Jun

8

 I find Tyler Cowen to be a very interesting, stimulating individual and am looking forward to his upcoming talk at the NYC Junto. I read his latest "The Great Stagnation" in preparation for the talk. It is a quick read, and well worth checking out. While I enjoyed it, I disagreed with many of his arguments put forth in it.

The premise distilled is that the US was in a unique spot in its younger days to take advantage of a large variety of low hanging fruit due to a variety of factors resulting in increased prosperity, and that since the mid 50s the pace of innovation has plummeted and the rate of return of technology has diminished greatly, requiring more and more dollars for less and less life altering discoveries. I take full blame for any misinterpretation in putting forth Tyler's arguments, but the above was my take away.

He references the work of Jonathan Huebner in attempting to quantify innovation rates, and put forth the argument that things are ugly from 1955 onwards. I believe there are major problems with Huebner's methodology despite a laudable effort, including a very subjective measurement of exactly what an innovation is by definition. He uses patent data also which while not without problems is at least measurable in some form compared to the other method he uses for counting innovations.

Here is one review of said work.

 Tyler also argues that "current innovation is more geared to private goods than to public goods…with only slight additional benefits to the majority of the population" and that "the basic material accoutrements of life (again, internet aside) haven't changed much since he was a kid."

I don't believe I am wearing a pair of rose colored glasses when I say that there has been tremendous amounts of innovation and technological progress since the 50s in the US with great benefits to large swaths of the population. The progress in integrated circuits and computers alone is absolutely amazing in my opinion. Materials science has also made great strides. Despite the BP mess, the oil and gas industry continues to innovate. These are just some areas I can think of right off the bat. There are many more, but I've got to call it a night soon.

I found the whole line of argument reminiscent of the perennial naysayer Paul Ehrlich.

I'm not sure if anyone else on the list has read the book yet, or has any opinions, but I'd be interested to hear what others think. I believe science and technology have delivered and will continue to deliver advances that improve our lot. I also believe there is plenty of innovation still happening and that will continue to happen which is a net positive to the majority of the population.


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3 Comments so far

  1. Roy Kim on June 8, 2011 4:28 pm

    Mr. Neiderhoffer-

    I’m in agreement with you, and not with Mr. Tyler Cowen or others who are too pessimistic about world conditions.

    In my professional field of plastic surgery and medicine, there have been stunning advances since the 1950’s. Just to rattle off a few, they include

    - better antibiotics
    - better anesthesia medications so that surgery is easier and less painful
    - better medications to cure more diseases
    - more refined surgical techniques that allow surgeons to do more, with better results, in a shorter period of time
    - better cancer survival rates
    - better aesthetic results from reconstructive surgery

    And on and on.

    There will always be the potential for disaster, but the human mind, and especially the American mind, will always have the capacity to hedge, to work harder, to come up with creative solutions, and to not accept the status quo to live better and avoid bad things from happening.

    Roy

  2. vic on June 9, 2011 11:09 am

    thanks mr. kim. tyler will be speaking at the next junta and staying at my establishment and I’ll relay your thoughts. As you mite suspect, he is a hard man to win a argument from. He’ll probably say ” read my book and you’ll see that I dont say that”. My college roommate is an example of what you say. He was the co inventor of laaser surgery. Jim Wynn. HIs company gave him a firm handshake for it. And now he has a new way of treating burns with lasesrs, and the firm wont even give him that handshake because they cant do test on animals such as pigs, and rats ” are not relevant to human skin”. vic

  3. Cliff Styles on June 15, 2011 2:05 pm

    Professor Cowen’s argument is about relative real growth rates, and the ’stagnation’ he is arguing for is not a stoppage in growth, rather a decline in the growth rate compared to prior periods.
    I don’t think interesting anecdotal evidence or general comments about technological innovation are sufficient evidence to counter his argument. You must either prove that his measures of growth are inaccurate and that growth is actually higher, or prove that prior periods were measured too high, or prove that his measurements are irrelevant to his thesis, and provide better measurements in their place.
    I don’t think you would accept anecdotal evidence or general optimism (or pessimism) in making speculations or investments?

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