Apr 4, 2011

The great stagnation

The Great Stagnation, the ebook recently released by Tyler Cowen and much debated in the blogosphere, states that the "economic engines in the rich world are running ever slower as countries exhaust easy sources of rapid growth".  His most talked-about example is how a kitchen from 1973, complete with refrigerator, microwave oven and dishwasher, would strike a person living in 1900 as a marvel. A time-traveller from 1973, on the other hand, would find a modern kitchen fairly ordinary.

Not many people, including The Economist, are 100% convinced. "The evidence of improvement is all around. Communication is dramatically cheaper, easier and better than it was just a decade ago. Kitchens may look much as they did 30 years ago but living rooms and desktops look remarkably different."

But the total-factor productivity (TFP) timeline, provided by David Beckworth, makes you think about it. In a previous post he argued that Cowen failed to appreciate how dramatically our lives have changed since the advent of the internet and faster computing.  Now he is thinking these gains are but a faint shadow of what they could have been had TFP continued to grow at its 1947-1973 trend.

But do TFP data really capture the imporvements of this time and age? Not so sure.Still, I should probably read the book before claiming TC is wrong.

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