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The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better is a pamphlet by Tyler Cowen which was published in 2011. It argues that the American economy has reached a historical technological plateau and that the factors, the figurative "low-hanging fruit", which drove economic growth for most of America's history are mostly over. These factors are the culitvation of much free, previously unused land; the application and spread of technological breakthroughs particularly during the period 1880-1940 including transport, refrigeration, electricity and sanitation; and the education of large numbers of smart people.

The book is 15,000 words long and was first published in January 2011 as an electronic book, priced at four USD. A hardback version, which Cowen dubbed "the retrogression" was published in June 2011.

Synopsis
The book's main thesis is that economic growth has slowed in the United States of America, and in advanced economies more generally, due to falling rates of innovation. In Chapter one, Cowen describes the three major forms of "low-hanging fruit": the ease of cultivating free and unused land, rapid invention from 1880 to 1940 which capitalised on the scientific breakthroughs of the 18th and 19th centuries, and the large returns from sending intelligent but uneducated children to school and university. There are potentially two further minor forms: cheap fossil fuels and the strength of the American constitution. Cowen concludes, "You could say, 'The modern United States was built at five forms of low-hanging fruit, and at most only two of those are still with us.' Fair enough." Whilst these produced extremely large returns future advances will be much more incremental. He offers anecdotal and statistical illustrations for this slowdown. In the first, he compares the changes witnessed by his Grandmother with those of his own generation. In the second he cites median income statistics: the rate of growth drastically slowed from 1973 onwards. "Of course, the personal computer and its cousin, the smartphone, have brought about some big changes. And many goods and services are now more plentiful and of better quality. But compared with what my grandmother witnessed, the basic accoutrements of life have remained broadly the same." He further argues that the failure to diagnose this trend has led to a degradation in political discourse since left and right leaning actors blame the policies of "the other side" and "what I like to call the ‘honest middle’ cannot be heard above the din".

Chapter two examines productivity in the contempory economy and asks whether the 2.8% between 1996-2000, and 3.8% from 2000-2004 disprove the stagnation thesis. Cowen agrees that there have been gains in some areas, such as information technology, but that in other important areas, such as, finance which constitutes 8% of GDP, there has been less value created. Secondly, whilst productivity figures have improved, neither median incomes nor stock market prices and thus the returns to capital nor labour have not improved. Furthermore, government consumption (government activity excluding transfer payments) represents between 15-20% of GDP yet since this sector is measured at cost it becoems less and less productive as it grows larger. Thus, the more government consumption there is, the more published GDP figures tend to overestimate growth in living standards. In healthcare (17% of GDP) the problems of asymetric information and moral hazard mean that increased spending results in little or no improvment in health outcomes. Similar result is observed in education (6% of GDP) and there has been no educational improvment in the last fourty years.

Chapter three considers whether the internet and other computing technologies disprove the argument. Cowen writes that while the internet has been fantastic for he intellectually curious, it has done little to raise material standards of living. The biggest internet companies employ at most a few thousand people and relatively few services are paying.

Chapter four examines American politics in light of the thesis. Cowen says Paul Krugman's The Conscience of a Liberal puts the "cart before the horse" in asking for high marginal tax rates, unionisation, and an egalitarian distribution of income and wealth these policies worked in the 1950s precisely because the real income growth was there to support them. Cowen argues that the failure to recognise the stagnation has led to poor policy ideas from the right (such as "revenue generating tax cuts") and the left (redistrubtion of incomes). Cowen laments the "exaggeration" of both sides and the influence of poltical lobbying on economic policy. The growth in government he says, was affordable during the period of low-hanging fruit, indeed the advances in transportation, industrial production, electronic communications and scientific management facilitated it. Chapter five proposes a simple cause for the 2008 financial crisis "We thought we were richer than we were." He argues that despite a series of regular, smaller crises since the 1980s, the crash was ultimately caused by investors taking too much risk across the economy, "housing and subprime loans were the proverbial canary in the coalmine". Cowen (2011:49)

Chapter six looks at solutions to the problem. Cowen praises the development of India and China as producers and consumers, the role of the internet in enlarging the scientific community, and a growing consensus for the reform of educational policy in the USA. He further suggests the social status of scientists be raised, at least as strong a motivating factor as money he says.

Analysis
Matthew Yglesias compared the themes of the book to Paul Krugman's from The Age of Diminished Expectations, Third Edition: U.S. Economic Policy in the 1990s (1997).

The Internet's contribution to growth
Annie Lowrey, writing in Slate, posits that the problem may partly because of deficiencies in the measurement of income and well-being. The internet promotes more free culture, the consumption of which provides utility and happiness to people but cannot be captured through GDP figures which measure revenue.

The Economist argued that Cowen "undersold" recent innovations in digital technologies and that society was still in the process of re-organising itself around them. A growth spurt should be expected but this could take anything from years to decades it warned. Furthermore, there are particularly large gains to be had in the area "cognition-augmenting innovations (as opposed to labour-augmenting innovations)".

Relationship to the 2008 Financial crisis and recession
The Economist criticised Cowen for associating the economic problems resulting from the 2008 financial crisis to his broader thesis, arguing instead that this was mostly due to a demand shock and mostly preventable. Matthew Yglesias also disagreed with the link. "Rich countries have experienced very divergent fates over the past 36 months when the key evidence for the technological stagnation thesis is that rich countries have experienced a broadly similar fate over the past 36 years", he writes.

Policy responses
Cowen writes that one way to improve innovation is to raise the social status of scientists, a suggestion described as "a bit empty" and not fully congruent with the problem of recent innovations being private goods, such as financial sector innovation, rather than public ones such as penicillin or the railroad. The Economist wrote that Cowen's analysis of education suggested that the rich world would do better by assisting in mass education programs in developing countries rather than pursuing the diminishing marginal returns in domestic education and research, in contrary to President Obama's State of the Union speech in 2011. Looser immigration law would also allow rich and poor countries to exploit this source of growth.

Secondly, it proposed to harvest "policy low-hanging fruit" i.e. reforming or abolishing foolish and costly policies. It proposed taxing "bads" such as traffic congestion and pollution rather than "goods" such as income, reducing spending on medical treatments with no clear benefits, and removing agricultural subsidies and mortgage interest reduction.

Publication
The book is 15,000 words long and was first published in January 2011 as an electronic book only, priced at four USD. The Economist noted that the "publishing model is fascinating in its own right". A hardback version, which Cowen dubbed "the retrogression" was published in June 2011. Yglesias described the publication as an innovation in "current affairs publishing" and "much shorter and cheaper than a conventional book in a way that actually leaves you wanting to read more once you finish it. My guess is that this is the future of books."

Reception
The Economist welcomed The Great Stagnation as "an important [book] that will have a profound impact on the way people think about the last thirty years". It praised "the trains of thought it suggests" and said the book merited "a rigorous debate" which should encourage different policy choices across the political spectrum. Matthew Yglesias described the book as a "bravua performance from one of the most interesting thinkers out there". Though he said it was remarkably silent on intellectual property law and the implications for society of a world in which most of the increase in output comes from catch-up growth from poor countries. The Wall Street Journal described the book as Cowen's most impactful book due to the direction in which he leads the debate. "What is exciting is to imagine students, economists, and scientists across the country reading the book, coming to terms with the depth of our challenge and pursuing new ways of trying to 'fix' things or generally improve our lot." Evans, Kelly The Great Stagnation, Low-Hanging Fruit and America’s ‘Sputnik Moment’ Wall Street Journal, 31 January 2011. Retrieved 26 August 2012./>