The US Economy at a Permanent Plateau?

If you want some insights into what's ahead for the economy, you should check out Tyler Cowan's new book, The Great Stagnation.  It's a $4 ebook (no doubt the price itself is an economic experiment).

His genius is that he describes the economy in terms we all can understand.  For those of us in our 40s or younger, what major technological innovations have occurred since our childhood?  That is, besides bigger refrigerators that produce different kinds of ice.  The answer is there have been practically none of significance, except the Internet, and the book describes why the Internet has had little impact on the economy.  Case in point, Twitter currently employs about 300 people and Facebook had to reach 500 million users before it had real revenues.

The book backs this up with many economic studies of real wages, GDP, and other factors.  I've long wondered why the growth of the financial industry in the last decade is attributed with helping the economy, and Tyler is the first economist I've seen who explains why it hasn't.  Similarly, healthcare and education have become larger chunks of the US economy while contributing relatively little to growth.

The message is that we should get ready for a flat economy.  And maybe that's not such a bad thing, so long as we can keep our society relatively equitable.

His blog marginrevolution.com is also a fascinating read.  I don't know how one person manages to post so much.

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