A couple of loyal readers asked me to comment on Tyler Cowen’s The Great Stagnation as it seems all the buzz in the econo-blogosphere.
Unfortunately, I don’t have much to add to what has already been said. In short, I don’t buy his argument. I don’t find data on median income, for example, as being useful for the argument that growth has slowed down for a number of reasons. Mostly importantly, however, is that I cannot get myself beyond a simple thought experiment: Would you be better off with $1000 of nominal income in 1973 or 2011? To my mind, the answer is unequivocally 2011. That would seem a clear refutation of Cowen’s hypothesis.
UPDATE: David Beckworth, in a much more entertaining post, presents a similar thought experiment by posting a video of the fictional Jack Bauer if the hit show ’24’ would have taken place in 1994.
UPDATE 2: I have just seen that Steve Horwitz captures more formally what I was trying to say with my (hasty) post. He calculates the number of work hours needed to buy a particular good at 1973 wages and 2009 wages. Here is a generalization of the results:
The other way to make it is to take an item from years past and ask what we could afford to buy today with the same number of labor hours. So take the $400 TV from 1973. At the 2009 wage of $18.72, the 97.1 hours of labor it took to earn that $400 in 1973 would net you $1817.71. So with the same work that would have purchased what, by our standards, was a pretty crappy color TV in 1973, we could today buy a darn-near top of the line very large flat-screen with 3D. Or alternatively, we could go to Walmart and get a relatively cheap LCD TV that would still be a way better product than the 1973 TV and tack onto it a surround sound system, a blu-ray player, and then for giggles maybe a cheap laptop and a small iPod and maybe even a digital camera and still have change left for some DVDs and software. And all of this ignores the increased variety and higher quality of the artistic creations one can enjoy on all of those toys.