bubbles have kept the illusion of prosperity going, has been part of non-orthodox economics for over three decades…
Of course mainstream economists could never acknowledge the prior arguments of a rival intellectual tradition, but now that Larry (peace be upon him) Summers has said it, suddenly it’s OK to spout what the leftists have been saying for 30 years (though with different explanations, of course—it’s declining population growth and falling levels of innovation, not nasty transnationals relocating production, or financialization of the economy [eroding] the industrial sector). (“Secular Stagnation III,” January 8, 2014, http://debtdeflation.com)”
Arrived in my  pile: The Evolution of Progress: The End of Economic Growth and the Beginning of Human Transformation, C. Owen Paepke
“Heavily annotated yet popularly written, this crystal-ball-gazing exercise combines sweeping economic predictions with heady speculations about science’s potential to transform human life. Paepke, an antitrust lawyer in Phoenix, Ariz., argues that the forces of material progress–capital accumulation, market expansion –are largely spent, resulting in global stagnation of living standards. Among the early portents that we have reached the limits of economic growth, he discerns declining productivity, widespread affluence and workers’ preference for family and leisure over fast-track careers” [SNIP]
The Myth of Average: Todd Rose at TEDxSonomaCounty (also 2013, an average lead time?)
A three year period between a Ted talk and publishing a hard cover book on the topic? It might be average or even faster than normal for someone who’s not a professional author.
“The thing that drives me up the wall is when mainstream economists (meaning neoclassical economists), after years and years of pushing a bad idea on the public and students, turn to, when finally admitting that their bad idea is really a bad idea, and claim a good idea that they ignored and kept on the fringes. [Paul] Krugman’s recent post [on secular stagnation] serves as an excellent example.… Though it’s about the idea of how the current recession (or stagnation) could be the “new normal,” it…makes no mention of the long and rich research on this very subject by Marxists (most notably the late Paul Sweezy) at the Monthly Review.
Since the 1970s, the Monthly Review has produced a solid body of work that places stagnation at the center of the capitalist system. It is, these Marxists argue, not the exception but the true state of things. Capitalism may begin with a bang of economic growth, but it always reaches a point where profits are weak and demand low. The way out of this problem in the ’30s was war. In the ’70s, it was financialization of the economy…. Financialization…was not tied to growth or expansion in the real economy. It instead absorbed the stagnation problem and transformed economic growth into debt accumulation. One must remember that in 1950, private debt in the U.S. was actually lower than government debt. Private debt rapidly increased in the ’70s and exploded in the ’80s and ’90s.” (http://slog.thestranger.com)
Communists have been predicting the end of capitalism for over 100 years. Instead, we’ve seen the collapse of Communism across Europe and Asia.
I don’t think the early ones (communists) imagined half way measures which offer enough crumbs to keep the pitchforks unused.
Re-reading from April 1, 2015, On secular stagnation: Larry Summers responds to Ben Bernanke, I think I must have internalized this view much more than I realized.
Looking back though, I think one mistake could be in thinking industrialized countries are “the world.” Per Steven Radelet, The Great Surge, a lot of nonstagnation can be happening outside the reference countries of USA and Japan.
Physical systems don’t grow forever, certainly not at constant rates.
That’s why intellectual property is important.
Don’t think of growth as ‘more’, think of growth as ‘better’. A 2015 car doesn’t use more materials or burn more fuel than a 1955 car — in fact, it uses less of both. But the vast improvements (in comfort, convenience, safety, and efficiency) represent an enormous amount of growth.
The economy is composed of people and their productivity. As long as these two factors continue to grow, the system will grow. If you refuse to grow, someone else will grow them and make you irrelevant (think of what happened to cavemen). If you somehow try to stop others from growing you will find yourself at war with them, and usually the bigger (growing) economy wins. There is an unlimited universe, and there is scant limitation to where people might live given the right level of productivity.
There is an unlimited universe, and there is scant limitation to where people might live given the right level of productivity.
I hope your grandchildren enjoy eating jellyfish because that is all that will be left if we continue on our present trajectory.
“I hope your grandchildren enjoy eating jellyfish because that is all that will be left if we continue on our present trajectory.”
There’s no indication that the world is anywhere near such a constraint. And this is a far to well informed readership to have that kind of rhetoric be excepted. However, in any case, I expect my grandchildren or great grandchildren to not be limited to the Earth.
They will learn to like jellyfish.
Well, for one, we are a multi-cultural family, Asian is common for us, but more to the point do you realize aquaculture is responsible for 40% of the world seafood and growing? And that the cost of lab grown meat is decreasing rapidly, being down to $11 for a hamburger?
You have not learned from Thomas Robert Malthus, Dennis Medows (Limits to Growth), Paul R. Ehrlich (Population Bomb) have all been wrong, over and over and over.
Innovations are still occurring in many fields, in Biology (Crispr, bio-engineered body parts) in stronger lighter materials, in lower cost per bit, in software AI, in automated transportation, in business models (uber/AirBnB), in engineering improvements of all kinds, in mortality rates in the developing world. Perhaps there is an unreasonable expectation for dramatic breakthroughs, (teleportation, antigravity? ).
Western economies are awash in regulations ( 6000 page tax code here), seem obsessed with lowering inequality, mandating minimum wage increases, declaring CO2 a pollutant to fight a non problematic 1.2C degree rise per century, rigid labor laws that stymie hiring( France for example), government financial oversight( Salbane-Oxley), forcing people to buy health care whether they want it or not, mandating to replace an incredibly potent, plentiful and convenient source of energy (oil ) with the most dilute and intermittent ones ( solar/wind). It’s telling that here in San Diego with the price of a barrel of oil incredibly low, gas prices have hardly moved and are still $3 a gallon ( Thank you California government for your regulatory omniscience).
Can non-anemic growth really occur in such heavily regulated economies.?
Arguments against perpetual growth all rest upon the assumption of some physical limitation. Our economy has not been limited to earth since sputnik launched, and last month, a company has returned a rocket from orbit, showing space access can be financially viable to upper middle class western individuals. The future is not one of stagnation.
Yep – hard to believe anyone is willing to listen to the Club of Rome types anymore after their comprehensive spanking by Julian Simon. The idea that we are in some kind of technological slowdown is absolutely ludicrous and there is plenty more to come.
“..showing space access can be financially viable to upper middle class western individuals” [SNIP]
Presumably, including yourself
Remember when the ever expanding American middle class was considered the best refutation against Marx in the tool chest of capitalism’s triumphalists?
Ha-ha, those triumphalists were just kidding – stagnation is here, average is over, the rich getting richer is simply the natural order.
“Ha-ha, those triumphalists were just kidding – stagnation is here,…”
The question to ask is, “What causes economic growth?”
The answer, as Julian Simon told everyone, is that human brains are what cause economic growth. More human brains, more economic growth.
In a decade or less, computers will be adding billions of human brain equivalents every year. And then a decade later, it will be *trillions* of human brain equivalents every year.
Why economic growth will be spectacular
Too much pessimism around here. Perhaps it’s not stagnation, just misallocation of lots of resources. Price per sq. foot is constant over 40 year inflation adjusted but the area per person in new homes has doubled. A home is one of the largest lifetime purchases, and homes keep getting larger.
Yes agreed. If the developed world slows from a 4% growth rate to a 1% growth rate, it’s still a growing world. And frankly, all indications are that technological development is still rapidly changing our world.
We read and post responses to this blog on our “Smart phones”. A device that didn’t exist 20 years ago and was considered science fiction 40 years ago is now common place across the world.
Yes, but the average age of US owner-occupied housing is 37 years.
Approximately 2/3 of owner-occupied homes in the U.S. were built before 1980, with 40% built before 1970. Homes constructed after 2000 account for just 17% of the owner-occupied homes. And newly built owner-occupied homes constructed after 2010 only make up 2% of the housing stock according to the 2013 AHS.
Be careful about using marginal data to reach conclusion about the average.
“Be careful about using marginal data to reach conclusion about the average”
There’s nothing in your statement that invalidates the premise that American homes are getting larger. Sure, the “average” house is not going to be as big as the house built last year, but the trend has been to much bigger homes. Perhaps we’ve reached the peak, but even if that’s the case your own statement would imply that the “average” will likely keep growing for decades.
I’ve got a bet for Satyajit Das, or any other economist who is willing to make a prediction for what the world per-capita GDP (in year 2000 dollars) will be in 2020, 2040, 2060, 2080, and 2100.
“The world per-capita GDP in the year 2000 was approximately $7,200. The world per-capita GDP (in year 2000 dollars) will exceed $13,000 in the year 2020, $31,000 in 2040, $130,000 in 2060, $1,000,000 in 2080, and $10,000,000 in 2100.”
Long Bet #194…world per-capita GDP will exceed $1 million this century
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