Loss and stagnation.

Steve Randy Waldman says in his February 15, 2011 post that he’s late to the game on Tyler Cowen’s Great Stagnation. That makes me unbelievably late, but I the piece has been linked to again recently and with its minor resurgence I have a few reactions.

I am especially fond of Waldman’s discussion of “information asymmetry industries,” namely government, health care and finance. Waldman elsewhere sings the praises of finance’s lack of transparency as core to its functioning, but he’s right that regardless it makes accounting for the value of finance difficult to untangle from mere transfers. I an age of increased rent-seeking from finance, this is surely a problem for the official accounts.

I’m less amenable to his treatment of technology.

I remain agnostic on the question of whether a slowdown in the pace of technological change is largely to blame for whatever it is that ails us. I wouldn’t rule it out, but like Kevin Drum and others, I see a lot of very real “low hanging fruit” arising enhanced capabilities to coordinate and collaborate via internet and information technologies. These benefits go well beyond “cognitive surplus” and bemused infovoria. [1] Coordination technologies, ranging from assembly lines to the limited-liability joint-stock corporation, contributed mightily to past golden ages of advancement and growth.

I’m not entirely sure what is being said here. On the one hand is a discussion of information technology, but the last sentence suggests other technologies. Because the assembly line revolutionized production, I don’t believe it follows that IT might do the same. In a way, IT has changed our lives dramatically and disruptively. But I think an enormous amount of information technology has entailed minor marginal increases in value. Most of the IT that touches my life involves Apple products. I own the majority of Apple’s product offerings I think. I love my iPhone and iPad and my MacBook, and all of the opportunity they have unlocked through ancillary technologies that utilize them. But I don’t think I’m immensely more productive and indeed much of my time is devoted to utilizing these technologies for leisure. Facebook will be the largest tech IPO in history and it’s a website designed for procrastinators. I don’t mean to pick on Waldman but I think the wow factor of technology has made a gross overvaluation of it endemic.

Now I’ll end on a positive note with something that struck me as particularly insightful. Here’s a relevant quote :

the concentration of economic power that attends technological changes demands countervailing state action if any semblance of broad-based affluence and democratic government is to be sustained.

This was opportune that I read this just after reading Jay Cost’s National Affairs essay on The Politics of Loss. Cost believes that our national political future is particularly grim because the chief role of government in the near future will be to allocate losses, instead of the gains of the past century. He warns Republicans that their advocacy of free markets is problematic because

The GOP’s emphasis on free markets inevitably tilts fiscal policy toward capital owners, at least in the short term. This is not because the Republicans have always been “the party of special interests,” as the fiery Truman once put it, but because Republicans believe that the private sector’s allocation of capital is the most progressive force in the world — and that it will produce broad prosperity if given enough time. If that widespread prosperity is not forthcoming, however, the political appeal of the conservative argument collapses, and Republicans suddenly appear to be a party of plutocrats, robbing the poor to pay the rich.

Maybe now is the time for the old refrain: In the long run, we’re all dead.


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