I bought Tyler Cowen's book "The Great Stagnation" and finished it the same evening. I enjoyed it much like I did from reading books like "Day of Empire", in that they shed light on understanding the world we live in and where we are going from that. Cowen's book is entirely about the situation in the US, but much of his analysis should apply to many other places in the world. He also talked about the political implication of such situation, or the "great stagnation", and his view on China's catching up, in an interview with The Economist.
Cowen's main point in the book is that we have exhausted what the technological advances of the past few decades have been able to bring us — hence the first chapter's name, "The Low-Hanging Fruit We Ate." New advances are harder to come by, as evidenced by the diminished return in ever-increasing R&D spending. The situation is worsened by two additional factors: The US education system is inadequate, especially the K-12, and the hubris in the financial system, based on the assumption that previous growth trend would continue, finally led to all kinds of troubles that we are still seeing today.
I'm not so sure about Cowen's view on the Internet. He devotes a whole chapter on it arguing that, while the Internet has brought us many great stuff, it creates few jobs, and people may even spend less because of all the (mostly free) fun they get from the Internet. Certainly eBay (one of his low job creation examples) does not hire many people — not at a scale of the Big Cars — but what about the benefits of disintermediation, which reduces the friction in transaction and makes many sellers reachable to more potential buyers (indie music comes to mind). But Cowen only spends a page to say that Google and Facebook hire less than 30k people combined and doesn't give us numbers to argue that it's indeed "not saving the revenue-generating sector of the economy." What's worrying about such argument is that, with politicians fixated on job creation (and that's certainly not confined to the US), when they start pointing fingers at the tech industry that they aren't creating many jobs, we may start to wonder where this may lead us.
One interesting, if also somber, implication of "the great stagnation" is political polarization, which Cowen doesn't mention in his book but talked about in the aforementioned interview. This seems a good perspective to understand the political dramas (sometimes ludicrously baffling to foreigners) in the US.
Cowen prescribes bitter remedies: "Raise the social status of scientists" — and this is not easy as it sounds. He warns us that the recession will be long, although Japan shows the US how to cope with the decline as a society to a large extent. There's a twist to the theme here, because Cowen also warns us to be ready when more low-hanging fruit comes:
[…] because sometimes low-hanging fruit is dangerous. The last time the world had a major dose of low-hanging fruit, a few countries didn't handle it very well, including the Axis powers, the Soviet Union, and Communist China, among others.
Without the new technologies of the time, the totalitarian mistakes of the twentieth century would not have been possible. […] The record-keeping techniques of mass bureaucracy were used to control and often kill other human beings en masse. Only after bitter experience did fascist ideas become less popular, and social and political norms subsequently evolved to protect electorates against the fascist temptation.
So expect a bumpy ride to the future. I think that's a good advice to everyone who's lived the optimistic 1990s. The ending words are worth quoting in full:
In the meantime, we need to be prepared for a recession that could last longer than we are used to. We need to be prepared for the possibility that the growth slowdown could continue once the immediate recession passes. Part of science is coming to terms with its limits. The rate of scientific progress will continue to be uneven, sometimes grossly so. Yet reason and science have never been more important: If nothing else, a more reasonable and more scientific understanding of our predicament can help us cope, both intellectually and emotionally.
Back to the hard problems.