Not So Stagnant

Are the good times really over for good?


The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, by Tyler Cowen, Dutton Adult, $3.99

By the time you make it through the fashionably prolix subtitle of Tyler Cowen's provocative new e-book, you'll have the gist of his argument. In The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, Cowen, a George Mason University economist, argues that since colonial times the American economy has benefited from "low-hanging fruit"—i.e., bountiful opportunities for growth. He singles out three in particular: free land, technological breakthroughs, and "smart but uneducated kids."

"Yet during the last forty years," Cowen writes, "that low-hanging fruit started disappearing, and we started pretending it was still there. We have failed to recognize that we are at a technological plateau and the trees are more bare than we would like to think. That's it. That is what has gone wrong." Cowen identifies the exhaustion of that low-hanging fruit as the main culprit behind the slowdown in growth during recent decades, rising inequality, the nastiness of present-day politics, and even the recent global financial meltdown. Looking forward, he admits the possibility that innovation and growth will pick up again, perhaps catalyzed by the rise of China and India. Cultural change would help, he argues. Specifically, his chief prescription is that we somehow raise the social status of scientists.

Cowen is hardly the first boy to cry wolf. In previous periods of deep economic distress, other prognosticators have grabbed attention by claiming that innovation and growth are at long last winding down. During the Great Depression of the 1930s, the "secular stagnationists," led by Keynesian economist Alvin Hansen, argued that falling population growth and dwindling prospects for technological progress meant that "mature" economies could combat chronic underinvestment and unemployment only through massive government spending. And during the stagflation of the 1970s, the Club of Rome and many others warned that ecological constraints were finally imposing "limits to growth." So here we are: another macroeconomic crisis, another gloomy prophet. 

We should remember, however, that at the end of this story the wolf actually does come. So could Cowen be right this time?

He certainly is correct in identifying a poorly understood phenomenon of fundamental importance: Innovation and economic growth are getting harder. During the last few decades, rapid growth in the number of scientists, engineers, and researchers has not resulted in a corresponding acceleration of economic growth or new inventions. Indeed, the number of patents per researcher has been falling steadily. "In each industry the most obvious ideas are discovered first," explained Paul Segerstrom of the Stockholm School of Economics in a 1998 American Economic Review article, "making it harder to find new ideas subsequently."

Cowen is also right that a big source of relatively easy growth during the 20th century—investment in education—has been exhausted. In 1900 only 6 percent of American kids graduated high school, and only 0.25 percent went to college. The high school graduation rate peaked at roughly 80 percent in the late 1960s and has slipped a bit since, while some 40 percent of college-age kids are now in college. Moving these numbers upward without cutting standards further may be possible, but it certainly won't be easy, and in any event the biggest gains in improving educational attainment are likely behind us.

But there is another side of the coin. Yes, pursuing any particular avenue of scientific research or technological development yields diminishing returns. But it is often the case that advances in one area open up entirely new avenues of progress in others. To put it another way, we keep discovering previously hidden orchards of low-hanging fruit. The microelectronics revolution of the last half-century is a spectacular case in point: Continuing exponential growth in information processing capacity has made possible sweeping innovations in a host of industries unrelated to silicon chips. Looking ahead, exciting developments in biotechnology, nanotechnology, and artificial intelligence promise future waves of revolutionary innovation.

Furthermore, even as growth gets harder, our institutions of wealth creation have improved. The number of scientists and researchers has grown, and their tools keep getting better. American corporations have undergone wrenching restructuring in recent decades to make them more innovative and responsive to change. On the whole, government policies today are much more favorable to entrepreneurship and innovation than they were a half-century ago. And continued progress on all these fronts remains possible. 

How do these countervailing forces balance out? My reading of the evidence doesn't support Cowen's sweeping historical narrative that centuries of easy progress are now behind us. Much of the force of his argument comes from contrasting America's glittering economic performance in the decades following World War II with the decidedly less impressive record in recent decades. But if you zoom out and look at the larger historical record, Cowen's "Great Stagnation" more or less disappears. And if you zoom in and examine recent trends in detail, the numbers likewise belie the claim that we have hit a "technological plateau."

Cowen correctly points out that median family income rose smartly after World War II, only to fall off sharply in the 1970s. Per capita GDP figures reveal the same trend, albeit a little less dramatically (because of the rise in income inequality, which means most of the income gains have come among higher earners). Between 1950 and 1973, the average annual growth rate of real GDP per capita was 2.5 percent; for the period between 1973 and 2007, the corresponding figure was only 1.9 percent.

But what happens when you put these figures in a larger historical context? Using calculations by the late British economic historian Angus Maddison in his 2001 book The World Economy: A Millennial Perspective, combined with U.S. Census figures for the years after World War II, we see these annual growth rates:

1820–1870: 1.3 percent

1870–1913: 1.8 percent

1913–1950: 1.6 percent

1950–1973: 2.5 percent

1973–2007: 1.9 percent

From this broader perspective, what Cowen calls the Great Stagnation looks like a return to normalcy after a Great Boom. Indeed, recent growth rates are better than those of all other earlier periods. So yes, growth has cooled down since the postwar "Golden Age," and that fact poses real economic and political challenges. But the Golden Age, not our present era, is the outlier; it just doesn't make sense to talk about the present period as stagnant after centuries of easy growth.

Now let's focus on trends in recent decades—in particular, productivity growth. If we have reached a technological plateau, it should show up most clearly in a fall-off in labor productivity. But look at the growth of output per worker-hour, according to Bureau of Labor Statistics data for the nonfarm business sector:

1947–1973: 2.8 percent

1973–1995: 1.4 percent

1995–2007: 2.7 percent

Again, there was a big drop-off after the postwar boom. But then look what happened: Beginning in the mid-'90s, fueled by advances in information technology, productivity growth came roaring back, nearly equaling the record of the Golden Age. It's hard to look at these figures and conclude, with Cowen, that the trees in the orchard are becoming bare.

Granted, the productivity comeback offers no grounds for complacency. The numbers look better than the per capita GDP figures, in large part because the labor force participation rate peaked in the late '90s, fell during the dot-com bust, and only recovered to early '90s levels by 2007. (Superior growth in output per worker thus was partially canceled out by sluggish growth in the number of workers.) Meanwhile, the per capita GDP figures look better than the median income figures cited by Cowen because of the rise in inequality—that is, because income growth has been concentrated at the top of the socioeconomic ladder.

These facts point to real challenges for future growth. One reason the labor force participation rate has stalled is the aging of the population, a trend that will cause all kinds of economic and political headaches in coming years. And rising income inequality is due in significant part to slumping human capital formation. Educational attainment at both the secondary and postsecondary levels has stagnated since the '70s even as the demand for highly skilled workers has continued to climb.

I've focused on criticisms here, but I want to close by stressing what an interesting, intelligent, clearly written, and thought-provoking book this is. Growth has gotten harder, and there are mounting obstacles ahead. For pointing out these sobering facts, and doing so in such an engaging manner, The Great Stagnation deserves a wide readership. 

Brink Lindsey ( is a senior scholar in research and policy at the Ewing Marion Kauffman Foundation.

NEXT: "Intuitive Toxicology" and Panicking Over Plastics at The New Republic

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Stagnation of Stagflation?

  2. Isn’t that what she said. Heyooo!

  3. Innovation isnt any harder now.

    Innovation within any existing industry is harder, but the key is to create an entirely new industry.

    1. Agreed.

      The clearest sign of this is the number of old industries that have had the legs cut out from under them by new technology, eg: photographic paper, land line phones, over-the-air broadcasting, newspapers, rail travel, typewriters, slide rules, traveller’s checks, etc.

    2. We have better tools to innovate with.

      1. We need something like the next pet rock…or beanie babies…

        1. Or thighmaster.

        2. robotic lifesize Japanese sex dolls. Now that would pump up the economy!!! It would inflate the economy, and demand would be hard to fulfill. Most men could not get enough!

          1. Most men could not get enough!

            And which is why, the whole economy, would grind to a halt. Head for the hills…

  4. Looking at the overall general trends it looks like “low hanging fruit” was actually “only industrialized nation without factories bombed into rubble”. I would guess that WalMart would have gigantic revenue growth if every Target was destroyed and it took them 2 decades to rebuild, no innovation needed.

    There’s plenty of room for growth, we’ve got technology and computing advances to capitalize on and we’re only scratching the surface of genomics.

    1. So, all we need to do to turn the economy around is level every other industrialized country? I think that’s feasible.

      1. What’s the point of having this superb military that you’re always talking about if we can’t use it?

        1. I hate to agree with such a bleak outlook, but you are correct. The last REAL growth spurt was the tech doom, because the whole world wanted what only we could give. The last FAKE growth spurt was the housing bubble, fake because it was completely isolated to the US. Other countries had housing bubbles, too, of course, but those were isolated to their countries: Nobody was flocking to each other’s country to spend money on housing, and certainly not like they were on tech.

          These days, there is NOTHING that the US can do (except bomb our neighbors) that Taiwan and India (and a dozen other countries) can’t do cheaper.

          The age of empire is over for us.

          1. These days, there is NOTHING that the US can do (except bomb our neighbors) that Taiwan and India (and a dozen other countries) can’t do cheaper.

            Understanding the law of comparative advantage is hard. and is very very confusing.

            By the way, why again are Nissons and Toyotas manufactured in the American South?

            1. What the fuck is a Nisson????

  5. Congress will protect us from reckless innovation.


  6. Cowen correctly points out that median family income rose smartly after World War II, only to fall off sharply in the 1970s.

    Household income is a misleading statistic. Since the 70’s, the number of single parent households has grown substantially, meaning the number of wage earners, in many cases, has been cut in half. Despite this, inflation adjusted median household income has increased.

    1. No, it has not.

      Have we been swallowing statist kool-aid?

      1. Nope. Thomas Sowell

        1. Shit. Not how I intended to respond. Their is no point in trying to defend it though. Any abuse is well deserved.

          1. LOLZ…

            Absolution granted…

  7. I’ve got some low hanging fruit for this guy to hum on.

    1. Hey I’m a low hanging fruit and you can hum on me.

  8. If Congress suddenly disappeared while in session, I’m sure we’d see more innovation and growth, too.

  9. I was very pleased to find this site.I wanted to thank you for this great read!! I definitely enjoying every little bit of it and I have you bookmarked to check out new stuff you post.

  10. I’m not sure I could ever read a book with a title like that. It’s exhausting.

  11. From this broader perspective, what Cowen calls the Great Stagnation looks like a return to normalcy after a Great Boom.

    Seriously people, quit using this word! Just because Warren Harding fabricated a word, and, after decades of dumbasses using it, it made its way into some dictionaries, does not mean it’s okay to use it. Say normality. You just sound like an idiot when you say normalcy.

    1. Normalcy, I would agree with you.

    2. Yes, it’s dis-orientating.

    3. I hope this post is as “impactful” as you want it to be. But “irregardless” of the fact, I totally agree with you on the annoyance of fake words.

    4. Sounds like you’re against innovation in language.

  12. The nineties were an abnormalcy?

    1. Abby someone. Abby normal.

      1. The word is perfectly cromulent

  13. You just sound like an idiot when you say normalcy.

    Couldn’t agree more. That’s why I always say “normalness”.

    1. I love the best though!

    2. I always like deliteful, delovely, de-normal

    3. You guys are killing me…

  14. I’ve focused on criticisms here, but I want to close by stressing what an interesting, intelligent, clearly written, and thought-provoking book this is.

    Yes. The title of this book alone provoked me into thinking “the author is a genuine idiot, and if everybody’s as smart as he is then we’re all doomed”.

    Then I realized that there is almost no one in congress (or any other part of government today) that’s as smart as this guy.

  15. The Next Big Bubble

    […]the bubble that has taken the place of housing is the higher education bubble. “A true bubble is when something is overvalued and intensely believed,” he says. “Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. It’s like telling the world there’s no Santa Claus.”

    Like the housing bubble, the education bubble is about security and insurance against the future. Both whisper a seductive promise into the ears of worried Americans: Do this and you will be safe. The excesses of both were always excused by a core national belief that no matter what happens in the world, these were the best investments you could make. Housing prices would always go up, and you will always make more money if you are college educated.

    Like any good bubble, this belief? while rooted in truth? gets pushed to unhealthy levels. Thiel talks about consumption masquerading as investment during the housing bubble, as people would take out speculative interest-only loans to get a bigger house with a pool and tell themselves they were being frugal and saving for retirement. Similarly, the idea that attending Harvard is all about learning? Yeah. No one pays a quarter of a million dollars just to read Chaucer. The implicit promise is that you work hard to get there, and then you are set for life. It can lead to an unhealthy sense of entitlement. “It’s what you’ve been told all your life, and it’s how schools rationalize a quarter of a million dollars in debt,” Thiel says.

    Statists like Tony and others believe that “education” is a right (which means: People, by right, should have their college experience paid by others.) Clearly, the purported advantages of higher education are simply not there; the cost does not reflect the result, nor is it the “investment” people were lead to believe.

    Fair warning has been given that high education has the worst ROI, yet the greatest demand – a classic bubble.

    1. OM, guess how a probate court judge here in Massachusetts reacted after reading the following language in a Separation Agreement regarding college education:

      The parties agree and acknowledge that the pursuit of learning and thirst for knowledge and understanding is of paramount importance for the well being of their minor child. Toward that end, the Husband and the Wife each covenant that they shall foster the minor child’s intellectual curiousity and that they shall strive to instill a love of learning, for its own sake, in their son.

      However, the parties do not agree with the prevailing propaganda that a college education is a prerequisite to success and happiness. The Husband and the Wife agree and acknowledge that a positive return on investment for college education is not a guarantee and is often illusory.

      The above is not the typical boilerplate found in separation agreements. Predictably, the judge threw a hissy fit and demanded that the language be amended. Keep in mind that there was no dispute, i.e., the parties had agreed upon everything, including child support / visitation / division of assets.

  16. I get his point, but, I am convinced innovation and economic growth suffer far more from regulatory strangulation than anything else. Cut loose the shackles and see what happens.

    1. I am convinced that you just identified the primary cause of the current recession, depression, Bad Hair Day, or whatever we’d like to call it these days.

      But we should not expect that the author of this brilliant and thought provoking piece of work — who is a mere economist — should be able to see that.

  17. How long does the head shaking period last? As soon as I start reading this stuff, it begins.

  18. So now we have dumb kids who are educated…

  19. This book is about stagnation in growth. Unfortunately, the author hasn’t looked at the growth of government. Not only growth in taxes as a percentage of GDP, but also the costs of following government dictates and regulations that have significant costs of their own. There isn’t stagnation in government here in the US, it’s growing by leaps and bounds.

    If he’d written a book on the stagnation of the standard of living, it seems to me technological changes are coming faster, but so is the drag of government. I’d argue, that improvements in our living standards are being taken away by increased government burdens.

    1. “I’d argue, that improvements in our living standards are being taken away by increased government burdens.”

      This is actually one of the arguments in the book.

  20. “Are the good times really over for good?”
    Probably for Americans.

  21. The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, by Tyler Cowen, Dutton Adult, $3.99


    Wasted space… and at $3.99, it must be the phony statist bidders, which are jacking up the price.

    Again, no sale!

  22. Why the recession, this what a relationship and would like to know!

  23. ty rights, etc. seem like a more accurate measure of freedom than democracy.

  24. This plan has no merit

Please to post comments

Comments are closed.